Statoil cuts spending, to offer share option on dividends

OSLO/LONDON: Norway's Statoil pledged on Thursday to keep cutting capital spending as oil prices fall, after reporting better than expected fourth-quarter results, and said it would give shareholders the option to take their dividends in shares instead of cash.

Statoil said it now plans capital spending this year to be in the order of $13 billion, down from $14.7 billion in 2015. Last October it had forecast total capital spending in 2015 would be $16.5 billion. Oil and gas firms have been cutting costs as oil prices have dropped by around 70 percent since mid-2014.

ExxonMobil earlier this week said it would cut its capital spending for this year by a quarter while Royal Dutch Shell on Thursday vowed further cuts.

"Cost deflation has visibly intensified offshore Norway in the past year and this is clearly reflected in today's low capex (capital expenditure) guidance," said Redburn analyst Rob West, who has a 'neutral' rating on the stock. "For long-termist shareholders, I believe Statoil's outlook has now improved."

Statoil reported an adjusted operating profit of 15.2 billion crowns ($1.78 billion), down from 26.9 billion crowns in the same quarter a year ago. That was ahead of expectations for 13.9 billion crowns according to a Reuters poll of analysts.

Shares in Statoil were up 7.61 percent at 0942 GMT and were among the top performers on both the Stoxx Europe 600 oil and gas sector index, up 2.58 percent, and the Oslo share market index, up 1.95 percent. It was its best trading day in seven years.

Statoil said it would make a fourth-quarter dividend payment of $0.2201 per share and would continue to pay the same level for the first three quarters of this year despite calls from labour unions and some politicians in Norway to reduce payouts.

But Statoil announced on Thursday it would give investors the option for the next two years to receive dividends either as cash or in the form of new Statoil shares at a discount.

"Ultimately we see this as an admission that the dividend at current levels is not sustainable," said RBC Capital Markets analyst Biraj Borkhataria.

"We would have preferred to see a rebasement rather than share dilution, although this now brings Statoil in line with most of the sector."

Italy's Eni is the only European oil major so far to have cut its dividend.

The Norwegian government separately confirmed it would back the dividend scheme and that its 67 percent stake in Statoil would be kept unchanged.