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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.
Wed, Sep. 10, 5:32 PM
- The U.S. and EU are said to be close to imposing the toughest round of energy sanctions yet, which would hit both Russia's energy industry and companies such as Exxon Mobil (NYSE:XOM) that are working with Rosneft (OTC:RNFTF) and other state-controlled companies.
- The sanctions reportedly would ban U.S. and European companies from working with Russia on future oil exploration in the Russian Arctic, deep seas and shale rock formations; the move would go beyond previously reported proposals to widen curbs on technologies for the oil industry.
- The sanctions would not affect current oil production but could imperil the future of existing partnerships, including a deal between XOM and Rosneft to drill in the Arctic Ocean; other vulnerable oil majors would include BP, Shell (RDS.A, RDS.B), Statoil (NYSE:STO) and Total (NYSE:TOT).
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, Sep. 5, 4:42 PM
- Statoil (NYSE:STO) reported late Thursday that it has signed farm-in agreements with Repsol (OTCPK:REPYF, OTCQX:REPYY) to acquire stakes in two licenses offshore Colombia - a 10% share in the Tayrona license and 20% in the Guajira Offshore-1 license.
- Petrobras (NYSE:PBR) operates Tayrona with a 40% stake, and Repsol retains 20% of the license after its farm-down to STO; the remaining 30% is held by Ecopetrol (NYSE:EC).
- Repsol operates Guajira Offshore-1 and retains 30%, with EC holding the remaining 50%.
Thu, Sep. 4, 4:56 PM
- Tanzania's government says it plans to review all contracts signed with investors in its natural gas and mining sectors, in a drive to tighten control and raise greater revenue from its expanding natural resource industry.
- The move likely will test relations between the government and multinational corporations such as Exxon Mobil (NYSE:XOM), Statoil (NYSE:STO), Eni (NYSE:E) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY), which are implementing multi-billion dollar projects to exploit gas fields in the region.
- E&P companies have discovered nearly 50T cf of natural gas in Tanzania and more than 180T cf in neighboring Mozambique.
Thu, Sep. 4, 7:45 AM
- Statoil (NYSE:STO) announces disappointing results as it completes drilling two wells, with the Martin prospect in the Gulf of Mexico not considered a commercial discovery, while the Dilolo well in the Kwanza basin in Angola failed to encounter hydrocarbons.
- The Martin well has been drilled efficiently and plug and abandonment operations are now ongoing, while the Dilolo-1 exploration well in Block 39 offshore Angola provided a valuable calibration for other prospects in the area.
Wed, Sep. 3, 7:56 AM
- Norway's oil and gas investments are seen falling 13.9% Y/Y in 2015, more than earlier forecasts, Reuters reports; companies are now expected to invest 185B Norwegian crowns ($29.8B) in the sector, vs. 215B crowns in 2014.
- Norway has been one of the best-performing economies through Europe's slowdown, but it has struggled in recent quarters due to weak exports and consumption; the country's fortunes could sour further as its energy firms, which account for nearly 25% of the economy, cancel or delay some of their biggest projects.
- Related: RDS.A, RDS.B, STO.
Wed, Aug. 27, 2:13 PM
- Statoil (STO +0.7%) says its Aasta Hansteen gas development in the northern Norwegian Sea is on schedule for drilling in H1 2016 and production start-up in Q3 2017.
- STO considers development of Aasta Hansteen and its Polarled pipeline as the most complex industrial project in Europe, as the company is taking Norwegian gas infrastructure northward into the Arctic Circle for the first time.
- STO expects to invest ~NOK57B on the project, which will include the largest SPAR platform in the world, which is expected to set a new depth record of 1,300 meters for a field development and pipeline on the Norwegian continental shelf.
- Aasta Hansteen is estimated to hold ~1.66T cu. ft. of natural gas.
Wed, Aug. 27, 9:19 AM
- BG Group (OTCPK:BRGXF, OTCQX:BRGYY) says it has produced higher than expected flows of gas from a test well off the coast of Tanzania, boosting the financial viability of its planned liquefied natural gas export terminal in the country.
- Test flows at BG's Mzia-3 well off the southern part of Tanzania's coast reached a maximum rate of 101M cf/day, nearly double the flow rate measured at Mzia-2 last year.
- BG and partners Statoil (NYSE:STO), Exxon Mobil (NYSE:XOM) and Ophir Energy plan to build a two-train LNG export terminal, with operations expected to start in the early 2020s and a final investment decision set for 2016.
Tue, Aug. 26, 12:44 PM
- Statoil (STO +0.6%) says its activity level is at its highest ever, with 100-plus projects in planning or execution, and says it aims to maintain its current oil and gas production in coming years.
- STO is heading 61 projects in the execution phase, with capex totaling 205B kroner ($33.2B), a bill that will be shared with its project partners; the portfolio also includes eight mega projects, defined as exceeding a cost of 12B kroner or being highly complicated.
- STO's 2013 oil and gas output totaled 1.94M bbl/day, up 5.5% from 2007, but targets flat output in Norway in the coming years as mature giant fields are fading, so it plans to make up the difference by increasing its international output.
Tue, Aug. 26, 11:57 AM
- Norway is open to Rosneft (OTC:RNFTF) deepening its involvement in the country, as western Europe’s largest oil and natural gas producer seeks to counter a slowdown in investments and output.
- Norway is struggling to sustain oil production which has been cut by more than half since its 2000 peak as producers including Statoil (NYSE:STO) and Royal Dutch Shell (RDS.A, RDS.B) have postponed projects and cut planned investments.
- Rosneft in partnership with Statoil is currently drilling its first well in Norway's Barents Sea, has signed deals to explore blocks in Russia’s Barents Sea and the Sea of Okhotsk, and plans pilot projects for heavy oil in Siberia and shale oil in the Samara region.
- Norway's energy minister says European sanctions against Russia will not be relevant for foreign companies’ participation in petroleum activities or licensing rounds offshore Norway.
Mon, Aug. 25, 5:51 PM
- Statoil (NYSE:STO) says it will only slightly increase its U.S. shale oil and gas production in the near term due to reduced spending, well below a potential for a 50% surge.
- STO, which produces ~10% of its oil and gas from its U.S. shale operations in the Bakken, Eagle Ford and Marcellus formations, also is cutting back investments in the area, as shale projects are competing for capital within the company, said its head of U.S. onshore activities.
- STO abandoned its 2020 production target earlier this year and cut its capex budget, saying it needs to save cash and return more to shareholders after a decade of ramping up spending.
Mon, Aug. 25, 12:23 PM
- Statoil (STO +0.7%) is seeking talks with Lundin Petroleum (OTCPK:LNDNF) to link the Gohta discovery to STO's Johan Castberg field to determine whether developing the Arctic fields together will make both projects viable by reducing the cost of connecting them to shore via a pipeline.
- The talks are still at a “working level” and aimed at finding a joint solution for infrastructure, Lundin CEO Ashley Heppenstall says.
- In June, STO again postponed a development decision for Johan Castberg after an exploration campaign aimed at boosting volumes and making the project more profitable uncovered crude in only two of five prospects.
Mon, Aug. 25, 7:00 AM
- Statoil (NYSE:STO) highlights that western sanctions against Russia will slow down the process of getting the go-ahead for some of its joint ventures with Rosneft (OTC:RNFTF).
- "This will be a more bureaucratic process, so that things will take more time," warns CEO Helge Lund.
- However, not all projects will be slowed down, as sanctions mainly target shale oil, deep-water oil and Arctic oil production.
- Statoil says it will stand by its 27-month-old partnership with Rosneft and hopes diplomacy will resolve the standoff between the U.S., Europe and Russia over the crisis in Ukraine.
Thu, Aug. 21, 1:03 PM
- Statoil (STO +0.4%) signs a five-year deal with Lithuanian gas supplier Litgas to deliver 540M cubic meters/year of liquefied natural gas from 2015, a move that could end Lithuania's dependence on Russian gas.
- STO's first shipment of LNG is set to be delivered at the Klaipeda terminal in December, with a new floating terminal set to begin commercial operations by Jan. 1, 2015.
- Lithuania is currently dependent on Gazprom (OTCPK:OGZPY) for 100% of its gas, and the country has been paying 15% higher than the European average gas price.
Tue, Aug. 19, 3:37 PM
- Aker Solutions (OTCPK:AKKVF) plans to boost margins at its subsea unit by as much as two-thirds within two to five years after splitting the company, raising margins to the same level as its biggest competitors, CEO Luis Araujo tells Bloomberg.
- That would require Aker to improve the margin on EBIT at its subsea unit by 68% from Q2 if it is to match the 14.6% reported by FMC Technologies (NYSE:FTI) compared with 8.7% for Aker's subsea unit; Cameron’s (NYSE:CAM) drilling and productions systems unit reported an EBIT margin of 12.3% in the quarter.
- Aker's decision to split to cut costs and focus on its flagship subsea division as it seeks to improve returns that have lagged competitors comes as oil service companies face a slowdown in investments from energy producers, including Statoil (NYSE:STO), Aker's biggest customer.
Mon, Aug. 18, 11:56 AM
- The Obama administration is closer than ever to imposing the first minimum standards for oil and gas activity in U.S. Arctic waters, as Royal Dutch Shell (RDS.A, RDS.B) pursues permits that could allow it to resume drilling in the region next year.
- There are no specific mandates currently governing Arctic oil development; federal agencies regulate drilling in the Arctic using the same basic rules that apply generally offshore.
- Shell built a specialized, first-of-its-kind containment system for its Arctic operations two years ago, but the equipment did not reach the waters north of Alaska in time; if a requirement for similar equipment is written into new Arctic mandates, other oil companies such as ConocoPhillips (NYSE:COP) and Statoil (NYSE:STO) which hold oil and gas leases in the region might have to procure such a device before they could begin drilling.
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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