Norway based integrated energy company Statoil ASA (STO) announced the sale of its 40% interest in its oil sands project of Kai Kos Dehseh to PTT Exploration and Production (“PTTEP”) of Thailand. Statoil will receive a total consideration of $2.28 billion for the sale.
With the ownership of the remaining 60% interest, Statoil will continue to function as the Managing Partner and operator of the project. The deal is expected to be sealed in the first quarter 2011, with the effective date, January 1, 2011 and is subject to customary regulatory approvals.
Alberta, Canada based Kai Kos Dehseh project was started by Statoil through the acquisition of North American Oil Sands Corporation in 2007. There are five core areas of the project -- Leismer, Corner, Thornbury, Hangingstone and South Leismer -- which will be developed in stages. The Leismer area is in its first phase of SAGD (Steam Assisted Gravity Drainage) and will start production in early 2011, with a capacity of 10,000 barrels per day.
Statoil remains committed to improving the production volumes of the project as well as reducing the harmful emission of greenhouse gases.
The Canadian oil sands resources appear to be a lucrative area of development in recent times. Many Chinese and Korean companies have come up with major investments to take a position in the oil sands project of Canada.
Worth mentioning is the agreement that enabled ConocoPhillips (COP) to strike a deal with China Petroleum & Chemical Corporation or Sinopec (SNP) so as to sell its 9.03% interest in the Canadian oil sands project, Syncrude, for $4.65 billion in April, 2010.
We remain upbeat about the alliance between Statoil and PTTEP in forming a partnership to optimize the expansion of the oil sands projects through upgraded technological services and expertise. The deal highlights Statoil’s confidence and faith in its operational execution and management of oil sands projects.
We are maintaining our long-term Neutral recommendation on the stock. Statoil currently retains a Zacks #3 Rank (short-term Hold rating).