Statoil ASA (STO) has been fairly active on the project development front. As a part of this effort, Statoil preponed its production commencement for Smoerbukk North-East field to December 2011 from its earlier plan of 2013 start up.
The company highlighted that it is developing the Smoerbukk North-East field as a satellite to the Aasgard B platform, making it one of the fastest developments ever in the Norwegian Sea. Asgard is situated on the Haltenbank in the Norwegian Sea, about 200 kilometers from mid-Norway and 50 kilometers south of Statoil’s Heidrun field, with a water depth of 240-300 meters.
Recoverable reserves of oil, gas and condensate on the field are estimated to be about 16 million barrels of oil equivalent (MMBoe) and will require about NOK 1 billion ($165 million) to develop. This development will not only boost the future oil and gas production through Asgard B, but will also ensure further prospects for developing new finds in the area.
The company pointed out that the early start-up is possible by utilizing an existing exploration well as a production well, and will also employ modified subsea well equipment originally built for the Sigrid field.
Partners in Smoerbukk North-East are Statoil (with 34.57% interest acts as the operator), Petoro AS (35.69%), Eni Norge AS (14.82%), ExxonMobil Corporation’s (XOM) Norwegian affiliate, i.e., ExxonMobil Exploration & Production Norway AS (7.24%), as well as Total SA’s (TOT) Norwegian subsidiary, i.e., Total E&P Norge AS (7.68%).
Statoil is well on track on several turnarounds to improve recovery of resources in mature fields. While the company is still exploring various domestic as well as international resources for upstream growth, its recent entry in the Eagle Ford Shale play by a joint venture with Talisman is appreciable.
However, in the third quarter, equity and entitlement production decreased 17% and 19%, respectively, from the year-earlier quarter. The decrease in production was due to heavy maintenance activities and normal field decline. Again, the company also revised its 2010 equity production guidance at 1.9 MMBoe per day (down from a range of 1.925–1.975 MMBoe per day). Capital expenditures for this year are expected to be around $13 billion.
For the next year, the company also guided limited growth as ongoing issues on the NCS will likely fall over into 2011, and start-ups (Leismer, Peregrino, Gjoa, Vega) will be offset by underlying declines.
Although near-term interruptions on the production front persist, we have a favorable outlook on Statoil’s long-term production growth with the company’s significant investment in domestic fields along with Norway’s largest natural gas field, Troll.
Our Neutral recommendation remains unchanged for the company and Statoil holds a Zacks #3 Rank (short-term Hold rating).
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