Lower profit for oil companies

The operating profit for the oil companies operating on the Norwegian continental shelf decreased by NOK 52 billion to NOK 248 billion in 2007, as a consequence of decreased oil production and a decline in prices for natural gas. Last time the profit went down was in 2002.

Prices of natural gas decreased by 10 per cent in 2007 and the production went down with 6 per cent. This contributed to a decline in the operating profit of 18.3 per cent.

The average return on total assets and the average return on equity went down in 2007. The average return on total assets was measured to 39.4 per cent in 2007, but corrected for a merger between two companies, the figure falls to about 36 per cent.

Average return on equity increased from 46.3 to 48.0 per cent, corrected for the merger. Without the merger, the equity return would have been about 42 per cent in 2007.

The decrease in average return on total assets is caused by a decrease in operating result and an increase in total capital. The decrease in average return on equity is mainly caused by the decrease in the ordinary result.

Profitability measures. Extraction of crude oil and natural gas. 2003-2007.

Increased total capital

Total capital in the companies was booked at NOK 918 billion at the end of 2007, an increase of more than 23 per cent since 2006. Of this capital, 19.3 per cent was bound in current assets (mainly receivables) and 80.7 per cent in fixed assets (mainly property, plant and equipment). There has been an increase in fixed assets from NOK 610 billion in 2006 to NOK 741 billion in 2007. 33 per cent of the capital was financed by short-term debt. Long-term financing by long-term debt made up 40 per cent and long-term financing by equity capital 27 per cent at the end of 2007. Due to a relatively larger increase in short-term debt compared with current assets, the current ratio decreased from 0.62 to 0.60 in the course of the year, and thereby decreasing the oil companies’ financial strength in 2007.

Read more at Statistics Norway.

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