Last quarter, taxes were the savior of the company formerly known as Statoil. Now StatoilHydro
The company reported 1% higher revenue and 2% lower daily production volumes, which together don't exactly sound like the recipe for potent profits. Nonetheless, there it is: a net income gain of 26%. The boost clearly didn't come from Statoil's operating income, which plummeted 19% on higher expenses.
No, the magic happened below the operating line, with something called "net financial items" juicing pre-tax income by 23%. The item responsible for the boost was an outsized foreign exchange gain. StatoilHydro, like just about every operator facing currency risk, uses hedges to guard against fluctuations. The Norwegian krone appreciated against the dollar appreciably, and the firm recognized a gain on its hedge.
In accounting land, StatoilHydro was spared, but in the real world, it didn't fare much better than behemoth BP
StatoilHydro's exploration success rate outside of its home turf is running at a dismal 38% this year. The share price today is buoyed by the firm's relatively high leverage to oil versus natural gas, which has increased further with the Norsk Hydro