StatoilHydro: Alternative Energy Practical Idealist

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.

Comments

[Larry House:]

"Owned primarily by environmentally conscious Norwegians..."

STO is okay. It is tightly controlled and is not, in my opinion, managed (or allowed to be managed) for maximum profits. Your words above are why. They are also dealing with declining supplies of oil. That may be good for investors in oil, but it is not good for investors in STO.

Jun 17 04:58 PM

[Albert Meyer:]

Larry have you ever read a STO 10K, or are you opining on gut feel?

Jun 18 09:11 AM

[HerrHansa:]

They are global, and not strictly dependent upon Norwegian oil reserves. On top of that it seems that every month or less is another announcement of oil discoveries in areas they drill, though to be fair some of that is being developed through other Norwegian companies.

www.energycurrent.com/...

They are also a huge natural gas pipeline operator. If you only look at what Statoil (STO) do with oil, then you miss that the company is looking forward. Couple that with their non-EU Norwegian attitude and stable currency, and that's why I bought shares a few months ago. While they are not rising fast, I consider them a good longer term investment.

Jun 18 02:37 PM