Norwegian oil company Statoil has slashed its spending plans by $5 billion and abandoned its production targets for 2020 in an attempt to boost dividends to shareholders, Reuters are reporting.
The falling price of oil coupled with an increase in investment costs has dramatically reduced the profitability of new oil & gas projects.
Statoil has been one of the top spenders, ploughing much of the $18 billion it earned since 2010 from selling producing fields, pipelines and its retail chain to fund an aggressive global expansion of exploration and production.
Its wild success in exploration – it found more reserves than any other conventional energy firm last year – risks becoming a burden as it now has a plethora of projects to monetise across every continent.
Statoil is a pioneer in Arctic oil exploration. It has also spent heavily on U.S. shale assets, leaving it exposed to depressed U.S. gas prices, dragging down its profits last year.
“Given market circumstances we need to find a better balance between growth and return that also gives us earlier free cash flow so that we can also service the shareholders,” chief executive Helge Lund told Reuters.
Lund has made Statoil a global player with big finds in places like Brazil, Canada and Tanzania. Now the company aims to spend $5 billion less than planned in the next three years and is pushing back a 2020 target to increase output by a quarter to 2023 or 2024 so it can raise dividends and buy back shares.
Statoil shares dropped 3 percent soon after Friday’s announcement. But, in a sign that investors welcomed Lund’s move, the stock changed course and was up 5.8 percent by 1500 GMT, its highest in almost two years. The sector index was up 0.3 percent.
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