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Statoil president and CEO Eldar Sætre. Image courtesy of Ole Jørgen Bratland/Statoil.

Norway’s Statoil said on Thursday that it plans to lower its capital expenditure budget by about $1 billion after posting a drop in third quarter income.

Statoil reported a third quarter net operating income of $737 million in the third quarter compared to $883 million in the same period of 2015.

The company said the income decline was tied to lower oil and gas prices, expensed exploration wells and lower refinery margins.

“Continued progress on the improvement program with reduced costs and strong operational performance contributing positively to the results,” Statoil said.

Statoil is lowering its 2016 capital expenditure guidance to about $11 billion, down from its previous guidance of $12 billion.

The company trimmed its exploration guidance for 2016 down to $1.5 billion, down from its previous guidance of $1.8 billion.

“Strict prioritization and continued good results from our improvement programme allow us to further lower our 2016 capex and exploration guidance,” Statoil president and CEO Eldar Sætre said.

The company’s production guidance remained unchanged.

Statoil said it expects annual organic production growth of 1 percent from 2014 to 2017.

Third quarter adjusted earnings declined to $636 million compared to $2.027 billion in the same period in 2015.

Statoil said the earnings result reflected continued low oil prices and “reduced overall operating costs mainly as a result of the on-going cost improvement initiatives.”

Adjusted earnings after tax came in at a loss of $261 million in the third quarter, down from adjusted earnings of $445 million in the year-ago period.

Statoil delivered equity production of 1.805 million barrels of oil equivalent per day (MMBOED) in the third quarter compared to 1.909 MMBOED per day same period in 2015.

The production decline was primarily due to planned maintenance and deferral of gas sales.

Excluding the planned maintenance, deferred gas sales and divestment, underlying
production grew 5 percent compared to the third quarter of last year.

Cash flow from operations came in at $7.0 billion after tax in the first nine months of 2016 compared to $11.4 billion during the same period last year.

Organic capital expenditure was $7.8 billion in the first nine months of 2016 and net debt to capital employed was 30.3 percent at the end of the third quarter.

“The financial results were affected by low oil and gas prices, extensive planned maintenance and expensed exploration wells from previous periods. We delivered solid operational performance with strong cost improvements and progress on project execution,” Sætre said.