Statoil ASA - ADR (STO): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


We are downgrading our recommendation on Statoil ADRs to Underperform from Neutral. The company posted lower-than-expected earnings and revenues in the third quarter, due mainly to decreased liquids and gas sales volumes and margins. However, Statoil has a strong balance sheet, has exited from low-profit generating operations and broadened its international asset base. The addition of new projects is expected to produce a CAGR growth rate of 2% 3% annually during the 2014 to 2016 period. While Statoil is fairly active in its development operations, we remain apprehensive as hiccups remain in the company's production growth for the time being.


Statoil ASA (STO) is a Norway-based major international integrated oil and gas company. The company emerged in its present shape following the acquisition of Norsk Hydro's (NHY) oil and gas business, which was completed on October 1, 2007. With effect from November 2, 2009, Statoil ASA is the name of the erstwhile StatoilHydro ASA.

Though the company has operations in all major hydrocarbon-producing regions of the world, it has an upstream focus on the Norwegian Continental Shelf (NCS). As of year-end 2012, Statoil had approximately 5.600 billion oil-equivalent barrels (BOE) in proved reserves compared to 5.422 billion BOE at the end of 2012. Due to its strong offshore exposure, Statoil is a leader in subsea production. Statoil's organic reserve replacement was 150% for 2013 compared to 110% in 2012.

Statoil operates in four segments: Exploration and Production Norway, Natural Gas, International Exploration and Production and Manufacturing and Marketing. Statoil is one of the leading suppliers of natural gas in the European market and has a 21.1% stake in the world's largest offshore pipeline network, Gassled, which transports natural gas from the North Sea to the European gas transmission system. The company's refining operations include its 79% stake in the Mongstad refinery in Norway (capacity: 180,000 barrels per day) and a 100% ownership of the Kalundborg refinery in Denmark (118,000 barrels per day). The company's retail distribution network consists of about 2,000 Statoil-branded service stations, 470 tank and trucks, and 99 depots in eight countries in northern Europe. The Norwegian government is Statoil's majority shareholder, with a roughly 67% stake.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: BOE , NCS , STO

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