Norwegian state-owned integrated oil and gas company Statoil ASA (STO) has signed a five-year contract with Seadrill Management for a newly built jack-up for the development of the Norwegian Continental Shelf (NCS). The value of this contract is $650 million.
Currently under construction in Singapore, this jack-up − Gusto MSC CJ70 150A − is expected to start operating in the third quarter of 2011. This is the third consecutive contract with Seadrill in the last four weeks, bringing the total value to approximately $1.8 billion. Importantly, all three contracts are for the development of NCS. Statoil is increasingly shifting its focus to the still unexplored areas of the Norwegian Sea. These will enhance the company’s volume growth prospects going forward.
Though the company has operations in all major hydrocarbon-producing regions of the world, it has an upstream focus on the NCS. Statoil is the operator of 42 productive oil and gas fields on the NCS. Production from the NCS is about 75% of the company’s total production volume.
Statoil is well positioned to sustain a steady production growth for the next few years. The growing share of natural gas in the company’s NCS volume mix and its extensive interests in infrastructure assets enable it to play a leading role in the European natural gas market. However, the Norwegian state’s concentrated ownership in the company significantly reduces the stock’s liquidity and attractiveness. We are currently Neutral on Statoil ADRs.

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