From: Reuters
Published February 27, 2008 06:19 AM

StatoilHydro sweetens weak quarter with big dividend

By Wojciech Moskwa and Joergen Frich

OSLO (Reuters) - Norway's StatoilHydro <STL.OL> posted a smaller-than-expected fourth-quarter profit due to hefty merger costs and other one-offs but its shares rose on strong underlying oil and gas production and a fat dividend.

The $95 billion group, long struggling to ramp up production as its core Norwegian oilfields mature, stuck to its output guidance and said it was stronger and more competitive after taking over Norsk Hydro's <NHY.OL> oil and gas divisions.

Earnings before interest and tax fell to 30.8 billion crowns ($5.79 billion) in October-December from a pro-forma 35.2 billion a year earlier -- missing all 17 forecasts in a Reuters poll of analysts. EPS tumbled to 1.93 crowns from 4.65 crowns.

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"These results are competitive, if you take the merger costs into consideration," Chief Executive Helge Lund told reporters.

It said merger-related costs amounted to 10.7 billion crowns before tax, more than the expected 10.4 billion, and it lost 800 million crowns after tax in derivative transactions, against a gain of 2.1 billion in the same period of 2006.

StatoilHydro's reserve replacement rate, which shows the extent to which production was matched by new finds, amounted to 86 percent in 2007, up from 61 percent in 2006.

"A messy set of numbers given merger effects should not obscure solid underlying operating performance and better than expected production growth, reserve replacement and dividend," Citigroup analyst Mark Bloomfield said in a note.

StatoilHydro produced 1.82 million barrels of oil equivalent per day (boed) in the quarter, above the expected 1.79 million.

Shares in StatoilHydro rose 3.3 percent to 160.90 crowns by 0540 EST, outpacing a 0.1 percent rise in the DJ Stoxx European oil and gas Index <.SXEP> and helped up by record-high oil prices above $100 a barrel.

DIVIDEND BOOST

StatoilHydro proposed a total of 8.5 crowns per share in dividend for 2007, higher than the expected 7.96 crowns. It gave shareholders about 62 percent of its earnings, well above its guidance of 45-50 percent.

"Considering the one-offs, the figures are actually pretty neutral," said Carnegie analyst John Olaisen.

The group repeated its 2008 and 2012 production targets for 1.75 million boed and 1.96 million boed respectively.

It said production costs jumped to 44.1 crowns per barrel of oil equivalent last year from 28.4 crowns in 2006. But excluding merger costs, it paid 35.7 crowns a barrel.

Lund said 2008 production risks remained at its Snoehvit gas field in the Barents Sea, repeating that it would work at 60 percent of capacity this year due to start-up difficulties at the first LNG export facility in Europe and in the Arctic.

Lund also said that there were no cost estimates for its investments at Russia's giant gas field Shtokman, adding that the landmark project was not only about costs and profits.

"Our role in Shtokman cannot be looked at in isolation, but in a strategic light as part of our global Arctic strategy," Lund said. "We think StatoilHydro has a competitive edge (with Arctic exploration know-how) if we make the right moves."

Russian gas giant Gazprom <GAZP.MM> holds a 51 percent stake in the company that will develop Shtokman, StatoilHydro has 24 percent and French Total <TOTF.PA> 25 percent.

The pro-forma figures for the fourth quarter of 2006 combine Statoil with the oil and gas divisions of Norsk Hydro, which the group officially took over on October 1, 2007.

(Additional reporting by Aasa Christine Stoltz; Editing by Louise Ireland)

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