StatoilHydro ASA (StatoilHydro) has reported total revenues and other income of NOK105.2 billion for the second quarter of 2009, compared with the total revenues and other income of NOK171.6 billion in the year-ago quarter. It also reported a net income of NOK26 million for the second quarter of 2009, compared with the net income of NOK18,916 million in the ear-ago quarter.

The quarterly result was negatively affected by a 40% drop in oil prices, an 18% decrease in the average price of natural gas and a 9% reduction in liftings of liquids, partly offset by a 4% increase in lifted gas volumes and improved margins for natural gas.

Adjusted for certain items that management considers not to be reflective of StatoilHydro’s underlying operational performance in the individual reporting period, adjusted earnings in the second quarter of 2009 were NOK29.2 billion, compared to NOK56.3 billion in the second quarter of 2008. The decrease in adjusted earnings was primarily due to lower prices and volumes of liquids and partly due to decreasing prices for natural gas. The reduction was only partly compensated by higher margins and sales volumes of natural gas.

The second quarter net income was was mostly influenced by lower crude oil and gas prices, currency effects and an unusually high effective tax rate caused in part by tax on currency gains not reflected in the net financial items.

Adjusted earnings after tax amounted to NOK9 billion, down from NOK16.7 billion in the second quarter of 2008. The decrease is mainly due to lower oil prices and volumes, partly offset by higher income from natural gas sales and a lower effective tax rate on adjusted earnings. Adjusted earnings after tax excludes the effects of tax on net financial items, and represented an effective tax rate of 69.2% in the second quarter of 2009 and 70.3% in the second quarter of 2008.

“StatoilHydro maintains a high activity level and robust operations both in Norway and internationally. In a demanding market, our operational performance is solid. We have increased our efforts to reduce costs, and we continue to deliver good results from operations,” says StatoilHydro’s chief executive Helge Lund.

“Since first quarter we have started operations on important oil and gas fields such as Tyrihans in the Norwegian Sea and Tahiti and Thunder Hawk in the Gulf of Mexico and our exploration programme continues to yield good results.”

“So far this year we have completed a total of 48 exploration and extension wells, 30 of which resulted in discoveries. Twenty-five of these discoveries were made on the Norwegian continental shelf,” says Lund.

The CEO continues: “Although the outlook for the global economy seems somewhat less pessimistic and the balance of risks appears to have improved, the uncertainty remains high. We therefore continue to focus on operational efficiency and capital discipline, and we have the flexibility to adjust our activity level according to market development,” says Lund.

In the second quarter of 2009, equity production of liquids and natural gas was 1.137 million and 708 thousand barrels of oil equivalent per day, respectively. Total equity production was 1.845 million barrels of oil equivalent per day, down 3% from the second quarter of 2008. The decrease in equity production was primarily caused by declining production from mature fields.

Performance update

In the second quarter of 2009, StatoilHydro delivered total liquids and gas entitlement production of 1,729 mboe per day, which is an increase of 1% compared to the 1,710 mboe per day in the second quarter of 2008. Total liftings of liquids and gas were 1,664 mboe per day in the second quarter of 2009, a 4% decrease from 1,736 mboe per day in the second quarter of 2008.

StatoilHydro delivered an extensive exploration programme in the second quarter of 2009. Of a total of 22 exploration wells completed before June 30, 2009, eight were drilled outside the NCS. Fourteen wells have been announced as discoveries, of which two are located outside the NCS. In the first half of 2009 StatoilHydro has completed 44 wells, 27 on the NCS and 17 internationally. A total of 27 wells have been announced as discoveries, 23 on the NCS and four internationally. An additional four wells, of which three have been declared as discoveries, have been completed since June 30, 2009.

In the second quarter of 2009, the Tyrihans field started production on the NCS and first oil was received from the Chevron-operated Tahiti field in the US Gulf of Mexico.

The StatoilHydro operated Troll field received approval from the Norwegian government on June 19, 2009 on a project to increase reserves and extend the lifetime of the field. The Goliat field also received approval from the Norwegian government on June 19, 2009, marking the go-ahead for development of the first oil field in the Barents Sea.

Return on average capital employed after tax (ROACE) for the 12 months ended June 30, 2009 was 13.4%, compared to 23.2% for the 12 months ended June 30, 2008. The decrease was due to the reduced income and a higher average capital employed.

In the second quarter of 2009, earnings per share based on net income was NOK0.02 compared to NOK5.89 in the second quarter of 2008. In the first half of 2009 earnings per share based on net income amounted to NOK1.18, compared to NOK10.91 in the first half of 2008.

Profit and loss discussion

In the second quarter of 2009, net operating income was NOK24.3 billion, compared to NOK62.6 billion in the second quarter of 2008.

Net operating income includes certain items that management considers not to be reflective of StatoilHydro’s underlying operational performance. Management adjusts for these items to arrive at adjusted earnings. Adjusted earnings is a supplemental non-GAAP measure to StatoilHydro’s IFRS measure of net operating income which management believes provides an indication of StatoilHydro’s underlying operational performance in the period and facilitates a better evaluation of operational developments between periods.

In the second quarter of 2009, lower fair value of derivatives (NOK0.5 billion), impairment charges net of reversals (NOK3.3 billion), underlift (NOK1.1 billion) and other accruals (NOK0.1 billion) negatively impacted net operating income, while higher values of products in operational storage (NOK1.2 billion) and gain on sale of assets (NOK0.2 billion) both had a positive impact on net operating income in the second quarter of 2009. Adjusted for these items and effects of eliminations (NOK1.3 billion), adjusted earnings were NOK29.2 billion in the second quarter of 2009.

In the second quarter of 2008 restructuring cost accruals (NOK0.2 billion) and other accruals (NOK0.3 billion) negatively impacted net operating income, while higher value of derivatives (NOK3.3 billion), impairment charges net of reversals (NOK2.1 billion), overlift (NOK1.8 billion), higher values of products in operational storage (NOK1.4 billion) and gain on sale of assets (NOK0.5 billion), had a positive impact on net operating income in the second quarter of 2008. Adjusted for these items and effects of eliminations (NOK1.3 billion), adjusted earnings were NOK56.3 billion in the second quarter 2008.

The 48% decrease in adjusted earnings from second quarter 2008 to second quarter 2009 was primarily due to the reduction in prices for both liquids and gas, and the decrease in volumes of liquids sold, partly compensated by increased results from sales of natural gas.

In the first half of 2009, the net operating income was NOK59.8 billion, compared to NOK114.1 billion in the first half of 2008.