Norwegian oil major
) is about to venture into Australian shale gas exploration through
a farm-in deal with Toronto-listed energy company Petrofrontier
Statoil has purchased interests in Petrofrontier's four existing
Exploration Permits (EP) - 103, 104, 127 and 128 - as well as the
pending exploration permits - 213 and 252 - in South Georgina Basin
in Australia's Northern Territories in the joint venture
Statoil believes its access to the immature acreage of 13
million holds immense potential at low cost but high risk. These
are in sync with its strategy of acquiring assets at an early stage
at a low cost and build them up into potentially high value
Per the exploration program, the partners plan to spud up to
10-20 wells, in three phases by 2017, to prove the potential of the
licenses. The first phase of the program will be operated by
Petrofrontier. Statoil, however, holds options to operate from the
second exploration phase and boost ownership stakes to 65% from 25%
of Petrofrontier's holding.
Both parties have allocated $25 million each for the first phase
of the exploration program. Depending on the outcome of the
exploration, this figure could further spiral to $200 million
through phase two and three.
If the partners progress with the second phase, Statoil will
commit $80 million while Petrofrontier will put in $20 million. In
addition, Statoil's holding will increase by 25%.
Presuming, the partners move ahead with the third phase as well,
Statoil will throw in all the necessary $80 million. This will
boost Statoil's holding by 15%, taking its total holding to 65%.
With the completion of all the three phases, the partners would
split expenses on the basis of their holdings.
Statoil, which faces competition from
), holds a Zacks #3 Rank, equivalent to a Hold rating for a period
of one to three months. Longer term, we maintain our Neutral
recommendation on the stock.
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