Statoil, Rosneft in Barents Venture - Analyst Blog


Norwegian oil giant Statoil ASA ( STO ) has inked an agreement with Russian state-owned oil company Rosneft to complete its earlier co-operation deal that encompasses exploration of the Kashevarovsky, Lisyansky and Magadan-1 licenses in the Sea of Okhotsk north of Sakhalin Island and the Perseevsky license in the Barents Sea. The co-operation deal was signed in May 2012.

Statoil, with a 33.33% stake of 33.33% in the joint venture, will be liable to fund the majority of exploration costs on an offshore acreage of about 102,000 square kilometers. Rosneft will hold the remaining 66.67% and will pay back its share of exploration costs from the future production at commercial discoveries.

Per the requirement of the license, Statoil will need to drill 6 exploration wells during the period from 2016 to 2021 and will carry the cost of exploration activities necessary to establish the commercial value of the licenses.

Recently, both the companies signed a heads of agreement for the joint pilot development of Domanik shale formations in 12 licenses in the Samara region. Rosneft will hold the majority stake of 51% in the project and Statoil will have a stake of 49%. According to the terms of the agreement, Statoil will provide carry-based financing of about $60 million for a pilot survey program as well as technology to explore the shale play.

Earlier this month, Statoil was awarded interests in production license 713 and six other licenses in the Barents Sea in the twenty-second licensing round on the Norwegian Continental Shelf. PL 713 spans 1,213 square kilometers and lies adjacent to the recently discovered Johan Castberg field.

These licenses, which are considered to be of high priority in this round, have solidified the company's position in the region and formed a solid foundation for further growth.

Moreover, Statoil's close co-operation with Rosneft both in the Norwegian and Russian parts of the Barents Sea will help in leveraging the combined experience of operating in extreme environments of both the companies. Statoil will also continue to work with Italian explorer, Eni SpA ( E ) - its long-standing partner in the area.

Statoil carries a Zacks Rank #4 (Sell). However, there are other Zacks Ranked #1 (Strong Buy) stocks - Newpark Resources Inc. ( NR ) and Gulfmark Offshore, Inc. ( GLF ) - that are expected to perform impressively over the short term.

ENI SPA-ADR (E): Free Stock Analysis Report

GULFMARK OFFSHR (GLF): Free Stock Analysis Report

NEWPARK RESOUR (NR): Free Stock Analysis Report

STATOIL ASA-ADR (STO): Free Stock Analysis Report

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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 OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: E , GLF , NR , STO

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