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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.
Today, 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
Fri, Nov. 21, 8:29 AM| 1 Comment
Thu, Nov. 20, 5:58 PM
- It’s time for the medium-term investor to start buying the biggest of big oil companies, HSBC says, as the market seems to have capitulated on the sector.
- HSBC views BP and Total (NYSE:TOT) as clearly the cheapest of the oil supermajors, with share price discounts to sum-of-the-parts valuation for BG Group (OTCPK:BRGXF, OTCQX:BRGYY), Statoil (NYSE:STO) and Repsol (OTCQX:REPYY, OTCPK:REPYF); Exxon Mobil (NYSE:XOM) still trades at small premium to the SoP valuation, and the firm likes Chevron (NYSE:CVX), which was penalized in its valuation by its ongoing capital intensity in 2017.
- The stocks also offer average prospective dividend yields of 5%-plus for 2015, and the dividends look robust as they are supported by strong balance sheets, more active asset disposal programs, and strong new project cash margins.
Tue, Nov. 18, 7:59 AM
- Statoil (NYSE:STO) says its Johan Castberg oil discovery in the Arctic Barents Sea can be developed profitably even after Brent crude prices have tumbled more than $35 to below $80/bbl from a June high.
- Developing Castberg with an FPSO unit remains the cheapest option, according to a STO exec, who adds that nearby finds by Lundin Petroleum (OTCPK:LNDNF) have raised the possibility that a combined development including a new onshore oil terminal at North Cape can be commercially viable.
- Norway's Barents Sea, estimated to hold 40% of Norway’s undiscovered resources and seen as key to halt a long decline in the country’s crude production, lacks infrastructure including terminals and pipelines.
Tue, Nov. 11, 12:33 PM
- Algeria's In Amenas gas plant is on track to return to full output capacity in early 2015 following an attack last year by Islamist militants, according to a report citing the country's energy minister.
- Three processing plants were damaged in the attack which left 40 workers dead and several hundred taken hostage; two of the trains already have resumed production.
- Operating partners BP and Statoil (NYSE:STO) have been working towards returning full capacity to the plant, which had totaled 9B cm/year prior to the attack and accounted for ~11.5% of Algeria's natural gas output.
Tue, Nov. 11, 11:59 AM
- Investment in Norway's oil sector will fall sharply next year before leveling out as energy firms grapple with lower oil prices, Norway's Oil & Gas Association says.
- Oil investments will fall to ~NOK197B ($28.9B) next year from NOK221B in 2014, and then hold at 190B-205B/year through to 2019, according to the trade association.
- Erik Bruce, chief analyst at Nordea Markets, says the report argued the decline in investment would be less than feared, even with oil prices down to $85/bbl.
- Several oil and gas fields coming up for development remain attractive projects, the group says, including Statoil's (STO -0.9%) giant Johan Sverdrup field, which could contain up to 2.9B barrels of oil and has an estimated breakeven price as low as $37/bbl.
Thu, Nov. 6, 8:33 AM
- Statoil (NYSE:STO) says it will suspend operations of two offshore drilling rigs for at least the rest of the year, with no plans for redeployment, citing overcapacity.
- The Transocean Spitsbergen and Songa Trym rigs will be suspended through 2014, but the period "might be extended," STO says.
- STO's action is "another negative for the North Sea drilling market,” Nordea's Janne Kvernland says, especially for drillers with rigs ending contracts in Norway next year, including Transocean, Seadrill (NYSE:SDRL) subsidiary North Atlantic Drilling (NYSE:NADL) and Fred Olsen Energy (OTC:FOEAF).
Tue, Nov. 4, 8:59 AM
- Stocks in European energy companies are hit hard following Saudi Arabia's move yesterday to cut prices for crude sold in the U.S., sending oil prices tumbling.
- Seadrill (NYSE:SDRL) sank more than 6% to the bottom of the Stoxx Europe 600 index; BP, Royal Dutch Shell (RDS.A, RDS.B), Total (NYSE:TOT), Statoil (NYSE:STO), Tullow Oil (OTCPK:TUWLF, OTCPK:TUWOY) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY) are all more than 2% lower.
- Oil prices are sharply lower again today, with Brent crude falling to four-year lows near $82/bbl and U.S. crude touching a session low of $75.84, its weakest since Oct. 2011.
Mon, Nov. 3, 8:26 AM
- Statoil (NYSE:STO) says the giant Johan Sverdrup oil field in the North Sea could generate NOK1.35T (~$205B) in revenue over the next five decades.
- The field, estimated to hold ~1.8B barrels of oil, is expected to produce 315K-380K bbl/day in the first phase and could produce as much as 650K bbl/day in later development stages.
- STO says the Norwegian government would take NOK670B in corporation taxes alone, based on its latest projections.
Thu, Oct. 30, 3:34 PM
- Statoil (STO -2%) says it will invest $1.5B on development of the Stampede development in the Gulf of Mexico, sanctioning the project along with co-owners Hess (HES -0.1%), Chevron (CVX -0.3%) unit Union Oil of California and Cnooc's (CEO -1.4%) Nexen.
- STO estimates the reservoir contains ~350M barrels of recoverable oil; total project development is expected to cost $6B.
- Earlier: Hess to develop Stampede field in deepwater Gulf of Mexico
Wed, Oct. 29, 8:26 AM
- Statoil (NYSE:STO) +0.4% premarket despite reported its first quarterly loss since listing in 2001, mostly because of impairments amid a weaker market outlook and lower oil and gas prices.
- The net loss was 4.7B kroner ($727M) compared with a profit of 14.3B kroner a year ago; adjusted net income, which excludes financial items, fell to 9.1B kroner from 12.1B kroner, missing the 9.3B kroner analyst consensus estimate.
- STO booked impairments of 13.5B kroner, mainly relating to the delay of the Corner field at the Kai Kos Dehseh oil sands project in Canada, impairments on midstream assets amid reduced expectations for trading activities, and exploration assets in Angola and the Gulf of Mexico because of disappointing discoveries.
- STO got an average of $91.2/bbl for oil in the quarter, down from $102.9 a year ago.
- Although the negative result "is close to sensational, we think substantial impairments on particularly the oil sand assets have been expected by the market," a Swedbank analyst says.
Wed, Oct. 29, 6:27 AM
Tue, Oct. 28, 5:58 PM
- Hess (NYSE:HES) says it will proceed with development of the $6B Stampede oil and gas project in the deepwater Gulf of Mexico.
- Gross topsides processing capacity for the project is ~80K bbl/day of oil and 100K bbl/day of water injection capacity; total estimated recoverable resources for Stampede are estimated at 300M-350M boe.
- Hess has a 25% working interest and is operator; Chevron (NYSE:CVX) subsidiary Union Oil of California, Statoil (NYSE:STO) and Cnooc's (NYSE:CEO) Nexen each have 25% stakes.
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. 28, 7:44 AM
- BP has been told by the Federal Trade Commission it is closing its investigation into anti-competitive practices in oil price reporting and assessment, the company says in its Q3 earnings report.
- European Commission officials in May 2013 raided the offices of BP, Shell (RDS.A, RDS.B) and Statoil (NYSE:STO) as part of a probe into suspected manipulation of oil and biofuel prices; related inquiries then were received from U.S. and other regulators.
- The other investigations appear to remain open, BP says.
- BP +0.5% premarket.
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
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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