Recently, Norway-based energy firm StatoilHydro ASA (STO) gained a permit from the country’s top petroleum resources regulatory agency, the Norwegian Petroleum Directorate (NPD), to drill wellbore 25/2-17 in production license 442.

The company plans to drill “wildcat” wells (those drilled in an area where no current oil or gas production exists) on the license using semi-submersible facility Ocean Vanguard. StatoilHydro has a 40% operated interest in production license 442, which was awarded in June 2007. Well 25/2-17 is located about 20 kilometers east of the company’s Frigg field in the central part of the North Sea and is the first well to be drilled on the production license.

We believe that the 25/2-17 well, if successful and rendered economically feasible, will further consolidate StatoilHydro’s leading position in the Norwegian Continental Shelf (NCS). The company’s current production from NCS is expected to decrease somewhat in the short run due to delayed ramp-up of new fields and other project delays. We, however, expect volumes to start building up from this year onwards.

StatoilHydro is a major international integrated oil and gas company that emerged in its present shape following the acquisition of Norsk Hydro’s (NHY) oil and gas business in 2007. Though the company has operations in all major hydrocarbon-producing regions of the world, it has an upstream focus on the NCS.

As of year-end 2008, StatoilHydro had approximately 5.58 billion oil-equivalent barrels in proved reserves. It is the operator of 39 producing oil and gas fields and accounts for 60% of all Norwegian petroleum production. Due to its strong offshore exposure, Statoil is a leader in subsea production.

We currently rate ADRs of StatoilHydro as Outperform.
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