Buy-recommended StatoilHydro (STO) offers unlevered appreciation potential of 43% to a McDep Ratio of 1.0 and levered appreciation potential of 58% to Net Present Value (NPV) of $35 a share. During the first quarter, according to results released today, the company generated cash from oil and gas production of about $21 a barrel of oil equivalent as the difference between price of about $51 and cash operating costs, mostly tax, of about $30. First quarter unlevered cash flow (Ebitda) was ahead of expectations from three months ago.
We project gradual increases in Ebitda in the quarters ahead. Our valuation capitalizes cash flow at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P) for natural gas and oil. Pointing to expected oil price recovery, futures prices for the next six years averaged $71 a barrel recently.
Owned primarily by environmentally conscious Norwegians, Statoil operates to strict limits on emissions. The company pioneers carbon dioxide sequestration and invests in alternative energy experiments, such as electricity from wind. Solar does not work too well in Arctic winters with no sun. More important, Statoil stock offers concentrated representation in natural gas outside North America that we now estimate at 53% of NPV.
Originally published on May 11, 2009.
