Statoil Sells Edvard Greig Stake To Increase Share In Lundin

Statoil (OL:STL) ASA (NYSE:STO) and Lundin Petroleum have concluded their earlier announced transaction, whereby the former has farmed out its entire stake of 15% in the Edvard Greig field in exchange of an increased shareholding in Lundin Petroleum.

The transaction also included the divestment of a 9% interest in the Edvard Greig Oil pipeline and a 6% interest in the Utsira High Gas pipeline. Additionally, Statoil will pay $64 million in cash to Lundin Petroleum.

The transaction has received the consent by Lundin Petroleum AB’s Extraordinary General Meeting on May 30, 2016 alongside other regulatory approvals.

On completion of the transaction, Statoil will own about 68.4 million shares of Lundin Petroleum or 20.1% of the shares and votes. The divestment of these assets has an economic effective date of Jan 1, 2016.

The latest transaction will further boost Statoil’s indirect exposure to core field development projects and growth assets on the Norwegian Continental Shelf (NCS), including the Johan Sverdrup field project. The mega project, which has a break-even of less than $30 per barrel for first phase, is operated by Statoil.

Statoil’s endeavor to improve recovery of resources in mature fields is commendable. The company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the 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. Growth is expected from new projects between 2014 and 2017, which would translate into an annual organic production growth of 1%. The second stream of projects, which are expected from 2017 to 2016, are likely to lead to an annual organic production growth of 2–4%. The state-controlled explorer projects investments of about $16 billion in 2016, lower than that in 2015. The lower investment plans reflect increased capital efficiency.

Statoil holds a Zacks Rank #2 (Buy). Other well-ranked players from the energy sector are Braskem S.A. (NYSE:BAK) , FutureFuel Corp. (NYSE:FF) and ReneSola Ltd. (NYSE:SOL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).