Norway's StatoilHydro said currency gains boosted its third-quarter net profit, but lower oil and gas output and higher costs hit operating results and made the $110 billion group cautious on 2007 production targets.
Output fell 2 percent year-on-year to just over 1 million barrels of oil equivalent per day, a touch below forecasts and echoing industry trends seen at both Shell and BP, where production fell 4 percent.
Shares in StatoilHydro rose 1.6 percent to 185.7 crowns after a slow start to outpace the DJ Stoxx Oil and Gas Index, up 1.2 percent on the back of record oil prices.
Earnings before interest and tax fell to 24.4 billion crowns ($4.54 billion) in July-September from 30.2 billion a year ago, worse than all forecasts by 18 analysts in a Reuters poll, which ranged from 24.8 billion to 30.3 billion crowns.
"The decrease is mainly caused by lower downstream results, a 15 percent decrease in gas prices, as well as higher operational costs and exploration activity," Chief Executive Helge Lund told a news conference on Monday.
Net profit rose 26 percent to 10.7 billion crowns, beating an average forecast of 9.9 billion in the Reuters survey, "mainly due to an increase in net financial items from currency gains," StatoilHydro said.
The third-quarter results are the last without the oil and gas assets of industrial group Norsk Hydro, which Statoil officially took over on Oct. 1 to become StatoilHydro.
"The numbers were worse than expected, and adjusted for one-off effects, they were even worse," said analyst Martin Moelsaeter at First Securities.
Lund said he expected Statoil's production to be at the lower end of its 2007 target of 1.15-1.2 million boed, but offered little vision for beyond this year.
The group will give figures including output from the acquired Norsk Hydro assets on Nov. 12, and its production targets for 2008 are due out early next year.
Mark Bloomfield, analyst at Citigroup Global Markets, said StatoilHydro did not have a "confidence-building quarter" in terms of production, but he expected combined StatoilHydro production to grow by 8 percent in 2008.
"(StatoilHydro's investment) story may be hurt by near-term uncertainty over volume guidance, but this is presently outweighed by $90 a barrel plus oil price," Bloomfield said.
"StatoilHydro remains our top pick (in Europe's integrated oil and gas segment), reflecting attractive fundamental valuation and a 10 percent ... discount to the peer group."
StatoilHydro's oil and gas production in the third quarter fell to 1.056 million barrels of oil equivalent per day, below the 1.08 million boed average forecast. Its production costs per barrel rose to 31.3 crowns for the 12 months ended Sept. 30, from 26.2 crowns for all of 2006.
Last week StatoilHydro agreed with Russia's Gazprom to become a partner in the giant Shtokman gas field in the Russian part of the Barents Sea.
Lund said costs stemming from the deal will come later. "We have not paid one crown at this stage," Lund told Reuters, rejecting Russian newspaper reports that his group had paid hundreds of millions to participate in the project.
StatoilHydro has said project expenses are limited initially to the costs of planning and studies, until a final investment decision is made, probably in the second half of 2009.
In a research note on Friday, HSBC said if the Shtokman deal went ahead it could be worth an additional 2.5-5 crowns per StatoilHydro share.
StatoilHydro gets 24 percent of the company that will develop the Arctic field, by far the biggest in Europe, and will probably be able to book reserves from it despite not being a direct owner of the field. It joins France's Total as a second western partner in Shtokman.
Shares in StatoilHydro have surged by 22 percent since mid-August lows, outpacing an 18 percent rise by the DJ Stoxx Oil and Gas Index.
According to Reuters Knowledge, StatoilHydro trades at around 11.5 times forecast 2008 earnings, below the 12.9 times average in the Integrated Oil and Gas sector.