Reduced profitability in oil industry

Companies holding licences on the Norwegian continental shelf saw lower profits in 1997 according to preliminary account statistics. Average return on total assets dropped from 22.4 per cent in 1996 to 19.9 per cent in 1997, while the return on equity was reduced from 28.4 to 20.3 per cent. The equity ratio increased by 0.9 percentage point to 28.2 per cent.

Although profitability was reduced in 1997 compared with 1996, when it was historically high, it was higher than the figures from 1992 to 1995. Return on total assets in 1997 was 19.9 per cent, down from 22.4 per cent in 1996. The reduction in profits was due to higher financing costs. The financial result worsened in 1997 compared with the year before due mainly to an increase in currency losses. The operating result was virtually unchanged, accounting for 32.6 per cent in 1996 and 32.8 per cent in 1997.
Lower return on equity
The return on equity also dropped in 1997. The return on equity went down from 28.4 per cent in 1996 to 20.3 per cent in 1997. A substantial portion of the earnings of the licensees was returned to the state through taxes and duties. Taxes were estimated at NOK 37 billion in 1997, with payable taxes totalling NOK 28 billion. Taxes therefore made up 64 per cent of the pre-tax profit. Companies working in oil and gas extraction netted an average of NOK 10.6 from each NOK 100 traded.
NOK 308 billion in total capital
The total capital of companies was NOK 308 billion at the end of 1997. Of this capital, 14 per cent was bound in current assets (mainly accounts receivable) and 86 per cent in fixed assets (mainly property, plant and equipment). Twenty-one per cent of the capital was financed by short-term debt. Long-term financing by long-term debt accounted for 50 per cent and long-term financing with equity 28.2 per cent at the close of 1997. The equity ratio increased over the course of the year, improving the financial strength of the oil companies in 1997.

New Statistics
Accounts statistics, 1997. Oil and gas extraction.
The statistics are published annually in the Weekly Bulletin of Statistics and Official Statistics of Norway (NOS) Oil and Gas Activity. For more information contact: Sissel.Fjeld@ssb.no, tel. +47 21 09 47 62.

Weekly Bulletin issue no. 12, 1999