[email protected]. 2 agenda about statoil shareholding entry barriers remaining multinational risks...
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Agenda
• About Statoil• Shareholding• Entry Barriers• Remaining Multinational• Risks• Emerging Markets Investment Research
– Venezuela– Russia
• Financing Investment Activities• W.A.C.C and W.M.C.C Calculations
About StatoilAbout Statoil
• Statoil, an integrated oil and gas company.
• One of the major suppliers of natural gas to the European market
• One of the world's biggest sellers of crude oil.
About StatoilAbout Statoil
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2003 2002 2001 2000 1999
Total revenues
Net income
• Founded 1972• Listed 2001 • Total Turnover 2003
listed NOK 249 billion• 24000 Employees
About StatoilAbout Statoil
Source: www.statoil.com/statoils_world
• 50% of employees work outside Norway
• Operator of 20 oil and gas fields
• Represented in 28 countries
• 2003 imp. Int. operations– Gas fields Algeria– New producing Angola
ShareholdingShareholding
• Listed June 2001; Oslo and New York stock exchanges
• One-third of the company’s value was permitted to to be sold
• Main objective - to strengthen the company’s competitive position and the group with a broader ownership base
Share price Oslo Stock Exchange 2001-2004
ShareholdingShareholding
• Government holds 76,3 % of the shares
• State ownership in Statoil still important - ensuring that company retains a Norwegian base.
• State guidelines from the Norwegian Ministry of Petroleum and Energy.
• Statoil’s Board of directors – responsible for development
Rank Percent Name1 76.33 The Norwegian State
2 2.28State Street Bank and Trust Co.
3 1.44 JP Morgan Chase Bank
4 1.07 Bank of New York
5 0.86 Mellon Bank AS Agent
6 0.71 The Northern Trust Co.
7 0.49 JP Morgan Chase Bank
8 0.47 Folketrygtfondet
9 0.43 Investors Bank and Trust
10 0.42 Deutsche Bank AG
Top 10 Shareholders Sept. 2004
Entry Barriers Entry Barriers -Oil & Gas Market-Oil & Gas Market
• Government restrictions on entry.Government restrictions on entry.Major development projects or issues of principle must be considered and approved by the Storting. The oil and gas market is highly regulated. Statoil has competitive advantage as a state owned company.
• Economies of scale.Economies of scale.Benefit from producing on a large scale, which means that the average cost of one barrel is lower. Statoil is actively involved in the direct trade sector, delivering large quantities.
Entry Barriers Entry Barriers -Oil & Gas Market-Oil & Gas Market
• Research and Development ExpenditureResearch and Development ExpenditureHeavy spending on research and development can act as a strong deterrent to potential entrants to the industry.
Statoil’s research expenditure were NOK 1,004 million 2003, NOK 736 million 2002 and NOK 633 million in 2001.
International StrategyInternational Strategy
• Health, safety and the environment • Zero harm• Cut its share of greenhouse gas by 1.5 million
tonnes of carbon dioxide • Close cooperation between government,
industry, and a select few environmental NGOs • Zero accept in corrupt activities in any country
– Statoil belongs to the anti-corruption sub-committee
• Staff training.
Corporate Risk ManagementCorporate Risk Management• “Top-down” approach • Corporate Risk Committee; responsible for
reviewing, defining and developing the company´s strategic market risk policies.
• The main goals; ensure Statoil’s long term strategic development and to reach targets through protecting financial flexibility, i.e. avoiding different categories of financial distress, down-rating and protecting cash flows.
Foreign Exchange Foreign Exchange & & Interest Rate RisksInterest Rate Risks
• Forward foreign exchange – Receivables and payables – Borrowing in foreign currencies
Emerging Markets Investment Emerging Markets Investment ResearchResearch
Venezuela
Russia
Statoil in VenezuelaStatoil in Venezuela
• Largest oil reserves in the western hemisphere
• 21,000 barrels of oil per day from the LL 652 and Sincor fields,2003.
• Committed 2004 to drill three exploration wells in the Plataforma Deltana area
Statoil's share
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5,00%
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25,00%
30,00%
Sincor LL652
Statoil's share
May 26th 2004
From the Economist Intelligence Unit
Source: Country data
2000 2001 2002 2003
GDP (% real change pa) 3.24 2.79 -8.88 -9.20
Government consumption (% of GDP) 7.23 8.59 8.06 8.90
Budget balance (% of GDP) -1.65 -4.41 -4.80 -5.80
Public debt (% of GDP)* 27.01 30.41 38.35 38.60
Labour costs per hour (USD) 3.22 3.44 2.45 2.11
Recorded unemployment (%)** 13.90 13.30 15.90 21.00
Foreign-exchange reserves (mUS$) 13,09 9,239 8,49 16
Economic Fundamentals Economic Fundamentals – Country Investment Risk Venezuela – Country Investment Risk Venezuela
Economic Fundamentals Economic Fundamentals – Country Investment Risk Venezuela – Country Investment Risk Venezuela
• Geopolitical, political and social risks are expected to remain reasonably low until early 2005.
• Increasing risk factors:– Bush’s re-election – Regional impact of the war on terrorism – Regional and Venezuela-specific US government
policy goals – Hugo Chavez’s government – Displaced from its position as the OPEC´s third
largest oil producer, due United Arab Emirates
Economic Fundamentals Economic Fundamentals – Country Investment Risk Venezuela – Country Investment Risk Venezuela
• Oil sector: 25% of GDP, 80% of Venezuela's total exports and 50% of the government income.
• Production decline; GDP fell 8.9% in 2002 and 9.2% in 2003
• Unemployment 21% and inflation 27.1% in 2003
• Economic growth, fiscal and balance of payments risks – remain reasonably low through 2005
• GDP slightly above average, though distribution very uneven
• Exportation of commodities: oil, gas and aluminium
• Rapid increases in public revenues
Economic FundamentalsEconomic Fundamentals – Country Investment Risk Venezuela – Country Investment Risk Venezuela
Economic Fundamentals Economic Fundamentals – Country Investment Risk Venezuela – Country Investment Risk Venezuela
• So, Investment risk is expected to remain reasonably low through early 2005.
• Low investment risk:– has been discounted in equities, leaped
almost 250 % higher in 2003 – cheap international bonds // Latin America //
other other oil producing emerging markets.
Financial SectorFinancial Sector
• Chavez survived the referendum with 58% of the votes – fiscal profligacy will keep the public finances in deficit,
despite firm oil prices – continue attract FDI with the aim of boosting fiscal oil
revenue– non-oil FDI put off by uncertain legal and regulatory
regime– domestic investment and profitability will remain
crippled by price and exchange controls.
Policy IssuesPolicy Issues
• Petroleum,mainstay of the economy since the 1920s
• 80% of export revenue • 25% of GDP • largely uncompetitive manufacturing industries
Legal SystemLegal System
• Republic and a federal state • The President of the Republic, same as Head of
State and Head of issues for example regulations for the execution of laws
• Legal rules:national, state and municipal.
RegulatoryRegulatory FrameworkFramework
• System to prevent and prosecute corruption• Fines and/or prison sentences• Technical Judicial Police - open cases
– private bankers for the 1994-95
financial crisis
Banking System
• Commercial banks• Government-owned banks• Foreign-owned banks• Commercial banks comprise the largest group
– accept demand deposits (checking accounts) without paying interest
• Savings accounts and time deposits are freely negotiated on a minimum 30 days term
• Lending is almost all short term, not exceed three years.
Banking SystemBanking System
• Central bank is legally an independent entity• Operates under the control of the Ministry of
Finance • Responsible; government monetary, tax and
foreign exchange policies
Capital & Credit MarketsCapital & Credit Markets
• Foreign debt credit rating raised from Caa1 to B2 (2004, Moody’s)
• Fitch Ratings upped the country's credit rating to "BB-" from "B+" with a stable outlook 2004.
• keep up payments of foreign debt after oil prices rose to record highs
• CSE (Bolsa de Valores de Caracas)is the only Stock Exchange– common/ ordinary shares and preferred shares – owned by brokers the National Securities Commission
(CNV)
Capital & Credit MarketsCapital & Credit Markets
• Second highest growth in the world in 2003 • 2004, the Caracas bourse is leading the ranking • To obtain dollars; buy shares in CANTV
exchange them for US deposit receipts listed on the New York Stock Exchange
• The telephone company, 40% of trading volume, the only stock in demand by foreign investors
Statoil in RussiaStatoil in Russia
• Representation office in Moscow since August 1991.
• Cooperation with Lukoil, Gazprom and Rosneft
• Cooperated in 1995-2000 with Russia’s OAO Gazprom Five service stations in the Murmansk region of north-western Russia.
Economic Fundamentals Economic Fundamentals – – Country Investment Risk RussiaCountry Investment Risk Russia
May 26th 2004
From the Economist Intelligence Unit
Source: www.eonomist.com
2000 2001 2002 2003
GDP (% real change pa) 10.05 5.09 4.66 7.33
Government consumption (% of GDP) 15.09 16.44 17.69 16.89
Budget balance (% of GDP)* 2.37 3.08 1.65 1.63
Public debt (% of GDP) 62.15 49.35 42.01 34.80
Labour costs per hour (USD) 0.44 0.63 0.78 1.00
Recorded unemployment (%) 10.49 9.03 8.00 8.47
Foreign-exchange reserves (mUS$) 24,3 32,54 44,1 73,174
Economic Fundamentals Economic Fundamentals – – Country Investment Risk RussiaCountry Investment Risk Russia
• Oil and gas; 20 percent of Russia's economy, 55 percent of export earnings, 40 percent of total tax revenues.
• The world's second largest oil exporter• Its subsoil contains 33 percent of the world's gas
reserves• Supplies 30 percent of Europe's gas needs.
Economic FundamentalsEconomic Fundamentals
– Country Investment Risk Russia– Country Investment Risk Russia
• High oil prices and strong global demand for oil - acceleration of growth in the country from the beginning of 2004.
• Forecast; GDP should grow by close to 7 per cent in 2004, slowdown to 5.7 per cent expected for 2005.
• Oil generates export revenues and taxes for the state, but it creates few jobs.
• Financial crash 1998
Economic FundamentalsEconomic Fundamentals – Country Investment Risk Russia – Country Investment Risk Russia
• Trend towards real exchange rate appreciation. • Investment risk expected to remain low over the
short and medium-terms. • In the long-term, investment risk is expected to
increase. • Political risk is expected to remain low over all
investment horizons.
Financial SectorFinancial Sector
1) Policy, legal and regulatory framework
2) Bank Restructuring
3) Tax Reform in the oil-sector of Russia
1) Policy, legal and regulatory Policy, legal and regulatory frameworkframework
2000-2004, important structural reforms;• Package of laws to reduce bureaucratic
interference in businesses’ activities• Adoption of new codes of procedure for the
various courts• Weakness, inefficiency and, in many cases,
corruption of the state administration, the judiciary and the lawenforcement agencies
• Arbitrary exercise of state power
2) Bank RestructuringBank Restructuring
• Financial crisis of 1998 lead to reform of the system of banking regulation.
• Since 2002; deposit insurance legislation, reform of the framework for prudential supervision, steps to increase transparency in the sector, measures to facilitate the development of specific banking activities.
• Emphasis on transparency will facilitate better monitoring of banks by private-sector agents.
• Russia’s largest banks continue to be controlled by the state.
3)Tax reform 3)Tax reform in the oil-sector of Russiain the oil-sector of Russia
• Russian tax reform implemented in 2002. • Changes in all three principle group of taxes
imposed on oil producers;– Export duty scale became ‘steeper’ and export duties,
increased more rapidly. – Three resource payments: royalty, the tax for mineral
resources reproduction and the excise tax on oil were replaced by a single extraction tax (ET).
– Oil extracting enterprises enjoyed profit tax rate reduction (from 35% to 24%)
Statoil Capital CostStatoil Capital Cost
Kd= Weighted Average Interest Rate= 4.06 %
Ki= Kd x (1 - T)= 3.87 x (1 - 0.4)= 2.44%
Ks= D1/P0 + g= 2.95/ 96 + 0.017= 4.80%
Kn= D1/Nn + g= 2.95/ 77 + 0.017= 5.60%
Statoil TCSStatoil TCSTARGET CAPITAL STRUCTURETARGET CAPITAL STRUCTURE
Long Term Debt = Long Term Debt = 64%64%
Common Stock Equity = Common Stock Equity = 36%36%
Statoil Breaking PointsStatoil Breaking Points
Assumtion of Ki up to 70% of total balance sheet gives an Afi of 130 184 250 NOK
BPLTD = 130 184 250 / 0.64= 203 412 891 NOK
BPCSE = 46 758 000 / 0.36= 129 883 333 NOK
IOS ScheduleIOS Schedule
12%
10%
8%
6%
4%
2%
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