When oil prices fell from $100 to less than $40 and have since rebounded all oil companies had to quickly adjust to the revenue shrinkage. In the world of large oil companies including Statoil ASA of Norway it involves billions of dollars. Mikael Holter of Bloomberg News recently wrote a column about Statoil and management has come through the recession to put the company in terrific shape.

The company slashed investments by half in 2 years to $10 billion in 206 and plans to spend about the same in 2017 and move to $ 12 billion in two years. The company went through a stage of delaying projects, reducing its work force, and increased debt. At the same time, it increased efficiency improvements and lower rates from suppliers to the tune of $ 1 billion. This has resulted in the cost to break even in its next 5 projects of $ 27 and its biggest oil field the Johan Sverdrup field to $25 a barrel. Its oil field in the Arctic will make money at $35 a barrel down from 2 years ago needing $80 a barrel. The result of the cost cutting and improvements is Statoil can now fund investments and dividends from an oil price of $50 a barrel.

One of the reasons this is important is the Norway economy is built on the cash flows of the oil and $50 barrel allows the oil company to pump money into the government to be distributed for the benefit of the people. According to the Chief Executive Officer Eldar Saetre the next step is to move into a culture where we continuous improve.

Linking to dividend paying stocks, Statoil pays a dividend but equally important it had to go through the painful decisions involving cost cutting in the company in order to make it better. Part of cost cutting is letting go of people, generally some management knows and it is much easier to management when there a steady cash flow and ability to pay dividends. All companies to be better need to go through cost cutting, but generally only when they have to do they find the savings to drive down costs and come out on the other side ready for the opportunities which exist.

There are more questions than answers, till the next time – to raising questions.