Statoil ASA
(
STO
) has awarded an eight year contract to Aker Solutions to attain
heavy well intervention and light drilling services on the
Norwegian Continental Shelf (
NCS
).
The contract is worth $1.9 billion for the initial eight year
term and involves three two-year options for the Category B (Cat-B)
service. The technologically advanced Cat-B rig has been mainly
designed for industrialization of drilling and intervention
services in existing production wells.
This semi-submersible unit is operated by Aker's affiliate, Aker
Oilfield Services. It will provide a range of heavy well
intervention and light drilling tasks. These include through-tubing
rotary drilling, wireline, coil tubing, high pressure pumping, well
testing and cementing serves, as well as remotely operated vehicle
(
ROV
) operations. The rig is capable of operating up to 500 meters
under water.
For Statoil, this Cat-B tool is necessary to enhance the
recovery rate from its existing fields, which is a commitment for
the Norwegian company. Last year, the average oil recovery rate
increased to 50% from 49% from Statoil operated fields.
We believe this contract will aid Statoil to maintain its
current production level on the NCS. It is also associated with the
development of new fields. The world's largest offshore operator −
Statoil − delivered strong exploration results last year. It added
more than 1 billion barrels to its resource base. The company also
made significant discoveries in the mature North Sea as well as in
the Barents Sea, reaffirming the potential of the NCS.
While Statoil is fairly active in development operations, we
remain on the sidelines on account of its weak fourth quarter 2011
production profile. The management had earlier said that it would
deliver a compound annual production growth rate of around 3%
between 2010 and 2012. The company, however, remained cautious
about uncertainty due to gas value over volume, start-up and
ramp-up, and operational regularity. Thus it remained skeptic about
its growth target.
Notably, the company expects planned turnaround to have an
adverse effect of around 20 million barrels of oil equivalent per
day (MMBOE/d) on its first quarter production. Additionally,
Statoil expects its 2013 production to remain somewhere around the
2012 level.
Hence, our long-term Neutral recommendation remains unchanged
for Statoil. The company, which competes with
Eni SpA
(
E
), holds a Zacks #1 Rank (short-term Strong Buy rating).
ENI SPA-ADR (
E
): Free Stock Analysis Report
STATOIL ASA-ADR (
STO
): Free Stock Analysis Report
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