Global integrated energy company Statoil ASA (STO) and Austria-based OMV have signed a deal to swap their production interests in the Barents Sea. Management of both companies have approved the agreement.
Per the terms of the deal, Statoil will trade 30% of its 80% interest in production licence 393B for OMV’s 15% interest of the total 40% stake in production licence 537. OMV is the operator of the licence 537, following Norway’s 20th licensing round in 2009.
Statoil will continue to act as an operator for the licence 393B, with its remaining 50% interest.
Norway-based Statoil remains highly optimistic about the Barents Sea prospects. Spreading across 500,000 square miles to the north of Norway and Russia, Barents Sea is a deep shelf water body (average depth 760 feet) and holds significant amount of fossil fuel energy resources.
Early last decade, Statoil developed its first offshore field in the Barents Sea, Snohvit. With the latest interest swap deal, the company targets to solidify its foothold in the region.
The oil and gas company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the Norwegian Continental Shelf. We believe that Statoil is well positioned to sustain its steady production growth for the next few years.
We also appreciate Statoil’s focus on exploring the undeveloped areas of the Norwegian Sea. This will enhance the company’s volume growth and aid in meeting the targeted oil recovery rate of 50% by 2020 from the current 39%.
However, the unstable oil and gas prices along with competition from peers, such as BP plc (BP), Total SA (TOT) and Royal Dutch Shell plc (RDS.A) keep us cautious on the stock.
We are maintaining our long-term Neutral recommendation on the stock. Statoil currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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