Statoil’s Reitan sets sights on U.S. shale oil cost cutting

MIKAEL HOLTER

OSLO, Norway (Bloomberg) -- Torgrim Reitan, who’s about to take charge of Statoil's U.S. business after serving as CFO since 2011, has one priority: improve profitability by cutting costs.

Norway’s state-controlled oil producer has already reduced onshore operating costs in the U.S. by 30% this year as part of a company-wide efficiency program that Reitan, 46, helped to introduce, Statoil said Tuesday.

“There’s always more potential, both on the operational side, but also on technology,” Reitan said in an interview after an earnings presentation in Oslo. “In the current price environment, we’re struggling with profitability. The most important thing will be first to make sure that this part of the business is even more robust with regards to low prices.”

Reitan, a 20-year company veteran, assumes leadership of Statoil’s Houston-based U.S. operations on Aug. 1. They include shale oil and gas resources in the Marcellus, Eagle Ford and Bakken areas acquired since 2008 as Statoil sought to expand abroad to meet production-growth targets amid falling output from aging North Sea fields, as well as production and exploration assets in the Gulf of Mexico.

Those output targets have since been abandoned as the company refocused on shareholder returns in early 2014. ABG Sundal Collier Holding’s John Olaisen is among the analysts who have been critical of Statoil’s investments in unconventional U.S. assets, which bear the main responsibility for more than 84 billion kroner ($10.3 billion) in writedowns over the past year as oil prices collapsed.

Acquisition Opportunities

That hasn’t deterred Statoil, which is scouting for acquisition opportunities in the U.S. and elsewhere, Reitan said.

“Acquisitions and sales have always been an integrated part of how we view our business,” he said. “It’s a very dynamic market, and when the prices fluctuate as much as they do, it creates a unique tension in the market.”

While Statoil’s gas production in the Marcellus area is well-positioned for possible exports as the U.S. prepares to start shipping LNG, the company is unlikely to invest “a lot of money” in LNG infrastructure, Reitan said.

“Not more than 10 to 15 years ago, everyone thought LNG imports to the U.S. were the big thing,” he said. “Many companies have large investments that have now been written down.”

Roller Skis

At the end of the second quarter, Statoil had five rigs drilling in the Bakken, six in the Marcellus and three in the Eagle Ford, said spokesman Lars Erik Lund. That’s the same total as a quarter earlier, but with one less in Bakken and one more in the Marcellus.

Reitan, a keen cross-country skier, plans to take roller skis to use in George Bush Park in Houston.

Reitan’s new position, which will provide him with more operational experience than his CFO role, could be a way to groom him as a potential CEO when Eldar Saetre retires, said analysts Teodor Sveen Nilsen of Swedbank AB and Trond Omdal of Pareto Securities AS.

“I’m focusing on doing the best job possible,” Reitan said. “We already have one of the world’s best CEOs at Statoil. My job now is to lead the U.S. business.”