Petoro delivers second- best financial result ever

Press release, annual results for the SDFI in 2012
The State’s Direct Financial Interest (SDFI) on the Norwegian continental shelf (NCS) had one of its two best-ever years in 2012. Petoro’s accounts show that the net cash flow to the government was NOK 146.9 billion, almost 15 per cent higher than in 2011. Daily production averaged 1 132 000 barrels of oil equivalent (boe) in 2012, up by 11 per cent from the year before. The principal reason for the improved results was higher gas sales and prices. Revenue from gas exceeded oil income for the first time.
Net income was NOK 150 billion, compared with NOK 133.7 billion in 2011. Total operating revenue was NOK 213.9 billion, up from NOK 188.8 billion the year before. The net addition to reserves for 2012 was 278 million boe.
Gas output rose by 22 per cent from 2011 while the decline in oil production flattened out, with a drop of just two per cent from the year before after a decade of substantial annual reductions.
Sales income for gas was higher than for oil and other liquids in 2012. Gas sales earned NOK 106.4 billion, compared with NOK 81.7 billion the year before, and the average gas price rose nine per cent from 2011 to NOK 2.35 per standard cubic metre (scm). Income from oil and natural gas liquids was NOK 96.3 million, on a par with 2011. The oil price averaged NOK 657 per barrel, up four per cent from the year before.
Investment amounted to NOK 25.8 billion, an increase of 20 per cent from 2011. The biggest capital spending related to high levels of drilling activity on Troll, Gullfaks and Oseberg, continued development of Ormen Lange, and the subsea compression project on Åsgard. In addition came capitalised exploration expenses, so that investment for 2012 totalled NOK 26.4 billion.
Petoro chief executive Kjell Pedersen is very satisfied with the results for 2012. Figures for health, safety and the environment showed continued improvement, and no fatalities were suffered in Petoro’s portfolio.
In addition to the good financial and operational results, he is also pleased that the challenges which have concerned Petoro on mature fields are beginning to attract wider attention.
“We have good processes on Snorre, but I could wish for better progress towards decisions on other fields,” Pedersen says. “We must maintain our pressure here to maximise the value of these fields, which is still substantial.”
He otherwise points to exciting developments in the far north, both for Norway’s petroleum industry in general and for Petoro.
“We’ve been active ahead of the choice by the licence for landing oil from Skrugard/Havis in order to secure a flexible development solution. We need such flexibility to be able to transport increased volumes as a result of expected additional discoveries in the area, and we see that a landfall terminal at Magerøy could also make a positive contribution to development further east in the Barents Sea. At the same time, it’s gratifying that this will give northern Norway specific spin-offs from the industry.”

Petoro was recently awarded 25 per cent holdings in the first two licences in Iceland’s sector of the Jan Mayen Ridge. Pedersen says that the company is thereby well positioned in relation to a possible opening of the Norwegian sector of the continental shelf around Jan Mayen. He is also looking forward with great anticipation to an opening of the south-eastern Barents Sea, where Norway and Russia have reached agreement on a permanent boundary.
“A number of factors show that the Barents Sea and the far north are emerging more clearly as the next big province for developing Norway’s petroleum sector. It’s important that we as an industry have the expertise and capacity required to manage operations there in a profitable, safe and environmentally acceptable manner – as we have indeed done on the NCS so far."
Pedersen says that a substantial capacity challenge has been the availability of rigs to drill production wells for securing the value in existing fields as well as exploration wells. The industry – Petoro included – has largely responded to this challenge by acquiring new units. But calculations show that these rigs will call for 4 000 additional crew with the right expertise over the next two-three years.
“I see two main areas which must be addressed,” he says. “One is to make optimum use of existing crew expertise. The other is to recruit new personnel and effectively build their expertise. I would urge both companies and unions to sit down together and discuss what’s needed to meet the crewing challenge. Such a discussion must probably also embrace work schedules.”
Pedersen says that this proposal is aimed at securing expertise and capacity rather than addressing cost challenges on the NCS.

  Fourth quarter Full year
  2012 2011 2012 2011
Operating revenue 58 471 53 633 213 885 188 820
Total operating expenses 18 081 14 364 61 167 53 860
Operating income 41 467 39 269 152 717 134 959
Net financial items -851 -96 -2 731 -1 239
Income after financial items 39 539 39 174 149 986 133 721
Total investment 6 620 3 288 26 399 19 053
Net cash flow transferred to government 31 803 30 821 146 930 128 083
Average oil price (USD/bbl) 110.90 113.48 113.27 114.00
NOK/USD exchange rate 5.69 5.69 5.80 5.54
Average oil price (NOK/bbl) 631 646 657 632
Oil/NGL production (1 000 b/d) 433 463 430 440
Average gas price (NOK/scm) 2.38 2.33 2.35 2.15
Gas production (mill scm/d) 129 104 112 92
Total production (1 000 boe/d) 1 247 1 116 1 132 1 016

More information on the SDFI results for 2012 is provided in the directors’ report 
Sveinung Sletten
Head of communications
Petoro AS
51 50 20 24
950 75 554

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