TEXT-S&P summary: Statoil ASA
In accordance with our criteria for GREs, we see a "moderately high" likelihood that the Norwegian government would provide timely and sufficient extraordinary support to Statoil in the event of financial distress. Our view of a "moderate" likelihood of extraordinary government support is based on our assessment of Statoil's:
-- "Important" role for the Norwegian government, which reflects the group's dominant position in the Norwegian oil and gas production industry and its substantial tax and dividend payments to the state; and
-- "Strong" link with the Norwegian government, mostly reflecting the state's majority ownership, even if the state is not directly involved in operational decisions.
The SACP is underpinned by Statoil's access to vast hydrocarbon reserves on the Norwegian continental shelf, the group's increasing levels of international upstream diversity, resilient upstream profitability, and conservative balance sheet management. These strengths are somewhat offset by the group's limited downstream integration and exposure to exploration and production (E&P) industry risks, including the challenges of a continual need to replace depleting oil reserves and sustained weak discretionary cash flow (DCF) after capital investment and dividends.
S&P base-case operating scenario
We anticipate continued robust results for Statoil in 2012, with EBITDA of about Norwegian krone (NOK)250 billion-280 billion compared with NOK283 billion in 2011. We base this on our 2012 $100 per barrel oil price assumption, and production increases being somewhat offset by rising production costs. Beyond 2012, we anticipate that the company will bring significant new projects into production. As new capacity comes on stream, we expect operating performance to remain satisfactory, even with our prudent long-term oil price assumption of $80 per barrel. We believe that these projects involve execution risk linked to timing and costs, but note that progress appears sound. Continued...