StatoilHydro: High Dividends in Norwegian Currency

Buy-recommended StatoilHydro (STO) offers unlevered appreciation potential of 27% to estimated net present value [NPV] of $41 a share, concentrated 66% on oil and 34% on natural gas. Fourth quarter results released today included accounting write-offs that set up a clean basis for reporting gains in 2008, the first year of operations after the acquisition of oil and gas properties from Norsk Hydro (NHY) in October 2007.

Year-end oil and gas reserves matched those of the combined companies a year ago. Earlier on December 18, we increased NPV from $35 a share when we increased long-term oil price for calculating present value to $80 from $66 a barrel. Projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda). NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P).

STO pays a high dividend, denominated in Norwegian kroner, indicating a current annual yield of 5.2%. The company’s dividend and cash flow outlook is boosted by a continued uptrend for oil price and more recently natural gas price.

Originally published on February 27, 2008.