Norway's Statoil reported lower core second-quarter earnings yesterday due to weaker oil and gas output, but the energy company bumped up its 2003 production target and showed it was squeezing costs.

Norway's biggest company, in which the state has a stake of 82 per cent, said operating profit fell 7 per cent to 10.34 billion Norwegian krones (€1.27 billion) in the three months ended June from 11.12 billion in the same period a year ago.

"This is a strong result, which shows that we are on the right track with the right speed," Statoil chief executive Mr Olav Fjell told a news conference.

"Production was lower than in 2002 due to maintenance and lower gas sales, which was expected."

The result undershot an average forecast of 10.48 billion krones in a Reuters poll, but was within the range of estimates.

Statoil's report followed generally strong second-quarter results from European rivals BP and Shell, and the US majors, on the back of high oil and gas prices.

Second-quarter pre-tax earnings fell 71 per cent on a year ago to 4.71 billion krones due to an exceptional charge of six billion krones related to changed rules on state grants for removal of offshore oil installations.

The year-ago pre-tax comparison figure was also inflated by a big currency gain.

The charge was more than offset by a deferred tax benefit, and the net profit of 4.4 billion krones beat forecasts.

Statoil Ireland is the largest petrol retailer in the State. - (Reuters)