Norway’s Statoil reported a steeper-than-expected six per cent drop in fourth-quarter operating profit due to lower output and higher costs, and said its takeover of Norsk Hydro’s oil and gas business was well under way.

Operating profit at the Nordic region’s biggest industrial company by turnover fell to 26.06 billion Norwegian crowns ($4.17 billion) in the three months to end-December from 27.80 billion in the same quarter a year earlier.
The result lagged an average forecast of 26.8 billion crowns in a Reuters poll of 17 analysts whose forecasts had ranged from 21.3 billion to 28.5 billion crowns.
But net earnings for the quarter rose 41 per cent year-on-year to 12.01 billion crowns, due to higher financial income and lower income taxes and beat all analysts' forecasts of 8.4 billion to 10.3 billion in the Reuters poll.
Chief executive Helge Lund said: “The annual income for 2006 is the best ever for Statoil.”
Shares in Statoil fell after the announcment to 162.25 crowns , valuing the company at about $56.3 billion.
“All in all it was a bit disappointing,” said First Securities analyst Martin Moelsaeter who has a “reduce” recommendation and a 165-crown 12-month target on the stock.
Analyst Oddvar Bjoergan at ABG Sundal Collier said: “The result is more or less as expected. It is positive that they keep their 2007 production guidance, but then the reserve replacement ratio was a bit disappointing. The result is a touch weaker than expected.”
Statoil reiterated its 2007 production target of 1.3 million barrels of oil equivalent per day (boed) excluding Hydro’s contribution which the companies have said will boost the combined group's output to 1.9 million boed this year.
But Lund called the 2007 target “very ambitious and demanding” and added: “As we see it today, it is more likely that we end up below than above the target.”
The reserve replacement ratio, which reflects a company’s ability to find or acquire reserves to replace those it produces, fell to 73 per cent in 2006 from 102 percent in 2005.