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2014-07-28 17:50:00

STATOIL TOOK WRITE-DOWN U.S.

STATOIL TOOK WRITE-DOWN U.S.

Statoil's Chief Executive Helge Lund said Friday the company had taken a write down on its U.S. onshore oil and gas operations as a lack of pipeline capacity is hindering it from selling its output to regions where it can fetch a higher price.

The state-owned Norwegian oil and gas major earlier said it had booked a total impairment of 4.3 billion Norwegian kroner ($694 million) on its assets in the Bakken, Marcellus and Eagle Ford areas.

Mr. Lund said it had taken longer than expected for pipelines to be built to take gas from Statoil's fields to higher-paying markets. Meantime, Statoil has to sell most of its gas in the Bakken area and southern Marcellus, where gas prices are low due to excess supply.

"You sell the product in a market with lower prices than you would have if you had infrastructure," Mr. Lund told The Wall Street Journal in an interview. "We would have liked to have bigger capacity, for example out of the Marcellus area," he said.

The write-down of Statoil's U.S. assets nonetheless strengthens the perception the company overpaid for the assets in first place. It bought assets in the Marcellus in 2008, Eagle Ford in 2010 and Bakken in 2011.

"The fear is that these aren't good assets," said ABG Sundal Collier analyst John Olaisen. "More write-downs may be made, unless production picks up significantly."

Statoil earlier said its second-quarter net profit more than doubled on the year to NOK11.9 billion. However, investors were disappointed by Statoil's lower-than-expected production, which fell 9% year-on-year, and its shares fell 2.6% on Friday morning.

wsj.com

Tags: STATOIL, U.S., ONSHORE, OIL, GAS, PIPELINE