Norwegian oil giant Statoil ASA (STO) has struck ample oil in the license PL532 in the Barents Sea for the second time in a span nine months. Touted as the biggest discovery in the Arctic waters off the northern tip of Norway, the find is about 4.3 miles southwest of major block Skrugard (discovered in April, 2011).
The recent discovery was made in the well 7220/7-1 on the Havis prospect and was drilled by the rig Aker Barents. The find is estimated to hold about 200-300 million barrels of recoverable oil equivalents. Statoil stated that Havis, along with the other promising Skrugard, is estimated to hold a total of 400-600 million barrels of recoverable oil equivalents.
Statoil acts as the operator of the licence with a 50% stake, while Eni Norge AS, an affiliate of Eni SpA (E) controls 30% interest. The remaining 20% stake is with another state-owned Norwegian company Petoro AS.
The two high-impact finds in the Barents Sea — Havis and Skrugard — are expected to open opportunities for further activities in the area, where Statoil has been operating for more than 30 years. With access to 88 of the total 92 exploration wells drilled in the region, the company has profound knowledge of the hydrocarbon systems in the Barents Sea.
Statoil recognizes Barents Sea as a core area of development on the Norwegian Continental Shelf, where it is well entrenched and exhibits strong presence. The company intends to drill an appraisal well in the Skrugard and evaluate the resource potential of the area.
Apart from the new discoveries, Statoil is also concentrating to improve recovery of resources in mature fields. We have a favorable outlook on the company’s long-term production growth, given its growing upstream presence in the emerging basins of the Caspian Sea, West Africa and the deepwater of the U.S. Gulf of Mexico.
However, we remain apprehensive regarding the volatile macro environment, fluctuating oil and natural gas prices and geo-political disturbances that could hurt the company’s performance. The weak reserve replacement ratio exhibited by Statoil also adds to our negative sentiment.
We expect Statoil to perform at par with the larger market and maintain a long-term Neutral recommendation.
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