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StatoilHydro Projects Output Growth

Norway's StatoilHydro projected on Wednesday that its oil and gas production would grow to 2.2 million barrels of oil equivalents per day in 2012 from 1.9 million boed in 2008.

The new production target, based on the equity method which includes volumes from overseas production sharing agreements, came before the start of a day of presentations to investors and analysts in London.

Production from fields off Norway is estimated to be around 1.5 million boed for the next 10 years, reaching 1.55 million boed in 2012, while international equity oil and gas output is seen growing to 0.65 million boed in 2012, the company said.

The company has struggled to maintain domestic production against a long-term decline at ageing North Sea oilfields while seeking to grow overseas and strongly boost Norway gas output.

"Our strategic direction remains firm -- the key being that we will take out the potential of the (Norwegian continental shelf) while we continue to deliver international production growth," Chief Executive Helge Lund told reporters in a brief conference call before the group's capital markets Day.

"Our roadmap to 2012 should be seen as part of a bigger journey; the transforming of StatoilHydro into a global energy player," Lund said in the statement.

Targets Lower than Expected

StatoilHydro shares opened down 3 percent after the announcement, but pared losses to trade off 2.6 percent at 162.20 by 0855 GMT, valuing the company at about $96.34 billion.

Christian Kleindienst, analyst at HVB, said the production targets were lower than expected but he was optimistic that the planned higher capital expenditure could still be funded from cashflows. He said higher capex could limit dividend potential.

StatoilHydro said on Dec. 7 that its 2007 oil and gas output was "slightly lower" than its 1.735 million boed target, and production would rise to 1.75 million boed this year, adjusted for production sharing agreements, which sparked a steep sell-off of its shares.

High oil and gas prices reduce company's entitlement to output from some overseas fields governed by production sharing agreements (PSAs).

"At an oil price of $75 per barrel, PSAs are assumed to have an effect on entitlement production of around 150,000 boed in 2008 and 240,000 boed in 2012," StatoilHydro said. The PSA effect in 2007 was around 105,000 boed.

Scaled Back Production

Most international oil majors have scaled back production growth targets in the past year, partly due to PSAs which resource holding nations are increasingly forcing the majors to sign and which yield fewer barrels as oil prices rise.

However, the growing trend for resource holders to reserve their richest fields for their state oil companies means the international oil majors are increasingly opportunity poor.

This also forces them to look at more complex and capital intensive projects, which are more susceptible to delays.

Lund told reporters production from StatoilHydro's complex Snoehvit liquefied natural gas (LNG) project in the Barents Sea would be uncertain this year due to start-up difficulties.

StatoilHydro, formed by Statoil's acquisition last year of Norsk Hydro's oil and gas assets, said that annual synergies from the merger are now estimated at around 6 billion Norwegian crowns before tax, 2 billion above earlier estimates.

The company also announced that it had agreed to sell its computer systems firm IS Partner for about $222 million to EDB Business Partner, and Lund said: "This is also part of the overall synergy plan that we have."

Capital Expenditure Rising

Capital expenditure is seen rising to around 80 billion crowns in 2009 from 75 billion in 2008, the group said.

It said its 2008 exploration programme will represent an all-time high with spending of about 18 billion crowns, based on plans for around 70 wells. "Drilling rigs have been secured for the entire 2008 drilling programme," the company said.

Exploration activity will be split equally between offshore Norway and internationally.

Lund said StatoilHydro would like to have a reserve replacement ratio above 1 -- meaning it would fully replace volumes it produces -- but declined to give specific guidance.

He also declined to say if the company expected to be able to book reserves from its participation in developing Russia's vast Shtokman gas field in the Arctic.

The group said it would stick to a dividend policy of paying out an average of 45-50 percent of net income to shareholders.

StatoilHydro said it aimed to develop a stronger position in the field of new energy, primarily focused on energy efficiency, carbon capture and storage, bio fuels and offshore wind.