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- Shares of StatOil are down 24% YTD and 40% from the June highs.
- Yet the Q3 loss was an impairment driven event. The Euro gas market may be more of a long-term concern.
- Meantime, US shale operations are showing improving productivity yet equate to ~12% of total production.
- In the Gulf of Mexico, first-oil was announced from Jack/St. Malo, but overshadowed by lower oil prices.
- STO is a HOLD for the dividend with little reason to get excited about it in the near term.
Update: As I Said Statoil's Near-Term Headwinds Make The Story Less Compelling
- There was nothing surprising in the company’s quarterly results.
- Replacing Helge Lund will be difficult for Statoil.
- Statoil’s high leverage to European gas prices and oil prices also present downside risk to the share price.
Statoil's New Gas Discovery Strengthens Company's Position To Be A Major Supplier To Growing Asian Markets
- Statoil recently made its seventh major discovery in the gas-rich block 2 region offshore Tanzania.
- Tanzania is ideally positioned to ship natural gas to Southeast Asia.
- Several countries in Southeast Asia are likely to greatly increase their imports of natural gas over the next two to three decades.
- Statoil has sufficient gas reserves in the country to become a major supplier to these countries.
- The company is currently constructing the needed infrastructure to take advantage of this trend.
What Does The Agreement With Naftogaz Mean For Statoil?
- Russia, Ukraine’s main gas supplier, had signed a deal to supply gas at $480 per 1,000 cubic meters of gas, via Gazprom.
- Ukraine resorts to importing gas from other European countries such as Hungary, Slovakia and Poland. It was learnt that these countries divert their gas supplies received from Russia, to Ukraine.
- Naftogaz has signed a deal with Statoil for low volume of gas supplies at $385 per 1000 cubic meters of gas.
- It is believed that this deal will have no long term ramifications mainly because it is short term and low volume.
- Statoil has corrected by 24% from its 2014 peak and the correction is a buy opportunity.
- The company's primary focus is the NCS where Statoil has some excellent long-term assets.
- Cash flow from US onshore and through divestment of non-core assets will help fund the big Johan Sverdrup development.
- Statoil should deliver strong organic FCF growth in the next two years;
- However, the company faces several headwinds in the near-term;
- Weak European gas prices, higher exploration expense and higher DD&A from recent startups are likely to weigh on results.
- Statoil’s fields Fram H North and Svalin C’s have commenced production. According to estimates Fram H-North has 10 million barrels of recoverable oil. Svalin C has 30 million barrels.
- Statoil and partners announced the commencement of oil and gas production from their Gudrun field in the North Sea as well.
- Statoil has also signed a deal with Xcite Energy Ltd and EnQuest Heather Ltd to share information regarding their field specific technical activities and operations.
- The company needed this considering that the financial results for the second quarter were weak.
Statoil, The Cheapest Oil Major, Is Looking Super Attractive
- Statoil has just sold another asset for $1.3 billion.
- Statoil has built significant positions in three major U.S. shale plays.
- Statoil’s real strength, however, lies somewhere else.
Statoil Has Capitalized On Russian Sanctions With Lithuanian LNG Deal
- Sanctions on Russia have pressed Vilnius into action as STO has entered the Lithuanian natural gas arena.
- STO would be delivering 540 million cubic meters worth of gas to the LNG terminal in Klaipėda every year.
- The current oil and gas production of STO is comparable with the 80s.
- The oil and gas giant missed earnings estimates for 2Q by over 5%.
- We are still bullish on Statoil’s long-term prospects given its technology and solid dividend.
- We didn’t anticipate the slight earnings miss, but believe the market has overreacted.
- STO is the dominant producer on the lucrative Norwegian Continental Shelf.
- STO's international production is overwhelmingly in stable nations like Angola and the United States.
- FY2013 earnings were unusually low, but new wells are coming on line in 2014 that will increase production.
- Statoil missed analyst profit expectations as management chose to curtail production in the face of lower prices.
- A goodwill impairment charge for the U.S. unconventional assets doesn't help the asset quality argument, but high-impact exploration results later this year could change the tone.
- Statoil continues to trade at a low relative multiple, but even a 3.0x multiple to 12-month EBITDA supports a $32 stock and execution should lead to a multiple re-rating.
Statoil: Excellent Q1 Trounces Estimates; Here Come The Dividends
- First quarter earnings blowout due in part to a doubling in US gas prices this winter.
- 2013 annual dividend coming; quarterly dividends begin.
- Raising my 12-month price target (again) to $33.
- Statoil is a major oil company offering good growth prospects over the next few years due to its successful exploration history.
- It has a better risk profile than other oil & gas companies, due to low exposure to refining margins in Europe and low geo-political risk exposure.
- A dividend yield above 4% and a cheap valuation compared to peers makes Statoil a compelling investment opportunity.
Statoil: Attractive Valuations Coupled With Reduced Government Stake To Provide Shareholder Value
- Reassessing their assets to increase margins due to limited commodity upside.
- Government looking to reduce stake to ~51%.
- Solid 3.2% yield with very attractive valuations.
Tue, Dec. 16, 3:26 PM
- A consortium led by Statoil (STO +3.3%) has submitted a development plan for the Rutil discovery in the North Sea’s Gullfaks Rimfaks Valley that will extend production from the Gullfaks A platform, providing close to 80M boe.
- The development, one of STO's fast-track projects, will cost 4.6B kroners ($610M), and production is scheduled to begin during Q1 2017.
- The field, which is expected to operate for 15 years, is expected to produce 31K boe/day at its peak production in 2019.
- STO has delayed several new developments as low oil prices and high costs have hurt profits and eaten into its cash, but the Gullfaks project should keep costs relatively low by using existing infrastructure and extend the lifetime of the Gullfaks A platform.
Mon, Dec. 15, 2:42 PM
- The European Commission gives conditional clearance for BP (BP -3.1%) to acquire jet fuel business Statoil Fuel and Retail Aviation (NYSE:STO), subject to conditions.
- The competition authorities say BP had committed to divesting SFRA's activities at Stockholm, Malmo, Gothenburg and Copenhagen airports to remove concerns that increased concentration there would have led to price increases of fuel for airlines.
Tue, Dec. 2, 12:15 PM
- Chevron (CVX +1.8%) says oil and natural gas production has begun from the Jack and St. Malo fields development project in the deepwater Gulf of Mexico, 10 years after the fields were first discovered.
- CVX expects total production from the $7.5B project - its costliest active investment in the Americas - to ramp up to 94K bbl/day of crude and 21M cf/day of gas by 2020, with 500M boe from the two fields over their 30-year lifespan.
- CVX has a 50% interest in the Jack field, with Statoil (NYSE:STO) and Maersk splitting the remaining half, and it owns 51% of St. Malo, with co-owners Petrobras (NYSE:PBR), Statoil, Exxon (NYSE:XOM) and Eni (NYSE:E).
Fri, Nov. 28, 10:05 AM
- With OPEC having seemingly handed the market responsibility for removing the ~1mb/d of supply needed to achieve balance into 2015, our concern is that the lack of transparency around the price at which supply breaks and speed/scale of a non-OPEC response leaves oil equities facing a period of uncertainty," writes analyst Lucas Hermann, downgrading Statoil (STO -13.2%) to Hold.
- On a brighter note for the oil majors, Hermann notes on a 12-month view, the sector's relative valuation is at levels last seen in 2009, maybe meaning "absolute support" for names like Shell (RDS.A -6.2%) "where we have real conviction in the solidity of distributions."
Fri, Nov. 28, 9:17 AM| 13 Comments
Thu, Nov. 27, 1:51 PM
- Arctic Securities maintains its Sell rating and lowers its price and dividend targets on Statoil (NYSE:STO).
- Notes that “run rate” 2015 operational cash flow is currently at NOK 104B while CAPEX is currently guided at NOK 138B. Consensus dividend expectation is NOK 7.54/share, or NOK 24B. "Statoil will hence before any divestments have to borrow NOK 58B next year to bridge the funding gap."
- "Statoil is not in a position to continue the current dividend policy." Says oil prices would need to rise to $130/bbl for 2015 and $115/bbl for 2016 to make dividend sustainable.
- Lowers price target to NOK 115 and dividend estimate by NOK 1.75/share to NOK 5.75 and NOK 6.00 in 2015 and 2016.
- Shares are -24.6% since Arctic first pegged STO with a Sell rating on July 23. They fell 4.75% today to NOK 142.30.
- Previously: Crude now -7.6% on OPEC rollover
Tue, Oct. 28, 3:59 PM
- Total (TOT +2.9%) earlier today said it agreed to sell a minority stake in the Gina Krog field near Norway and three additional North Sea fields to PGNiG Upstream International for $317M.
- The deal includes an 8% ownership stake in Gina Krog, now under development and scheduled for a 2017 production start; through a subsidiary, TOT will retain a 30% interest in the project expected to produce ~60K barrels of oil and 9M cm/day of natural gas per day, while Statoil (NYSE:STO) is the majority partner with a 58.7% interest.
- Also included are interests in three minor fields in the Norwegian North Sea.
Tue, Oct. 21, 6:58 AM
- Statoil (NYSE:STO) says it has found up to 80M barrels of recoverable oil in a prospect first drilled more than two decades ago and abandoned because the initial discovery was too small.
- The find is located near the company's operating Grane field in the North Sea, and is well above the 6M barrels estimated when the prospect was explored by Norsk Hydro in 1992.
- Statoil owns 57% of the production license for the new discovery. State holding firm Petoro has 30% and ExxonMobil (NYSE:XOM) has 13%.
- STO +2.2% premarket
Thu, Oct. 16, 9:13 AM
Thu, Oct. 9, 3:25 PM
- Crushed by relentless anxiety about oversupply and weakening global demand, Nymex crude oil futures closed down $1.54 at $85.76/bbl, their lowest close since Dec. 2012, while Brent crude fell below $90/bbl for the first time in more than two years.
- Including today's losses, WTI crude is down 6.2% since the start of the month and Brent has surrendered ~5%.
- In the face of surging output, a move in WTI below its 10-year average at $82 is not out of the realm of possibility, Brown Brothers Harriman says, adding that "a break of $73/barrel could send WTI toward $64, which corresponds with the 2010 low."
- Among big oil names so far today: APC -6.3%, LINE -4.6%, EPD -3.8%, DVN -3.8%, MRO -3.6%, HES -3.8%, KMI -3.7%, TOT -3.5%, STO -3.3%, RDS.A -3.1%, OXY -3%, KMP -3%, XOM -2.6%, COP -2.6%, MUR -2.6%, CVX -2.5%, BP -2.4%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, PXE, USL, UWTI, PXJ, FENY, DNO, DWTI, RYE, FXN, SZO, OLO, DDG, OLEM, TWTI
Thu, Oct. 9, 9:56 AM
- Global oil producers open broadly lower as oil prices continue to slide on concerns about high supplies and weak global economic growth (also): RDS.A -2.7%, STO -2.7%, TOT -2.5%, HES -2%, APC -1.7%, BP -1.6%, CVX -1.5%, COP -1%, XOM -0.8%.
- Brent prices slump to $91/bbl, approaching two-year intraday lows, and Nymex crude tumbles to $86.67/bbl to an 18-month intraday low.
- The EIA said yesterday that U.S. crude supplies rose by a more than expected 5% last week, while gasoline and distillate inventories unexpectedly grew as well.
- Barclays is cutting its oil price forecasts: It now sees U.S. crude averaging $85/bbl in Q4 and $89 in 2015, down from previous estimates of $98 in Q4 and $100 next year, and Brent crude averaging $93/bbl in Q4 and $96 in 2015, down from a respective $106 and $107 previously.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, DTO, DBO, DUG, IYE, IEO, CRUD, PXE, USL, UWTI, PXJ, FENY, DNO, DWTI, RYE, FXN, SZO, OLO, DDG, OLEM, TWTI
Mon, Sep. 8, 2:17 PM
- Statoil's (STO -1.9%) first well off Norway with Russia's Rosneft (OTC:RNFTF) may be delayed following a Greenpeace complaint that says the well is too close to the Bear Island nature reserve and the polar ice cap.
- Drilling can’t start on the Statoil-operated Pingvin prospect in the Barents Sea until the appeal has been handled this week by Norway's environment regulator.
- The complaint comes as Rosneft, which owns a 20% stake in license 713 where Pingvin is located, faces sanctions due to Russia’s involvement in the Ukraine conflict.
Fri, Jul. 25, 12:30 PM
- Statoil (STO -3.2%) says it took a writedown of NOK4.3B ($694M) on its assets in the Bakken, Marcellus and Eagle Ford plays, as a lack of pipeline capacity has hindered the company from selling its output to regions where it can fetch a higher price.
- CEO Helge Lund says it had taken longer than expected for pipelines to be built to take gas from STO's fields to higher paying markets; in the meantime, STO has to sell most of its gas from Bakken and the southern Marcellus, where gas prices are low due to excess supply.
- The writedown strengthens the perception that STO overpaid for the assets in first place.
Fri, Jul. 25, 8:18 AM
- Statoil (NYSE:STO) -2.5% premarket after Q2 earnings before interest and taxes totaled NOK32B, missing analyst expectations of NOK37.7B, and oil and gas production fell 9% Y/Y.
- STO gained NOK3.6N from farming down in the Shah Deniz field in Azerbaijan and the South Caucasus Pipeline, but the gain was offset by NOK4.3B in impairments in its U.S. onshore business.
- Q2 production fell to 1.79M boe/day on the natural decline of mature fields, asset sales, redetermination and lower gas sales as prices in Europe decreased.
- Says programs to reduce cost and improve capital efficiency are on track, with staff cuts of ~1,000 already implemented.
Mon, Jul. 14, 2:21 PM
- Whiting Petroleum's (WLL +7.4%) $6B buyout of Kodiak Oil & Gas (KOG +5.1%) is renewing investor attention on independent energy firms with operations in the Bakken Shale, especially those significantly owned by hedge funds; Paulson & Co. is the single biggest owner of KOG stock, with just under 10% of shares outstanding as of the last filing date.
- While many of the largest Bakken producers are huge companies or parts of huge companies - Hess (NYSE:HES), EOG, Statoil (NYSE:STO), Marathon Oil (NYSE:MRO), XTO Energy (NYSE:XOM) - a few small and mid-cap independent players show hedge fund interest, CNBC's Brian Sullivan writes.
- The single biggest holder of Oasis Petroleum (OAS +0.5%) also is John Paulson's hedge fund, which owns 9.9M shares (~9.8% of shares outstanding), Jana Partners owns 16M-plus shares in QEP Resources (QEP +1.4%), and WPX Energy (WPX +1.1%) has substantial hedge fund ownership.
Thu, Jun. 5, 8:18 AM
- Statoil (STO) +2.1% premarket after Norway's government and opposition lawmakers reach a compromise to start electrification of three North Sea oil fields by 2022, which should reduce the risk of further delays in starting the giant Johan Sverdrup project.
- A majority in parliament had demanded that STO and other energy companies include three more fields in their power plan for Sverdrup as part of broader efforts to cut greenhouse gas emissions; the companies would have needed to start laying cables to the other fields in Sverdrup’s start-up phase, which STO said would delay the 2019 output start and lead to losses of as much as $3.3B.
- STO says the compromise means full electrification will not happen in the first phase, as the second phase will start some time in 2022.
STO vs. ETF Alternatives
Statoil ASA is an integrated oil and gas company. It explores, produces, transports, refines, and markets petroleum and petroleum-derived products. It has operations in Norway, rest of Europe, and North America.
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