Statoil ASA (STO), in a bid to replace and upgrade the drilling facilities on the Snorre A platform, has given Aker Solutions a contract worth NOK 1 billion ($180 million).
Located in blocks 34/4 and 34/7 in the Tampen area of the Norwegian North Sea, Snorre development comprises two platforms, A and B. The field came online in August 1992.
Drilling and maintenance being the two most significant operations, the contract will not only enhance the lifetime of the existing fields but also improve recovery of oil at the field. Following the upgrade to the facilities, Statoil will be able to drill new wells from Snorre A up to 2040 and, further increase its output from the Snorre field by 67 million barrels of oil.
Assuming an oil price of $100 per barrel, the additional yield would increase earnings by NOK 40 billion. The work of drilling facility upgrade is expected to commence in March 2012 with the intention to conclude it by 2015.
The contract encompasses engineering, procurement, construction, installation and commissioning assistance. The aim to upgrade the facilities involves improvements in both environmental and safety conditions by restoration of drilling hardware.
Modifications and drilling apart, attaching new marginal discoveries to established infrastructure also enhances the recovery. Statoil also intends to boost the recovery from the Gullfaks field by upgrading its drilling facilities.
We appreciate Statoil’s endeavor to improve recovery of resources in mature fields. The company has operations in all major hydrocarbon-producing regions of the world. 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.
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 BP Plc (BP) and ExxonMobil Corporation (XOM).
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