Balancing returns and growth Torgrim Reitan, Executive Vice President and CFO Swedbank Nordic Energy Summit
Forward-looking statements This presentation material contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as "aim", "ambition", "believe", "continue", "could", "estimate", "expect", "focus", "intend", "likely", "may", "outlook", "plan", "potential", "strategy", "will", "guidance" and similar expressions to identify forward-looking statements. All statements other than statements of historical fact, including, among others, statements regarding future financial position, results of operations and cash flows; changes in the fair value of derivatives; future financial ratios and information; future financial or operational portfolio or performance; future market position and conditions; business strategy; growth strategy; future impact of accounting policy judgments; sales, trading and market strategies; research and development initiatives and strategy; market outlook and future economic projections and assumptions; competitive position; projected regularity and performance levels; expectations related to our recent transactions, projects and discoveries, such as discoveries in the Bay du Nord prospect in the Flemish Pass Basin offshore Newfoundland as well as on the NCS; the termination of the full-scale carbon capture project at Mongstad; Statoil's interest in the OMV-operated Wisting Central oil discovery in the Hoop area; completion and results of acquisitions, disposals and other contractual arrangements; reserve information; future margins; projected returns; future levels, timing or development of capacity, reserves or resources; future decline of mature fields; planned maintenance (and the effects thereof); oil and gas production forecasts and reporting; domestic and international growth, expectations and development of production, projects, pipelines or resources; estimates related to production and development levels and dates; operational expectations, estimates, schedules and costs; exploration and development activities, plans and expectations; projections and expectations for upstream and downstream activities; oil, gas, alternative fuel and energy prices; oil, gas, alternative fuel and energy supply and demand; natural gas contract prices; timing of gas off-take; technological innovation, implementation, position and expectations; projected operational costs or savings; projected unit of production cost; our ability to create or improve value; future sources of financing; exploration and project development expenditure; effectiveness of our internal policies and plans; our ability to manage our risk exposure; our liquidity levels and management; estimated or future liabilities, obligations or expenses and how such liabilities, obligations and expenses are structured; expected impact of currency and interest rate fluctuations; expectations related to contractual or financial counterparties; capital expenditure estimates and expectations; projected outcome, objectives of management for future operations; impact of PSA effects; projected impact or timing of administrative or governmental rules, standards, decisions, standards or laws (including taxation laws); estimated costs of removal and abandonment; estimated lease payments and gas transport commitments are forwardlooking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described above in "Financial Risk update". 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. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including levels of industry product supply, demand and pricing; price and availability of alternative fuels; currency exchange rate and interest rate fluctuations; the political and economic policies of Norway and other oil-producing countries; EU directives; general economic conditions; political and social stability and economic growth in relevant areas of the world; Euro-zone uncertainty; global political events and actions, including war, terrorism and sanctions; security breaches, including breaches of our digital infrastructure (cybersecurity); changes or uncertainty in or non-compliance with laws and governmental regulations; the timing of bringing new fields on stream; an inability to exploit growth or investment opportunities; material differences from reserves estimates; unsuccessful drilling; an inability to find and develop reserves; ineffectiveness of crisis management systems; adverse changes in tax regimes; the development and use of new technology; geological or technical difficulties; operational problems; operator error; inadequate insurance coverage; the lack of necessary transportation infrastructure when a field is in a remote location and other transportation problems; the actions of competitors; the actions of field partners; the actions of governments (including the Norwegian state as majority shareholder); counterparty defaults; natural disasters and adverse weather conditions, climate change, and other changes to business conditions; failure to meet our ethical and social standards; an inability to attract and retain personnel; relevant governmental approvals (including in relation to the agreement with Wintershall); industrial actions by workers and other factors discussed elsewhere in this report. Additional information, including information on factors that may affect Statoil's business, is contained in Statoil's Annual Report on Form 20-F for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission, which can be found on Statoil's website at www.statoil.com. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this report, either to make them conform to actual results or changes in our expectations. 2
A consistent strategic roadmap Technology focused upstream company Exploration Development & Production Midstream & marketing Portfolio management Continue to prioritise high value exploration Firm strategy Deepen core areas Drill high impact wells Early access at scale Safe and secure operations Drive cost and capital efficiency Capitalise on technology and operating experience to Take out the full NCS value potential Strengthen global offshore positions Maximise value of onshore portfolio Leverage European gas position Onshore access to premium markets Exploit global trading competence Realise value Sharpen our upstream profile Strengthen execution and financial resilience Execute projects on time and cost 3
Adjusting to strengthened competitiveness Leverage exploration success Respond to industry challenges Strengthen our resilience World class performance last 3 years 3.9 bn barrels 11 high impact discoveries Strong portfolio with optionality In a position to prioritise Cost increase Capital intensity Falling returns Macro uncertainty and risks Cyclical industry Prepared for price fluctuations 4
High value growth High grading the portfolio Start-ups pre-2020 Optimising/future 1) Divested/reduced 1) High profitability Strategic fit Improvement potential Return on capital Low strategic fit Return on capital Market attractiveness Johan Sverdrup, Norway One of the world s largest undeveloped discoveries Bay du Nord, Canada The world s largest oil discovery in 2013 Non-sanctioned Johan Sverdrup IOR projects Sanctioned CLOV Jack Gudrun St.Malo Valemon Hebron Ivar Aasen Aasta Hansteen Mariner Gina Krog Shah Deniz II US onshore Non-sanctioned Snorre 2040 Johan Castberg Corner Bressay Peregrino II Eirin Peon Lavrans Snøhvit II Corvus Sigrid Future Bay du Nord Tanzania LNG Pão de Açúcar King Lear Non-sanctioned Rosebank Shtokman West Qurna II Sanctioned Gudrun Gjøa/Vega Valemon Shah Deniz Schiehallion In operation Gassled stake Statoil Fuel & Retail Gullfaks Brage Kvitebjørn Heimdal 5 1) Since Capital Markets Day 2011. Not exhaustive.
Bn boe USD bn High value growth Directing our capital to priority projects Strengthening profitability IRR 1) (USD 100/bbl / capex-weighted) 16% 24% Profitability index 2) (NPV/total capex) 0,19 0,37 Ongoing project developments Non-sanctioned pre-2020 start-ups Investing in high value growth Capex vs. IRR 20 15 10 5 0 >20% >15% >10% <10% Sum production 3) vs. break-even 2,0 1,5 1,0 0,5 0,0 <45 45-60 60-75 75+ Capital directed to high value projects Next wave of investments even more profitable Competitive project portfolio executed at cost and schedule 6 1) From time of sanction 2) NPV per USD capex (USD 100/bbl / aggregated) 3) Sum of production over field life
Average IRR % Average IRR % High value growth Growth projects to deliver higher returns Moving from good profitability Projects under development to performance well ahead of peers Probable development projects 25 25 20 20 15 15 10 Peer average Statoil 10 Peer average Statoil 7 Analysis based on Wood Mackenzie data (Dec 2013). Capex-weighted average nominal IRR of projects under development (ie post sanctioning) and probable (ie pre sanctioning). Excludes US onshore projects. Price assumption is Wood Mackenzie base prices. Assumes full fiscal consolidation of companies in concession regimes. Peers include: Anadarko, BG Group, BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Petrobras, Repsol, Shell and Total
bn USD Increase efficiency Reducing cost and improving efficiency Strong starting point with low relative Unit Production Cost 1) Launching improvement initiatives with expected annual savings of USD 1.3 bn from 2016 Statoil 1,5 1 0,3 1,3 Delivering capex improvements Reduce modification capex by 20% Potential for 10% lower facility cost from leaner concepts Reduce rig committments Potential to cut well construction time by 25% 0 5 10 15 20 0,5 0 1,0 Capex Opex / SG&A 2016 total Reducing opex & SG&A Maintain upstream cost level despite production growth Further reduce downstream cost Increase organisational efficiency 8 1) Peer group: Anadarko, BG, BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Petrobras, Repsol Shell, Total, Company reported figures sourced from IHS Herold Financial Database. The benchmark is based on average UPC for the years 2010-2012.
Net debt to Capital NOK per share Prioritise capital distribution Strong commitment to capital distribution Net debt reduced from 27% to 15% 27% 25% 21% 12% 15% 2009 2010 2011 2012 2013 2014E Underpins growth and robustness ~20% Firm dividend policy with quarterly payouts 6,00 6,25 6,50 6,75 7,00 2009 2010 2011 2012 2013 Grow with long term underlying earnings Firm financial framework Strong balance sheet will be maintained A-category rating on stand-alone basis Net debt/capital employed 15-30% Firm dividend policy 1) 2013 dividend at NOK 7.00 per share to be paid in 2014 Quarterly dividend from 2014 1) Two quarterly dividends to be paid in 2014 Share buy-back more actively used Will depend on proceeds, cash flow and balance sheet 9 1) Proposal to the Annual General Meeting 2014
Prioritise capital distribution Organic FCF covers dividend from 2016 Strong expected average cash flow 2014-2016 1) USD bn 25 20 15 10 5 ~22 ~20 Stable capital expenditure outlook 2014: USD ~20 bn organic capex 2014-16: USD ~20 bn organic capex Investing for profitable growth ~45% NCS ~60% liquids ~80% OECD ~30% non-sanctioned Portfolio management to be continued Proceeds not included in outlook 0 Cash flow from operations 1) Cash flow to (gross) investments 10 1) Brent Blend assumption 100 USD/bbl real
Balancing returns and growth Delivering ~3% organic production CAGR 2013-16 Equity production 1) 2) (mmboed) 2100 2% increase in production from 2013 (rebased) to 2014 1900 1940 New New 3% production CAGR from 2013-16 Divestments/ redeterminations 1850 Strong line-up of projects 1700 Existing Existing 3) 1500 2013 2013 rebased 2014 2016 1) 11 1) Rebased 2013 is adjusted with 90 000 mboepd for full year impact of transactions with OMV, Wintershall and BP/SOCAR, and redetermination Ormen Lange 2) According to current projections, 2.5 mill boed production to be reached 3-4 years after the previous 2020 estimate. 3) 2014 start-ups included in 2016 existing total.
Summary Balancing returns and growth 2014 2014-2016 Capex USD ~20 bn USD ~20 bn Key message USD 5 bn reduction 2014-16 Free cash flow positive from 2016 Exploration USD ~3.5 bn ~50 wells ~20 high impact wells Continuing significant exploration ROACE ~2013 level ~2013 level Maintaining returns Production growth ~2 % from 2013 (rebased) ~3 % CAGR from 2013 High graded production growth 12