Statoil Strikes Oil at Geitungen - Analyst Blog

By Zacks Equity Research,

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Statoil ASA ( STO ) has made an oil discovery in the Geitungen prospect in production license 265 (PL265), offshore Norway.

The exploration well 16/2-12 − located between the Johan Sverdrup discovery and the 16/2-9S Aldous Major North discovery in the Norwegian part of the North Sea − is performing the drilling operation in 6,759 feet (2,060 meters) below mean sea level. The well was spud in late July by Diamond Offshore Drilling Inc. 's ( DO ) mid-water semisubmersible drilling rig Ocean Vanguard.

With this Geitungen exploration well, Statoil as well as its project associates wish to prove the presence of oil-bearing Jurassic sandstones that are similar to the Johan Sverdrup field. Statoil operates the PL265 with a 40% interest, and its partners Petoro, Lundin Petroleum and Det norske oljeselskap ASA hold 30%, 10% and 20% share respectively.

We have a favorable stance on Statoil's long-term production growth given its growing upstream presence in the emerging basins of the Caspian Sea, West Africa and the deepwater U.S. Gulf of Mexico. Again, the company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the Norwegian Continental Shelf (NCS). We believe that Statoil is well positioned to sustain its steady production growth for the next few years on the back of its large resource base at NCS.

The Norwegian oil giant's second quarter equity and entitlement production increased 17% and 20%, respectively, from the year-earlier quarter. Of the total quarterly output, 64% was oil and 36% was natural gas.

With a handful of high potential discoveries in its portfolio and further attempts to expand its operation worldwide, Statoil is well positioned to achieve its 2020 worldwide output target of 2.5 million barrels per day.

Again, Statoil's recent deal with Russian state-owned oil company OAO Rosneft to jointly explore and develop Russian offshore deposits in the Barents Sea and Sea of Okhotsk enables the duo to conduct technical studies on two onshore Russian assets - West Siberia's North-Komsomolskoye field and the Stavropol shale oil play in south-west Russia. This enhances the companies' exploration activities and bodes well for their future growth.

Statoil holds a Zacks #2 Rank, equivalent to a Buy rating for a period of one to three months.

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: DO , NCS , STO

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