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Statoil Awards Dagny Contract

Zacks Equity Research

Norwegian giant Statoil ASA (STO) has awarded a contract worth NOK 6.1 billion to Daewoo Shipbuilding & Marine Engineering (“DSME”) relating to the construction of the topsides for the Dagny platform. The construction will be carried out with Aker Solutions as a major sub-contractor.

The scope of the contract comprises detailed design, procurement, engineering services, construction, hook-up as well as commissioning. Per the contract, DSME will design and build the topsides for the platform, while Aker Solutions (with operations in Stavanger and Oslo, Norway, and Kuala Lumpur, Malaysia) will support the comprehensive engineering services, offshore hook-up and commissioning work.

The construction work will begin instantly and is expected to conclude by the first quarter of 2017. The other partners in the project include Total SA (TOT) and Det Norske.

The contract, which has been awarded under widespread international competition among pre-qualified suppliers, is subject to approval by the Norwegian authorities. The approval is anticipated in the first half of 2013.

The Dagny field comprises 4 licenses and is estimated to hold recoverable reserves of about 225 million barrels of oil equivalent and an estimated productive life of 20 years. During the plateau phase, the yield is projected at 60,000 barrels per day of oil and 9 million cubic meters per day (MMcm/d) of gas. In order to enhance output, dry gas injection will be employed at a rate of 8 MMcm/d.

Towards the end of 2012, Statoil had proposed to invest NOK 31 billion ($5.6 billion) for the development of the Dagny field, according to the Plan for Development and Operation submitted to the Norwegian authorities.

The Netherlands' Allsea will perform pipe-laying operations. On the basis of design studies carried out by various Norwegian and international suppliers, the contracts for a floating storage and offloading unit, marine operations and tie-ins will be given by the spring of this year.

Statoil holds a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector – NGL Energy Partners LP (NGL) and Lehigh Gas Partners LP (LGP) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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