Norwegian state oil company
) has farmed out its 18.75% stake in Iraq's West Qurna 2 field to
Russia's biggest privately owned oil producer,
). However, the financial terms of the deal have not been
Statoil's decision to sell its interest in the huge development
project stemmed from its inability to fulfill the profitability
criteria. The transaction has also received Iraqi authorities'
Statoil and Lukoil have been partners in the West Qurna 2
project since December 2009, when they were awarded a 20-year
service contract in Iraq's second licensing round. Following the
farm out, Statoil will have no financial obligation relating to the
project as of January 1, 2012.
As the operator of the field, Lukoil will hold 75% stake in it
post acquisition, while state-owned North Oil Company will hold
25%. The Russian oil giant is also seeking prospective partners for
a probable farm-in deal.
The operator proposes to expend $25 billion for the development
of the West Qurna field. The drilling on the field commenced in
April 2012, targeting an output of 150,000 barrels per day (bpd) by
the end of 2013 that is expected to scale up to 500,000 bpd by
Over the last few quarters, Statoil has been divesting
low-profit generating assets, particularly those that do not fit
the company's long-term growth plan, and engaging in lucrative
deals in an attempt to streamline its operations.
Despite exiting from the West Qurna 2 project and confirming its
decision to not take part in Iraq's latest licensing round, Statoil
maintained that it is keen to invest in new business prospects in
the resource rich country. However, in recent times, foreign
companies have been reluctant to continue their operations in Iraq
due to tough contracts, a lack of financial incentives for
investment and constant insecurity.
Statoil holds a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation on the stock. The company faces
tough competition from
ENI SPA-ADR (E): Free Stock Analysis Report
(LUKOY): ETF Research Reports
STATOIL ASA-ADR (STO): Free Stock Analysis
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