Statoil ASA (STO) engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum derived products. As of Dec. 31, 2010, it had proved reserves of 2,124 million barrels of oil, as well as 509 billion cubic meters of natural gas. Combined these correspond to 5,325 million barrels of oil equivalent. It helps to keep in mind that almost all of Statoil's natural gas assets are in areas in which the natural gas prices are several times the current US Nymex natural gas price of $2.30/mmBTU. Statoil also operates a network of 2,283 fuel stations. These include full service stations, which include integrated convenience stores, and automated fuel stations and truck stops located in Scandinavia, Eastern Europe, and Russia
The big knock on Statoil in recent years is that it has not fully replaced its reserves used for production. That has changed in a big way recently. Some of the new discoveries and new opportunities are:
- STO announced a small discovery of 12-18 million barrels of recoverable oil equivalents on March 23, 2012 in the exploration well 30/6-28S located in production license PL053 in the Oseberg Area unit in the Statfjord Formation in the North Sea. STO is the operator, and it has a 49.3% interest.
- The Angolan pre-salt formation off the Angolan coast is now thought to be analogous to that of the pre-salt formations off the Brazilian coast. These are the structures that define the Tupi Field (5-8 billion barrels of recoverable oil equivalents). The outlook for development in the offshore Angolan coast area is thought to be tremendous. STO is the operator, and it has a 55% interest in blocks 38 and 39. STO has a 20% interest in blocks 22,25,and 40. On Feb. 9, Cobalt International Energy (CIE) announced the successful drilling of a test well in block 21. It found an 1,180 foot continuous oil column. The well test flowed at an unstipulated 5,010 barrels per day of oil and 14.3 million cubic feet per day of natural gas. The company believes a full production well will produce at least 20,000 barrels per day. Of course, there is no guarantee that STO's blocks will have equal success. However, the geological evidence in Angola and Brazil indicates that many more rich wells/fields will be found in offshore Angola. STO stands to be a big participant in these. It seems likely to uncover substantial finds in the blocks in which it is already a participant. Optimistically these could amount to billions of recoverable boe.
- STO bought Brigham Exploration (BEXP) for 4.4B - a Bakken play. This has an estimated resource base of 300-500 million recoverable boe, and estimates for the percentage of recoverable oil in the Bakken have been going up.
- STO announced the 250 million recoverable boe Skrugard oil discovery in the Barents Sea in April of 2011. Currents estimates are that this holds up to 500 million of recoverable boe. Statoil is the operator with a 50% interest.
- STO announced in June 2011 the discovery of the 150-300 million of recoverable boe Peregrino South oil field in offshore Brazil. STO is the operator with a 60% interest. Since the announcement the estimates of the amount of recoverable oil have gone up to 300-600 million of recoverable boe.
- It confirmed a new giant oil field discovery in the North Sea. There are two reservoir zones called the Aldous and the Avalsnes. I have seen estimates of 1.3B - 3.3B of recoverable boe. Time will elucidate the exact amount. STO has a 40% interest. It is partners in the field with Lundin Petroleum (LNDNY.PK).
- STO announced the discovery of a second Barents Sea find on Jan. 12, 2012. This one has 200-300 million of recoverable boe. STO has a 50% interest.
- STO recently announced that its Snoehvit offshore gas field in the Arctic contains more than 11% more gas in reserves than originally thought. (20B cubic meters more).
- STO signed a memorandum of understanding to explore a promising prospect, the Indra (and around there), in offshore Brazil with Petrobras (PBR). STO and PBR also agreed to share technology. This agreement should help both companies.
- On top of all of the above, STO is establishing a new operational area on the Norwegian continental shelf. This will be based in Harstad, and it will start up in 1H 2013. STO expects more activity from the fields in the Barents Sea and further north. In other words, more new discoveries are expected in the near future.
There may be a lag time before the development from all of the new fields increases reserves and production. However, STO trades at a P/E of 6.48 and an FPE of 9.71. It pays a dividend of 3.40%, and it has a next five years EPS growth estimate of 11.30%. This is fantastic for a company the size of STO. STO is stable due to its large market cap of $87.45B and its enterprise value of $99.79B. However, it is still a good grower, and its growth is probably still underestimated by the average analyst as many big new discoveries have come in the last year.
Many more such as the extremely rich Angolan fields and the rich Barents Sea fields (and north of there) are likely to come in in the near future. STO appears to be a company that is very much in the right places at the right time. Other than the above, it expects to increase its US unconventional oil field holdings over time. The outlook for STO is fantastic. The data above are from Yahoo Finance.
The two year chart of STO provides some technical direction to this trade.
click to enlarge
The slow stochastic sub chart shows that STO is near oversold levels. The main chart shows a slowly rising 200-day SMA. The current price is below recent highs, but it is still significantly above its 200-day SMA. Its price of $27.49 is near its 50-day SMA. Given all of the above recent oil discoveries and the secular growth uptrend in oil prices due to emerging market demand growth, it seems almost certain that the long term direction of STO is upward. The overall market is still over bought.
A near term pullback would likely pull STO down with it. A significant worsening of the coming EU recession and other world economic weaknesses would also likely result in an STO pullback. However, if you are looking for a place to hide in the coming trying times, STO is an excellent choice. Commodities may fall, but they will bounce back. If you are a long term investor, STO looks excellent in a long term perspective. Its near term technicals indicates that you could appropriately start averaging in now.
Good Luck Trading.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STO over the next 72 hours.