UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

May 4, 2017

Commission File Number 1-15200

Statoil ASA

(Translation of registrant’s name into English)

 

FORUSBEEN 50, N-4035, STAVANGER, NORWAY

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F X         Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_____

 

This Report on Form 6-K shall be deemed to be filed and incorporated by reference in the Registration Statements on Form F-3 (File No. 333-211232) and Form S-8 (File No. 333-168426) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

 

This document includes portions from the previously published results announcement of Statoil ASA as of, and for the three months ended 31 March  2017, as revised to comply with the requirements of Item 10(e) of Regulation S-K regarding non-GAAP financial information promulgated by the U.S. Securities and Exchange Commission. This document does not update or otherwise supplement the information contained in the previously published results announcement.

First quarter 2017 results

 

Statoil reports a net operating income of USD 4.3 billion in the first quarter of 2017. The net income was USD 1.1 billion.

The first quarter results were characterised by:

·           Solid earnings and strong cash flow from operations across all segments

·           Solid operational performance, continued high regularity and good progress on improvement work

“Our solid financial result and strong cash flow across all segments was driven by higher prices, good operational performance and production growth. Our production from the Norwegian Continental Shelf was at its highest level in five years, driven by high regularity and ramp-up of new fields. Our international portfolio delivered positive results and cash flow per barrel after tax on par with our Norwegian portfolio. We continue to capture efficiency gains and are on track to deliver an additional billion dollars in annual improvements in 2017”, says Eldar Sætre, President and CEO of Statoil ASA.

“We delivered seven discoveries from nine exploration wells drilled during first quarter. Many of these can be quickly put into profitable production. We are also about to start our exploration programme in the Barents Sea, testing several new opportunities over the next six months. In the quarter, we received approval for three plans for development and submitted additional two projects for approval by Norwegian authorities, showing commitment to industrial development on the NCS,” says Sætre.

 

Net operating income was USD 4.250 billion in the first quarter compared to USD 1.060 billion in the same period of 2016. Higher prices for both oil and North American gas, solid operational performance with high production, continued progress on improvement initiatives and positive changes in fair value of derivatives contributed to the increase. The increased production resulted in higher royalty costs and production fees, contributing negatively to the results, in addition to loss on sale of assets.

Net income was USD 1.064 billion in the first quarter, up from USD 0.611 billion in the same period last year.

Statoil delivered equity production of 2,146 mboe per day in the first quarter, an increase from 2,054 mboe per day in the same period in 2016. The increase was primarily due to ramp-up of new fields, increased gas offtake and solid operational performance. Excluding divestments, the underlying production growth was 5% compared to the first quarter last year.

Exploration expenses in the quarter were USD 227 million, down from USD 351 million in the first quarter of 2016.

Cash flows provided by operating activities amounted to USD 5.970 billion for the first quarter of 2017 compared to USD 2.205 billion for the same period last year.

The board of directors has decided to maintain a dividend of USD 0.2201 per ordinary share for the first quarter, and, pending approval from the annual general meeting, continue the scrip programme this quarter giving shareholders the option to receive the dividend in cash or newly issued shares in Statoil at a 5% discount.

The twelve-month average Serious incident frequency (SIF) was 0.8 for the twelve months ended 31 March 2017, compared to 0.6 in the same period a year ago. Statoil continues its efforts to improve safety performance.

 

	Quarters			Change
	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Net operating income (USD million)	4,250	(1,897)	1,060	>100%
Net income (USD million)	1,064	(2,785)	611	74%
Total equity liquids and gas production (mboe per day) [4]	2,146	2,095	2,054	4%
Group average liquids price (USD/bbl) [1]	49	44	29	70%

 

FIRST QUARTER 2017 GROUP REVIEW

The significant increase in liquids prices was the main cause for the increased results in the first quarter compared to last year. Also, reduced operational costs, higher US gas prices and increased gas sales, gains on derivatives and higher refinery margins positively impacted the quarterly results.

  

Total equity liquids and gas production [4]   was 2,146 mboe per day in the first quarter of 2017 , up 4% compared to first   quarter of 2016 mainly due to new production from start-up and ramp-up on various fields, effects from redetermination and stronger operational performance. The strong increase was partially offset by divestments and expected natural decline and cease of production on various fields.

Total entitlement liquids and gas production [3] was up by 5 % to 2,007 mboe per day compared to 1,909 mboe per day in the first   quarter of 2016 due to the increase in equity production as described above, and a slightly positive effect from production sharing agreements (PSA effect).   The PSA effect was 97 mboe per day in the first quarter of 2017 compared to 100 mboe per day in the first quarter of 2016.

 

  

Net operating income was USD 4,250 million in the first quarter of 2017, compared to net operating income of USD 1,060 million in the first quarter of 2016. The significant increase was primarily due to higher liquids prices. Reduced operational costs, increased gas sales, increased North American gas prices, unrealised gains on derivatives and higher refinery margins added to the increase.

In the first quarter of 2017, net operating income was positively affected by gains from changes in fair value of derivatives and inventory hedge contracts totalling USD 832 million, and reversal of impairments of USD 439 million. Loss on sale of assets of USD 384 million, primarily related to divestment of the oil sands activities in Canada, negatively impacted net operating income in the quarter.

In the first quarter of 2016, net operating income was positively affected by net impairment reversals of USD 308 million, mainly due to improved production profiles and lower operating and capital expenditures on both conventional and un-conventional assets.

Operating and administrative expenses increased by 6% to USD 2,642 million in the first quarter of 2017 mainly due to loss on sale of assets, increased transportation expenses and higher royalties due to the increase in prices and volumes. This was partially offset by reduction due to divestment of assets and reduced estimates for asset retirement obligations.

Depreciation, amortisation and net impairment losses decreased by 5% to USD 1,943 million in the first quarter of 2017 , mainly due to higher net impairment reversals in the first quarter of 2017. Depreciation cost was lower mainly because of increased proved reserves estimates and lower depreciation basis due to impairments of assets in 2016. The reduction in depreciation was partially offset by production start-up and ramp-up of new fields.

Exploration expenses decreased by USD 124 million to USD 227 million in the first quarter of 2017 mainly due to a lower portion of capitalised expenditures from earlier years being expensed this quarter and lower impairments. Lower exploration activity in the first quarter of 2017 added to the reduction in exploration costs.

Net financial items amounted to a loss of USD 206 million in the first   quarter of 2017 , compared to a gain of USD 625 million in the first   quarter of 2016 . The negative change of USD 831 million is mainly due to loss on derivatives related to our long term debt portfolio of USD 117 million in first quarter 2017, compared to a gain of USD 824 million in first quarter 2016. This is partly offset by increased gain from currency effects of USD 78 million in the first quarter of 2017, compared the first quarter of 2016.

Income taxes were USD 2,980 million in the first quarter of 2017. The effective tax rate was 73,7%.

In the first quarter of 2016, income taxes were USD 1,074 million and the effective tax rate was 63,7%.

Please refer to note 5 Income tax to the condensed interim financial statements for information related to income taxes.

 

Condensed income statement under IFRS	Quarters			Change
(unaudited, in USD million)	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Total revenues and other income	15,528	12,756	10,115	54%
Purchases [net of inventory variation]	(6,466)	(6,290)	(4,170)	55%
Operating and administrative expenses	(2,642)	(2,667)	(2,495)	6%
Depreciation, amortisation and net impairment losses	(1,943)	(4,261)	(2,039)	(5%)
Exploration expenses	(227)	(1,435)	(351)	(35%)
Net operating income	4,250	(1,897)	1,060	>100%
Net financial items	(206)	(838)	625	N/A
Income before tax	4,044	(2,735)	1,685	>100%
Income tax	(2,980)	(50)	(1,074)	>100%
Net income	1,064	(2,785)	611	74%

Net income in the first   quarter of 2017 was USD 1,064 million, up from USD 611 million in the first   quarter of 2016 . The increase was mainly due to the increase in net operating income explained above, partially offset by loss on net financial items and higher income taxes.

 

Total cash flows increased by USD 2,390 million compared to the first quarter of 2016.

Cash flows provided by operating activities were increased by USD 3,765 million compared to the first quarter of 2016. The increase was mainly due to increased liquids and gas prices and a reduction in working capital in the current period compared to an increase in the first quarter of last year.

Cash flows used in investing   activities were increased by USD 1,582 million compared to the first quarter of 2016. The increase was mainly due to financial investments made in the first quarter, partially offset by lower capital expenditures and increased proceeds from sale of assets mainly related to the divestment of the Kai Kos Dehseh (KKD) oil sands projects.

Cash flows used in financing activities were decreased by USD 208 million compared to the first quarter of 2016. The decrease is mainly due to no dividend payment in the quarter (dividend for the third quarter of 2016 was paid in April 2017) and decreased cash flow from collateral received related to derivatives.

  

OUTLOOK

 

·        Statoil intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.5 billion for 2017, excluding signature bonuses

·        Statoil expects to achieve an additional USD 1 billion in efficiency improvements in 2017 with a total of USD 4.2 billion

·        Statoil’s ambition is to keep the unit of production cost in the top quartile of its peer group

·        For the period 2016 – 2020, organic production growth [7] is expected to come from new projects resulting in around 3% CAGR (Compound Annual Growth Rate)

·        The equity production for 2017 is estimated to be around 4-5% above the 2016 level

·        Scheduled maintenance activity is estimated to reduce quarterly production by approximately 75 mboe per day in the second quarter of 2017. In total, maintenance is estimated to reduce equity production by around 30 mboe per day for the full fiscal year 2017

·        Indicative effects from Production Sharing Agreement (PSA-effect) [4] and US royalties are estimated to be around 150 mboe per day in 2017 based on an oil price of USD 40 per barrel and 165 mboe per day based on an oil price of USD 70 per barrel

·        Deferral of production to create future value, gas off-take, timing of new capacity coming on stream and operational regularity represent the most significant risks related to the foregoing production guidance

 

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. For further information, see section Forward-Looking Statements . 

  

 

DEVELOPMENT AND PRODUCTION NORWAY

 

First quarter 2017 review

 

Average daily production of liquids and gas increased by 5% to 1,393 mboe per day in the first quarter of 2017 compared to the first quarter of 2016. The increase was mainly due to ramp up of partner operated fields, higher gas off-take at Oseberg and redetermination effect at Ormen Lange. Cease of production on two fields and natural decline on mature fields partly offset the increase .

  

Net operating income for Development and Production Norway (DPN) was USD 3,241 million compared to USD 1,325 million in the first quarter of 2016. Impairment reversal of USD 439 million related to reduced cost estimates of a Norwegian continental shelf development asset positively impacted net operating income.

Operating and administrative expenses increased mainly due to a change in the internal allocation of gas transportation costs between DPN and MMP. This also increased the revenues due to a higher transfer price.

Depreciation, amortisation and net impairment losses decreased due to impairment reversal in addition to increased proved reserves.

Exploration expenses were stable, increased drilling activity was offset by increased capitalisation rate.

Income statement under IFRS	Quarters			Change
(in USD million)	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Total revenues and other income	4,694	3,628	3,338	41%
Operating and administrative expenses	(726)	(525)	(717)	1%
Depreciation, amortisation and net impairment losses	(658)	(2,177)	(1,228)	(46%)
Exploration expenses	(70)	(134)	(69)	1%
Net operating income	3,241	792	1,325	>100%

 

 

DEVELOPMENT AND PRODUCTION INTERNATIONAL

First quarter 2017 review

Average equity production of liquids and gas in the first quarter of 2017 increased by 3% to 753 mboe per day compared to the first quarter of 2016. The increase was primarily driven by start-up and ramp-up on several fields including In Salah Southern Fields and Corrib. This was partly offset by expected natural decline on various partner operated fields, as well as the divestments of the oil sands activities and West Virginia operated Marcellus properties.

Average daily entitlement production of liquids and gas   in the first quarter of 2017 increased by 4% to 615 mboe per day compared to the first quarter of 2016. The increase was due to higher equity production and a slightly positive effect from production sharing agreements (PSA-effect). The PSA-effect was 97 mboe per day in the first quarter of 2017 compared to 100 mboe per day in the first quarter of 2016. 

Net operating income for Development and Production International (DPI) was negative USD 161 million in the first quarter of 2017, compared to negative USD 473 million the first quarter of 2016 . In the first quarter of 2017, net operating income was negatively impacted by losses from sale of assets of USD 384 million, primarily related to divestment of the oil sands activities in Canada.   In the first quarter of 2016 , net operating income was positively impacted by net reversal of impairments of USD 314 million .

 

Operating and administrative expenses increased due to losses from sale of assets, higher royalties and transportation expenses, partly offset by reduced provisions for future asset retirement costs and portfolio changes.

 

Depreciation, amortisation and net impairment losses   increased primarily due to production start-up and ramp-up of new fields, in addition to net impairment reversals in the first quarter of 2016. Higher reserves estimates partially offset the increase in depreciation.

 

Exploration expenses decreased in the first quarter of 2017 mainly due to a lower portion of capitalised expenditures from earlier years being expensed this quarter. Lower exploration activity in the first quarter of 2017 further reduced the cost.

  

Income statement under IFRS	Quarters			Change
(in USD million)	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Total revenues and other income	2,167	1,974	1,139	90%
Operating and administrative expenses	(982)	(924)	(626)	57%
Depreciation, amortisation and net impairment losses	(1,184)	(2,357)	(702)	69%
Exploration expenses	(157)	(1,301)	(282)	(44%)
Net operating income	(161)	(2,610)	(473)	66%

 

 

MARKETING, MIDSTREAM AND PROCESSING

 

First quarter 2017 review

Natural gas sales volumes in the first quarter of 2017 amounted to 15.5 billion standard cubic meters (bcm), up 4% compared to the first quarter of 2016. The increase was due to higher Statoil entitlement production mainly on the Norwegian continental shelf. Of the total gas sales in the first quarter of 2017, entitlement gas was 13.1 bcm compared to 12.2 bcm in the first quarter of 2016.

Average invoiced European natural gas sales price [8] was strong in the quarter compared to the previous quarter and ended on the same level as first quarter last year. Average invoiced North American piped gas sales price [8] increased by 45%, mainly due to a general increase in Henry Hub prices.

Net operating income for Marketing, Midstream and Processing (MMP) was USD 1,279 million compared to USD 303 million in the first quarter of 2016. Net operating income was positively impacted by changes in fair value of derivatives and market value of storage and physical contracts, with the total of USD 788 million. In the first quarter of 2016, net operating income was negatively impacted by changes in the market value of storage and future physical contracts of USD 149 million.

Operating and administrative expenses decreased mainly due to a change in the internal allocation of gas transportation costs between MMP and DPN, partially offset by an increase in other transportation costs.

 

Income statement under IFRS	Quarters			Change
(in USD million)	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Total revenues and other income	15,062	12,790	9,934	52%
Purchases [net of inventory variation] [6]	(12,747)	(11,594)	(8,485)	50%
Operating and administrative expenses	(963)	(1,234)	(1,073)	(10%)
Depreciation, amortisation and net impairment losses	(73)	303	(73)	1%
Net operating income	1,279	264	303	>100%

 

 

CONDENSED INTERIM FINANCIAL STATEMENTS

First quarter 2017

CONSOLIDATED STATEMENT OF INCOME

	Quarters			Full year
(unaudited, in USD million)	Q1 2017	Q4 2016	Q1 2016	2016
Revenues	15,468	12,696	10,087	45,688
Net income from equity accounted investments	57	(58)	20	(119)
Other income	3	118	8	304
Total revenues and other income	15,528	12,756	10,115	45,873
Purchases [net of inventory variation]	(6,466)	(6,290)	(4,170)	(21,505)
Operating expenses	(2,418)	(2,439)	(2,247)	(9,025)
Selling, general and administrative expenses	(224)	(228)	(247)	(762)
Depreciation, amortisation and net impairment losses	(1,943)	(4,261)	(2,039)	(11,550)
Exploration expenses	(227)	(1,435)	(351)	(2,952)
Net operating income	4,250	(1,897)	1,060	80
Net financial items	(206)	(838)	625	(258)
Income before tax	4,044	(2,735)	1,685	(178)
Income tax	(2,980)	(50)	(1,074)	(2,724)
Net income	1,064	(2,785)	611	(2,902)
Attributable to equity holders of the company	1,062	(2,791)	607	(2,922)
Attributable to non-controlling interests	2	6	4	20
Basic earnings per share (in USD)	0.33	(0.87)	0.19	(0.91)
Diluted earnings per share (in USD)	0.33	(0.87)	0.19	(0.91)
Weighted average number of ordinary shares outstanding (in millions)	3,236	3,219	3,180	3,195

 

 

  

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited, in USD million)	Share capital	Additional paid-in capital	Retained earnings	Currency translation adjustments	Available for sale financial assets	Shareholders' equity	Non-controlling interests	Total equity
At 31 December 2015	1,139	5,720	38,693	(5,281)	(0)	40,271	36	40,307
Net income for the period			607			607	4	611
Other comprehensive income			(161)	1,357	89	1,285		1,285
Total comprehensive income								1,896
Other equity transactions		1	(1)			(0)	(5)	(5)
At 31 March 2016	1,139	5,720	39,138	(3,924)	89	42,162	36	42,198
At 31 December 2016	1,156	6,607	32,573	(5,264)	(0)	35,072	27	35,099
Net income for the period			1,062			1,062	2	1,064
Other comprehensive income			58	437 1)	(10)	486		486
Total comprehensive income								1,550
Other equity transactions		(2)	(0)			(2)	0	(2)
At 31 March 2017	1,156	6,606	33,693	(4,827)	(10)	36,618	28	36,647

1)      Currency translation adjustments year to date includes USD 294 million directly associated with the sale of interest in Kai Kos Dehseh (KKD) oil sands projects. 

CONSOLIDATED STATEMENT OF CASH FLOWS

	Quarters			Full year
(unaudited, in USD million)	Q1 2017	Q4 2016	Q1 2016	2016
Income before tax	4,044	(2,735)	1,685	(178)
Depreciation, amortisation and net impairment losses	1,943	4,261	2,039	11,550
Exploration expenditures written off	38	1,067	142	1,800
(Gains) losses on foreign currency transactions and balances	(78)	529	(614)	(137)
(Gains) losses on sales of assets and businesses	383	(29)	(5)	(110)
(Increase) decrease in other items related to operating activities	(21)	(203)	712	1,076
(Increase) decrease in net derivative financial instruments	(1)	2,350	(526)	1,307
Interest received	70	60	68	280
Interest paid	(134)	(151)	(115)	(548)
Cash flows provided by operating activities before taxes paid and working capital items	6,243	5,149	3,386	15,040
Taxes paid	(608)	(1,349)	(743)	(4,386)
(Increase) decrease in working capital	334	(1,774)	(438)	(1,620)
Cash flows provided by operating activities	5,970	2,027	2,205	9,034
Capital expenditures and investments 1)	(2,377)	(3,819)	(2,821)	(12,191)
(Increase) decrease in financial investments	(1,846)	557	451	877
(Increase) decrease in other items interest bearing	1	83	23	107
Proceeds from sale of assets and businesses	303	244	10	761
Cash flows used in investing activities	(3,919)	(2,935)	(2,337)	(10,446)
New finance debt	0	1,323	0	1,322
Repayment of finance debt	(5)	(893)	(3)	(1,072)
Dividend paid	(0)	(371)	(697)	(1,876)
Net current finance debt and other	(34)	(1,723)	452	(333)
Cash flows provided by (used in) financing activities	(40)	(1,664)	(248)	(1,959)
Net increase (decrease) in cash and cash equivalents	2,011	(2,572)	(379)	(3,371)
Effect of exchange rate changes on cash and cash equivalents	28	(352)	296	(152)
Cash and cash equivalents at the beginning of the period (net of overdraft)	5,090	8,014	8,613	8,613
Cash and cash equivalents at the end of the period (net of overdraft) 2)	7,128	5,090	8,530	5,090

1)         (Increase) decrease in items under operating activities include currency effects.

2)      At 31 March 2017, net overdrafts were USD 7 million. At 31 December 2016, net overdrafts were zero and at 31 March 2016 cash and cash equivalents included a net overdraft of USD 10 million.

 

 

  

 

  

 

Notes to the Condensed interim financial statements

 

1 Organisation and basis of preparation

General information and organisation

Statoil ASA, originally Den Norske Stats Oljeselskap AS, was founded in 1972 and is incorporated and domiciled in Norway. The address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway.

The Statoil group’s (Statoil) business consists principally of the exploration, production, transportation, refining and marketing of petroleum and petroleum-derived products. Statoil ASA is listed on the Oslo Børs (Norway) and the New York Stock Exchange (USA).

All Statoil's oil and gas activities and net assets on the Norwegian continental shelf are owned by Statoil Petroleum AS, a 100% owned operating subsidiary of Statoil ASA. Statoil Petroleum AS is co-obligor or guarantor of certain debt obligations of Statoil ASA.

Statoil's Condensed interim financial statements for the first quarter of 2017 were authorised for issue by the board of directors on 3 May 2017.

Basis of preparation

These Condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The Condensed interim financial statements do not include all of the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and these Condensed interim financial statements should be read in conjunction with the Consolidated annual financial statements. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB, but the differences do not impact Statoil's financial statements for the periods presented. A description of the significant accounting policies applied in preparing these Condensed interim financial statements is included in Statoil`s Consolidated annual financial statements for 2016.

With effect from 1 January 2017, Statoil presents net interest costs related to its defined benefit pension plans within Net financial items. These expenses were previously included in the Consolidated statement of income as part of pension cost within net operating income. The policy change better aligns the classification of the interest costs with their nature, as the benefit plan is closed to new members and now increasingly represents a financial exposure to Statoil. The change in presentation also impacts the gain or loss from changes in the fair value of Statoil’s notional contribution pension plans. The impact on the net operating income at implementation and for comparative periods presented in these Condensed interim financial statements is immaterial, and prior periods’ figures have consequently not been restated.

There have been no other changes to significant accounting policies in the first quarter of 2017 compared to the Consolidated annual financial statements for 2016.

The Condensed interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for an annual period. The subtotals and totals in some of the tables may not equal the sum of the amounts shown due to rounding.

The Condensed interim financial statements are unaudited.

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis, considering current and expected future market conditions. A change in an accounting estimate is recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

2 Segments

Statoil’s operations are managed through the following operating segments: Development and Production Norway (DPN), Development and Production USA (DPUSA), Development and Production International (DPI), Marketing, Midstream and Processing (MMP), New Energy Solutions (NES) and Other.

Statoil reports its business through reporting segments which correspond to the operating segments, except for the operating segments DPUSA and DPI which have been aggregated into one reporting segment, Development and Production International. This aggregation has its basis in similar economic characteristics, the nature of products, services and production processes, the type and class of customers, the methods of distribution and regulatory environment. The operating segment NES is reported in the reporting segment Other due to its immateriality.

The eliminations section includes the elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products. Inter-segment revenues are based upon estimated market prices.

Segment data for the first quarter of 2017 and 2016 is presented below. The reported measure of segment profit is net operating income .  Deferred tax assets, pension assets and non-current financial assets are not allocated to the segments. The line item additions to PP&E, intangibles and equity accounted investments exclude movements related to changes in asset retirement obligations.

 

First quarter 2017	Development and Production Norway	Development and Production International	Marketing, Midstream and Processing	Other	Eliminations	Total
(in USD million)
Revenues third party and other income	65	344	15,047	15	0	15,471
Revenues inter-segment	4,592	1,814	3	0	(6,410)	0
Net income from equity accounted investments	38	9	11	(1)	0	57
Total revenues and other income	4,694	2,167	15,062	15	(6,410)	15,528
Purchases [net of inventory variation]	1	(4)	(12,747)	(0)	6,284	(6,466)
Operating and SG&A expenses	(726)	(982)	(963)	(67)	96	(2,642)
Depreciation, amortisation and net impairment losses	(658)	(1,184)	(73)	(27)	0	(1,943)
Exploration expenses	(70)	(157)	0	0	0	(227)
Net operating income	3,241	(161)	1,279	(79)	(30)	4,250
Additions to PP&E, intangibles and equity accounted investments	1,306	900	68	125	0	2,399
Balance sheet information
Equity accounted investments	1,171	367	128	678	0	2,344
Non-current segment assets	28,597	35,910	4,460	377	0	69,345
Non-current assets, not allocated to segments						8,398
Total non-current assets						80,087

 

First quarter 2016	Development and Production Norway	Development and Production International	Marketing, Midstream and Processing	Other	Eliminations	Total
(in USD million)
Revenues third party and other income	22	137	9,909	27	0	10,095
Revenues inter-segment	3,317	1,000	12	(2)	(4,327)	0
Net income from equity accounted investments	0	2	13	5	0	20
Total revenues and other income	3,338	1,139	9,934	31	(4,327)	10,115
Purchases [net of inventory variation]	0	(3)	(8,485)	(0)	4,318	(4,170)
Operating and SG&A expenses	(717)	(626)	(1,073)	(103)	24	(2,495)
Depreciation, amortisation and net impairment losses	(1,228)	(702)	(73)	(37)	0	(2,039)
Exploration expenses	(69)	(282)	0	0	0	(351)
Net operating income	1,325	(473)	303	(108)	14	1,060
Additions to PP&E, intangibles and equity accounted investments	1,234	1,016	118	115	0	2,482
Balance sheet information
Equity accounted investments	6	437	123	269	0	835
Non-current segment assets	29,631	39,264	4,414	761	0	74,070
Non-current assets, not allocated to segments						10,197
Total non-current assets						85,102

 

In the first quarter of 2017, Statoil recognised an impairment reversal of USD 439 million in the DPN segment related to reduced cost estimates of a Norwegian continental shelf development asset. In addition a loss of USD 351 million was recognised on the divestment of the Kai Kos Dehseh (KKD) oil sands project in the DPI segment.

 

In the first quarter of 2016, Statoil recognised net impairment reversals of USD 308 million, consisting of impairment reversals of USD 633 million related to unconventional onshore assets in North America and two conventional assets in the DPI segments, partially offset by impairment charges of USD 325 million, related to an unconventional onshore asset in North America.

 

See note 6 Property, plant and equipment and intangible assets for further information on impairments.

 

See note 3 Acquisitions and disposals for information on transactions impacting the DPI segment.

Revenues by geographic areas

When attributing the line item revenues third party and other income to the country of the legal entity executing the sale for the first quarter of 2017, Norway constitutes 76% and the US constitutes 15%.

  

Non-current assets by country
	At 31 March	At 31 December	At 31 March
(in USD million)	2017	2016	2016
Norway	32,285	31,484	33,396
US	18,293	18,223	20,594
Brazil	5,251	5,308	3,483
Angola	3,553	3,884	5,203
UK	3,352	3,108	3,227
Canada	1,524	1,494	2,495
Algeria	1,271	1,344	1,454
Azerbaijan	1,312	1,326	1,398
Other countries	4,847	4,873	3,655
Total non-current assets 1)	71,689	71,043	74,905

 

1)      Excluding deferred tax assets, pension assets, non-current financial assets and assets classified as held for sale.

  

3 Acquisitions and disposals

 

Sale of interest in Kai Kos Dehseh

In the first quarter of 2017 Statoil closed an agreement, entered in December 2016, with Athabasca Oil Corporation to divest its 100% interest in Kai Kos Dehseh (KKD) oil sands. The total consideration consisted of cash consideration of CAD 431 million (USD 328 million), 100 million common shares in Athabasca Oil Corporation (which represent 19,7% of the outstanding shares as at 31 March 2017, and will be accounted for as an available for sale financial investment) and a series of contingent payments. The shares and the contingent consideration were measured at a combined fair value of CAD 185 million (USD 142 million) on the closing date. A loss on the transaction of USD 351 million has been recognised as operating expense. This loss relates to a reduced value of the shares in Athabasca compared to 31 December 2016 and a reclassification of accumulated foreign exchange losses, previously recognised in other comprehensive income. The transaction was closed on 31 January 2017, and is reflected in the Development and Production International (DPI) segment.

 

4 Financial items

	Quarters			Full year
(in USD million)	Q1 2017	Q4 2016	Q1 2016	2016
Net foreign exchange gains (losses)	86	10	8	(120)
Interest income and other financial items	182	107	48	436
Derivative financial instruments gains (losses)	(117)	(672)	824	470
Interest and other finance expenses	(357)	(283)	(255)	(1,043)
Net financial items	(206)	(838)	625	(258)

 

Statoil has a US Commercial paper program available with a limit of USD 5 billion of which USD 929 million has been utilised as of 31 March 2017.

 

5 Income tax

	Quarters			Full year
(in USD million)	Q1 2017	Q4 2016	Q1 2016	2016
Income before tax	4,044	(2,735)	1,685	(178)
Income tax	(2,980)	(50)	(1,074)	(2,724)
Equivalent to a tax rate of	73.7%	(1.8%)	63.7%	>(100%)

 

The tax rate for the first quarter of 2017 was primarily influenced by high tax rate on income from the Norwegian continental shelf caused by proportionally lower impact of uplift deduction and loss related to the sale of interest in the Kai Kos Dehseh (KKD) oil sand project as described in note 3 Acquisitions and disposals without reported tax benefit.

The tax rate for the first quarter of 2016 was primarily influenced by low tax rate on income from the Norwegian continental shelf caused by proportionally greater impact of uplift deduction and currency effects in entities that are taxable in other currencies than the functional currency. This was partially offset by write-off of deferred tax assets within Development and Production International segment, due to uncertainty related to future taxable income.

 

6 Property, plant and equipment and intangible assets

(in USD million)	Property, plant and equipment	Intangible assets
Balance at 31 December 2016	59,556	9,243
Additions	2,192	153
Transfers	125	(125)
Disposals	(37)	(2)
Expensed exploration expenditures and impairment losses	-	(38)
Depreciation, amortisation and net impairment losses	(1,940)	(3)
Effect of foreign currency translation adjustments	213	8
Balance at 31 March 2017	60,109	9,235

 

  

 

Impairments/reversal of impairments

For information on impairment losses and reversals for the first quarter of 2017 per reporting segment see note 2 Segments.

  

First quarter 2017	Property, plant and equipment	Intangible assets	Total
(in USD million)
Producing and development assets	(439)	0	(439)
Acquisition costs related to oil and gas prospects	-	26	26
Total net impairment losses (reversals) recognised	(439)	26	(413)

 

The impairment charges have been recognised in the Consolidated statement of income as depreciation, amortisation and net impairment losses and exploration expenses based on the impaired assets’ nature of property, plant and equipment and intangible assets , respectively.  

The recoverable amount of assets tested for impairment was based on Value in Use (VIU) estimates on the basis of internal forecasts on costs, production profiles and commodity prices.

 

7 Dividends

 

As part of Statoil's scrip dividend programme, eligible shareholders and holders of American Depositary Receipts (ADR) can elect to receive their dividend in the form of new ordinary Statoil shares and ADR holders in the form of American Depositary Shares (ADS). The subscription price for the dividend shares will have a discount compared to the volume-weighted average price on Oslo Børs (OSE) of the last two trading days of the subscription period for each quarter. For the fourth quarter of 2015 and for the first, second and third quarter of 2016 the discount has been set at 5%.

 

The two-year scrip dividend programme was approved by Statoil's general assembly in May 2016.

 

For the third quarter of 2016, a dividend of USD 0.2201 has been approved, paid on 7 April 2017, and the shares were traded ex-dividend on 22 February 2017 on Oslo Børs and 21 February for ADR shareholders on New York Stock Exchange.

 

Dividend approved, but not settled at quarter end, is presented as dividends payable in the Consolidated balance sheet, regardless of whether the dividend is expected to be paid in cash or by issuance of new shares. The line item dividend paid in the Consolidated statement of cash flows includes only dividend paid in cash during the period.

 

On 3 May the board of directors resolved to declare a dividend for the first quarter of 2017 of USD 0.2201 per share. The Statoil share will trade ex-dividend on Oslo Børs 9 August and 8 August for ADR shareholders on New York Stock Exchange. Record date will be 10 August and payment date will be around 22 September 2017. With reference to the scrip dividend programme approved by the annual general meeting (AGM) 11 May 2016, shareholders will, subject to AGM approval on 11 May 2017, get the option to receive the dividend in newly issued shares at a discount. For the dividend issue for first quarter 2017, the board has set the discount to 5%.

Dividends
				Full year
		Q1 2017	Q1 2016	2016
Dividends paid in cash (in USD million)		0	697	1,876
USD per share or ADS		0	0.2201	0.8804
NOK per share		0	1.8932	7.3464
Scrip dividends (in USD million)		0	0	904
Number of shares issued (in million)		0	0.0	56.4
Total dividends		0	697	2,780

8 Provisions, commitments, contingent liabilities and contingent assets

 

In April 2017, a federal judge granted an injunction request to suspend the assignment to Statoil of Petróleo Brasileiro S.A.’s (“Petrobras”) 66% operated interest in the Brazilian offshore license BM-S-8, in a class action suit filed by the Union of Workers of Oil Tankers of Sergipe (Sindipetro) against Petrobras, Statoil, and ANP - the Brazilian Regulatory Agency (“the defendants”). The suit seeks the annulment of Petrobras’ sale of the interest in BM-S-8 to Statoil, which was closed in November 2016. On 2 May 2017, the injunction was suspended by the President of the Federal Regional Court. The suspension of the injunction is appealable. The main issue will be examined in the Brazilian federal court system in due course. Statoil believes the defendants’ position to be strong in upholding the validity of Statoil’s ownership. At the end of first quarter 2017 the acquired interest remains in Statoil’s balance sheet as intangible assets of the DPI segment. For further information about Statoil’s acquisition, reference is made to the 2016 Consolidated annual financial statements note 4 Acquisitions and disposals.    

During discussions in March 2017, Statoil and the Angolan Ministry of Finance made progress towards a potential resolution of the dispute regarding additional profit oil and taxes assessed related to Statoil's participation in Block 4, Block 15, Block 17 and Block 31 offshore Angola. Statoil continues to use the same basis for the provision as at year end 2016. As the discussions are ongoing further details cannot be provided.

During the normal course of its business Statoil is involved in legal and other proceedings, and several claims are unresolved and currently outstanding. The ultimate liability or asset, respectively, in respect of such litigation and claims cannot be determined now. Statoil has provided in its condensed interim financial statements for probable liabilities related to litigation and claims based on the company's best judgement. Statoil does not expect that its financial position, results of operations or cash flows will be materially affected by the resolution of these legal proceedings.

 

Supplementary disclosures

 

OPERATIONAL DATA
	Quarters			Change
Operational data	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
Prices
Average Brent oil price (USD/bbl)	53.7	49.3	33.9	58%
DPN average liquids price (USD/bbl)	50.2	45.1	30.7	64%
DPI average liquids price (USD/bbl)	46.9	42.1	25.6	83%
Group average liquids price (USD/bbl)	48.9	43.8	28.7	70%
Group average liquids price (NOK/bbl) [1]	412.6	366.7	248.0	66%
Transfer price natural gas (USD/mmbtu) [9]	4.22	3.83	4.00	5%
Average invoiced gas prices - Europe (USD/mmbtu) [8]	5.46	5.30	5.45	0%
Average invoiced gas prices - North America (USD/mmbtu) [8]	3.31	2.53	2.29	45%
Refining reference margin (USD/bbl) [2]	5.4	5.0	4.3	25%
Entitlement production (mboe per day)
DPN entitlement liquids production	616	632	602	2%
DPI entitlement liquids production	439	416	434	1%
Group entitlement liquids production	1,054	1,048	1,036	2%
DPN entitlement gas production	777	742	719	8%
DPI entitlement gas production	176	143	155	14%
Group entitlement gas production	953	886	873	9%
Total entitlement liquids and gas production [3]	2,007	1,934	1,909	5%
Equity production (mboe per day)
DPN equity liquids production	616	632	602	2%
DPI equity liquids production	556	530	552	1%
Group equity liquids production	1,172	1,162	1,154	2%
DPN equity gas production	777	742	719	8%
DPI equity gas production	197	190	182	8%
Group equity gas production	974	933	901	8%
Total equity liquids and gas production [4]	2,146	2,095	2,054	4%
MMP sales volumes
Crude oil sales volumes (mmbl)	196.0	198.0	205.0	(4%)
Natural gas sales Statoil entitlement (bcm)	13.1	12.5	12.2	8%
Natural gas sales third-party volumes (bcm)	2.4	2.4	2.7	(11%)

 

EXCHANGE RATES
	Quarters			Change
Exchange rates	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
NOK/USD average daily exchange rate	0.1184	0.1193	0.1156	2%
NOK/USD period-end exchange rate	0.1166	0.1160	0.1209	(4%)
USD/NOK average daily exchange rate	8.4426	8.3798	8.6482	(2%)
USD/NOK period-end exchange rate	8.5757	8.6200	8.2692	4%
EUR/USD average daily exchange rate	1.0647	1.0783	1.1015	(3%)
EUR/USD period-end exchange rate	1.0691	1.0541	1.1385	(6%)

 

 

EXPLORATION EXPENSES
Exploration expenses	Quarters			Change
(in USD million)	Q1 2017	Q4 2016	Q1 2016	Q1 on Q1
DPN exploration expenditures (activity)	121	158	105	16%
DPI exploration expenditures (activity)	148	265	239	(38%)
Group exploration expenditures (activity)	269	423	344	(22%)
Expensed, previously capitalised exploration expenditures	13	274	71	(82%)
Capitalised share of current period's exploration activity	(81)	(55)	(135)	(40%)
Impairment (reversal of impairment)	26	794	71	(63%)
Exploration expenses IFRS	227	1,435	351	(35%)

 

HEALTH, SAFETY AND THE ENVIRONMENT
Twelve months average per				First quarter	First quarter
Q1 2017	Q1 2016			2017	2016
			Injury/incident frequency
2.7	2.6		Total recordable injury frequency (TRIF)	2.4	2.7
0.8	0.6		Serious incident frequency (SIF)	0.6	0.7
			Oil spills
144	144		Accidental oil spills (number of)	25	27
61	32		Accidental oil spills (cubic metres)	4	4
				First quarter	Full year
				2017	2016
			Climate
			Upstream CO2 intensity (kg CO2/boe) 1)	8	10

 

1)        For Statoil operated assets in DPN and DPI, the total amount of direct CO2 released to the atmosphere (kg), divided by total hydrocarbon production (boe).