Norway's Statoil (NYSE:EQNR) showed its resilience against the backdrop of low oil prices by increasing oil production volumes organically. The integrated oil company reported net income of 10.1 billion kroner ($1.2 billion) for the second quarter of 2015 and adjusted earnings of 7.2 billion kroner ($880 million).

With realized average liquids prices falling a significant 28% year on year, net income fell 16% while adjusted earnings fell 27% over the same period. However, free cash flow increased significantly to a negative 1.2 billion kroner (-$147 million) from a negative 31.4 billion kroner (-$3.8 billion), reflecting increased financial discipline.

Digging deeper
Statoil managed to increase production volumes to 1.87 million barrels of oil equivalent, or Mmboe, per day from 1.79 Mmboe a year ago. However, excluding divestments, production grew at an impressive 7% as the company ramped up production in various fields. Additionally, higher natural gas sales from the Norwegian Continental Shelf and lower maintenance downtime resulted in higher production. Thanks to increased production, total revenue fell only 13% to 124.4 billion kroner ($15.3 billion).

The highlight of the quarter, though, was the disciplined financial and operational efficiency the company displayed.

Statoil pushed back its investment activities, with organic capital expenditure falling to $7.8 billion while asset sales increased cash by 14 billion kroner ($1.7 billion). In total, cash outflow from investing activities fell a massive 33.8 billion kroner ($4.1 billion) to 16.7 billion kroner ($2.0 billion).

Image source: Q2 2015 earnings presentation.

Outlook for 2015
Statoil made a downward revision of its organic capex guidance (excluding acquisitions and capital leases) to $17.5 billion for the entire year. However, scheduled maintenance downtime of mature oil fields is expected to reduce third-quarter production by about 45,000 boe, and also by the same amount for the entire fiscal year of 2015. This could create a minor dent in the company's top and bottom lines given that oil prices are still languishing below $55 per barrel.

However, Statoil is deliberately deferring gas production in order to increase future value. In other words, the company is betting on commodity prices to go up in the future so that it might generate more value on its production. This equally creates a downside risk to production guidance as well as to revenues, since commodity prices could remain depressed for longer than expected.

The Norwegian company also made a couple of discoveries in the Norwegian Continental Shelf. Additionally, it found oil in the Yeti field in the Gulf of Mexico. Again, this could have a positive impact on production volumes.

Overall, in the quarter, Statoil managed to increase its operational and financial efficiency by increasing production and cutting down on investments.