Liquidity
Our annual cash flow from operations is highly dependent on oil and gas prices and our levels of production. Economic instability, such as the Euro crisis, may impact our business and cash flows. However, our cash flows from operations are only influenced to a small degree by seasonality and maintenance turnarounds. Fluctuations in oil and gas prices, which are outside our control, will cause changes in our cash flows. We will use available liquidity to finance Norwegian petroleum tax payments (due on 1 February, 1 April, 1 June, 1 August, 1 October and 1 December each year), any dividend payment and investments. Our investment programme is spread over the year. There may be a gap between funds from operations and funds required to fund investments, which may be financed by short and long-term borrowings. We aim to keep ratios relating to net debt at levels consistent with our objective of maintaining our long-term credit rating at least within the single A category. In this context, Statoil carries out various risk assessments, some of them in line with financial matrices used by S&P and Moody's, such as funds from operations over net debt and net debt to capital employed.

Management of the portfolio of security investments, mainly related to equity securities, is held by our insurance captive, Statoil Forsikring AS, and commercial papers and money market investments held by Statoil ASA.

As of 31 December 2011, cash and cash equivalents and current financial investments amounted in total to NOK 60.5 billion, including NOK 40.6 billion in cash and cash equivalents and NOK 19.9 billion in current financial investments (domestic and international capital market investments). Cash and cash equivalents include NOK 4.3 billion deposited with Statoil's US dollar-denominated bank account in Nigeria. There are certain restrictions on the use of cash from Statoil's Nigerian operations following an injunction against Statoil by the Nigerian courts relating to an on-going litigation claim. Both the injunction and the disputed claim have been appealed. Of the total restricted cash at 31 December 2011, NOK 3.9 billion is no longer to be reported as restricted cash from March 2012. Approximately 42% of our liquid assets were held in NOK-denominated assets, 25% in USD, 10% in CHF, 9% in EUR and 14% in other currencies (GBP, DKK), before the effect of currency swaps and forward contracts.

As of 31 December 2010, cash and cash equivalents and current financial investments amounted in total to NOK 42.0 billion, including NOK 30.5 billion in cash and cash equivalents and NOK 11.5 billion in current financial investments (domestic and international capital market investments). Cash and cash equivalents include NOK 2.6 billion deposited with Statoil's US dollar-denominated bank account in Nigeria. Approximately 44% of our liquid assets were held in EUR-denominated assets, 21% in USD, 16% in NOK and 19% in other currencies (GBP, DKK, CAD, BRL), before the effect of currency swaps and forward contracts.

The USD 3 billion multi-currency revolving credit facility that Statoil ASA, guaranteed by Statoil Petroleum AS, has available from a group of 20 international banks, had its term extended by one year until December 2016. Through one more extension option the facility may be further extended to December 2017. Up to one third of the facility may be utilised in the form of swing line advances, i.e. drawdowns available on a same day notice and with maximum maturities of ten days.

To secure financial flexibility, Statoil ASA issued new debt securities in 2011 in the amount of USD 0.65 billion maturing in November 2016, USD 0.75 billion maturing in January 2022 and USD 0.35 billion maturing in November 2041 (an aggregate amount of NOK 10.1 billion). Correspondingly, Statoil ASA issued new debt securities in 2010 in the amount of USD 1.25 billion maturing in August 2017 and USD 0.75 billion maturing in August 2040 (an aggregate amount of NOK 11.5 billion). All of the bonds are guaranteed by Statoil Petroleum AS.

Statoil's general policy is to maintain a liquidity reserve in the form of cash and cash equivalents in our balance sheet, and committed, unused credit facilities and credit lines in order to ensure that we have sufficient financial resources to meet our short-term requirements. Long-term funding is raised when we identify a need for such financing based on our business activities and cash flows, and when market conditions are considered favourable.

In 2012, Statoil aims to continue to secure financial flexibility and, depending, among other things, on oil and gas price developments, it may issue bonds should market conditions be viewed as attractive.

Net interest-bearing financial liabilities before adjustments were NOK 71.0 billion at 31 December 2011, compared with NOK 69.5 billion at 31 December 2010. The increase of NOK 1.5 billion was mainly related to an increase in gross interest-bearing financial liabilities of NOK 20.0 billion, offset by an increase in cash and cash equivalents and current financial investments of NOK 18.5 billion.

The net debt to capital employed ratio
before adjustments, defined as net interest-bearing financial liabilities before adjustments in relation to capital employed before adjustments, was 19.9% in 2011, compared with 23.5% in 2010.The net debt to capital employed ratio adjusted was 21.1% at 31 December 2011, compared with 25.5% at 31 December 2010. The 4.4 % decrease was mainly related to a decrease in net interest-bearing financial liabilities adjusted of NOK 1.4 billion in combination with an increase in capital employed adjusted of NOK 57.4 billion.

The group's borrowing needs are mainly covered through the issuing of short-term and long-term securities, including utilisation of a US Commercial Paper Program and a Euro Medium Term Note (EMTN) Programme (program limits being USD 4 billion and USD 8 billion, respectively) as well as issues under a US Shelf Registration Statement, and through draw-downs under committed credit facilities and credit lines. After the effect of currency swaps, 100% of our borrowings are in USD.

The management of financial assets and liabilities take into consideration funding sources, the maturity profile of non-current bonds, interest rate risk management, currency risk and the management of liquid assets. The company's borrowings are denominated in various currencies and swapped into USD, since the largest proportion of our net cash flow is denominated in USD. In addition, we use interest rate derivatives, primarily consisting of interest rate swaps, to manage the interest rate risk of our long-term debt portfolio. The company's central finance function manages the funding, liability and liquidity activities at group level.