Statoil ASA (STO) has awarded a contract to Aker Solutions for subsea compression topside modifications on the Statoil-operated Asgard A and B platforms in the North Sea. The contract is worth NOK 650 million ($116.7 million). This deal is classified as an engineering, procurement, construction and installation contract.
Modification work mainly involves the supply of electricity to the Asgard subsea compressor units, slated for installation in 2013. Per the contract terms, Aker will construct and install an 800 ton new module and carry out assimilation work in the region. Aker will initiate design and procurement work immediately, while fabrication work will commence in October 2011. Delivery is scheduled for the last quarter of 2014.
The Asgard field is one of the major field developments along the Norwegian Continental Shelf (NCS) to take up subsea gas compression. This represents an essential technological stride in challenging and deep sea field development. It even opens up exciting prospects for the industry as the subsea technological approach is intended to enhance recovery rate as well as field tenures.
With 34.57% share, Statoil acts as the operator of the Asgard field. The remainder is held 35.69% by Petoro; 14.82% by Eni Norge, a subsidiary of Eni SpA (E); 7.68% by Total E&P Norge, an affiliate of TOTAL SA (TOT); and 7.24% by ExxonMobil Corp. (XOM).
Late last year, Aker Solutions had secured the NOK 3.4 billion contract from the Norwegian company, Statoil, for the development of the world’s first subsea compression system. Statoil now plans to offer several contracts involving pipelines, marine operations and other major procurement items related to the Asgard field throughout 2011.
We appreciate Statoil’s attempt to improve recovery of resources in mature fields. The company has operations in all major hydrocarbon-producing regions of the world, with emphasis on the NCS.
We believe that Statoil is on track for steady production growth for the next few years on the back of its large resource base at NCS. Hence, its decision to install gas compressors on the seabed in the Asgard field marks a significant progress in this regard.
However, the company has a weak oil and gas production outlook for 2011, which compels us to maintain our Neutral recommendation. Statoil expects its 2011 volume to be flat with or lower than the 2010 level due to field maintenance. We maintain our Neutral recommendation for the company.
Statoil currently holds a Zacks #3 Rank (short-term Hold rating), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months.
