Statoil Wins Bids For Block 1 And 3 In The Saline Basin, Mexico

Statoil (OL:STL) ASA (NYSE:STO) was recently awarded blocks 1 and 3 in the Saline Basin in the deepwater exploration tender in the Mexican Round 1. The announcement is expected to result in some positive movement in the stock price. Statoil’s price chart reveals that it has outpaced the Zacks categorized Zacks sub industry Oil & Gas-International Integrated Market, year to date. While Statoil has risen by 27.8%, the broader market has increased by 15.6%.

Spanning across an area of about 5,650 square kilometers (about 2,200 square miles), the block lies in the largely unexplored deepwater areas of the Saline Basin. Statoil will be the operator of blocks 1 and 3 with an equity interest of 33.4%. Other partners in the block are BP plc (NYSE:BP) and Total SA (TO:TOT) with 33.3% each.

The licenses, which were awarded in a competitive bid round, comprise a total of 10 deepwater blocks – four in the Perdido Area and six in the Saline Basin. The blocks awarded are in water depths ranging from about 900 meters to 3,200 meters. The bid round represents Mexico’s first ever tender for deepwater exploration acreage.

The winning bids for both blocks included an additional royalty of 10% (on potential future revenues) and a supplementary work program corresponding to one biddable well per block. Every block also has a minimum work program as elucidated by authorities, including a variety of geological activities but no required wells.

Statoil has had a representative office in Mexico City since 2001.

Statoil’s endeavors to improve recovery of resources in mature fields are commendable. The company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the Norwegian Continental Shelf (NCS). We believe that Statoil is well positioned to sustain its steady production growth over the next few years on the back of its large resource base at NCS.

Statoil aims to achieve an equity production of above 2.5 million barrels of oil equivalent in 2020. The new projects are expected to deliver impressive results during 2014–2017 that would translate into an annual organic production growth of 1%. The state-controlled explorer intends to invest about $11 billion in 2016 for organic projects, lower than the investments in 2015. The lower investment plans reflect increased capital efficiency.

Statoil currently has a Zacks Rank #3 (Hold). A better-ranked player in the same sector is SunCoke Energy Inc. (NYSE:SXC) . The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SunCoke Energy posted a positive earnings surprise of 177.78% in the last reported quarter. It reported a positive earnings surprise in three of the four preceding quarters.

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