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Statoil Offloads 10% Stake in Azerbaijan

Zacks Equity Research

Norwegian giant Statoil ASA’s (STO) share price rose 0.9% before dropping 0.4% and 0.1% in the next two trading sessions following the announcement of farm-down of part of its stake in the BP plc (BP) operated Shah Deniz project off Azerbaijan.

Notably, Statoil raised $1.45 billion from the sale and transfer of these assets.

Statoil offloaded 10% stake in the Shah Deniz production sharing agreement and South Caucasus Pipeline Company to BP and SOCAR. Staoil’s interests in the Caspian Sea project is now 15%, after BP and SOCAR obtained 3.33% and 6.67% interests, respectively.

Statoil’s disposal of assets is part of its strategy to restructure the asset portfolio based on rigid project prioritization. It aims to focus on value creation over production volumes since higher costs has weighed on its profit margins.

Apart from its 15.5% interests in the Shah Deniz project and South Caucasus Pipeline, Statoil’s Azerbaijan portfolio comprises 8.56% interests in Azeri-Chirag-Guneshli and 8.71% interests in Baku-Tbilisi-Ceyhan Pipeline. Statoil also has a 20% stake in Trans Adriatic Pipeline AG that will transfer the gas from the second phase of Shah Deniz to European markets.

Apart from BP, SOCAR and Statoil that have 28.8%, 16.7% and 15.5% interests, respectively, other licensees in Shah Deniz include Lukoil, NICO, Total SA (TOT) and TPAO holding 10%, 10%, 10% and 9% interests, respectively.

Statoil’s endeavors to improve recovery of resources from mature fields is noteworthy. 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 the steady production growth for the next few years on the back of its large resource base at NCS.

Currently, Statoil carries a Zacks Rank #3 (Hold). Another oil and gas stock worth mentioning is Encana Corp. (ECA), which sports a Zacks Rank #1 (Strong Buy).

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