Norwegian oil and gas company StatoilHydro stuck to its 2009 production target after posting a smaller-than-expected drop in profits for the first quarter as a record output partly offset steeply lower oil prices.

A higher-than-expected 87 per cent tax rate in the quarter, up from 71 per cent a year ago, resulting from a shift to the US dollar as the functional currency of the parent company, dampened the positive news of record output, analysts said.
Earnings before interest and tax (Ebit) fell to 35.5 billion crowns ($5.57 billion) in the three months to the end of March from 51.4 billion in the same quarter last year.
The result beat an average forecast of a drop to 30.2 billion crowns in a Reuters poll of 22 analysts. Their estimates ranged from 25.9 billion to 35.7 billion crowns.
Oil and gas production rose to 1.94 million barrels of oil equivalent (mboed) per day in the first quarter from 1.89 million a year earlier, beating analysts’ average forecast of 1.89 million.
StatoilHydro shares erased early gains to end the day down 2.1 per cent at 137.70 Norwegian crowns, valuing the company at around 440 billion crowns ($69 billion). The DJ Stoxx Oil and Gas index was down 2.3 per cent.
StatoilHydro announced earlier that it adopted the dollar as its “functional currency” from the start of 2009, though not its reporting currency which remains Norwegian crowns.
The company said that the change would reduce the volatility of the financial items, but increase uncertainties about tax rates.
“StatoilHydro has reported a great operating result ... with profit ahead of estimates across the divisions,” ING said in a note to clients. The company’s Ebit was 25 per cent higher than ING had forecast. “However, this upside was more than offset by a significantly higher-than-expected tax charge ... related to the change in functional currency,” ING said, adding that the change would continue to cause uncertainty in the future.
StatoilHydro kept its 2009 production guidance of 1.95 mboed and 2012 target of 2.2 mboed, using its “equity method”, which does not include the impact of production sharing agreements that curb its off-take when oil prices rise.
“The quarterly result was negatively affected by a 41 per cent drop in oil prices, partly offset by a 23 per cent increase in the average price of natural gas and a 7 per cent increase in lifted volumes of oil and gas,” StatoilHydro said.