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Statoil to Shelve Rig Scarbeo5 Temporarily

Zacks Equity Research

Norwegian oil major, Statoil ASA (STO) intends to suspend its contract with Saipem for the rig Scarabeo5 from the autumn of 2014, temporarily, for the rest of the year. The suspension is mainly due to the overcapacity in its rig portfolio.

The rig Scarabeo5 will be shelved for a short period and Statoil plans to re-commission the rig by early next year. Currently, the rig is employed on Visund and scheduled to complete its work there in August. The period for which the rig is being put on hold is equivalent to less than 3% of Statoil’s drilling capacity on the Norwegian Continental Shelf (NCS) in the current year.

The rig has been hired on contract till 2017 and will be utilized for drilling and completion of production wells on various NCS fields. This will aid in enhancing the recovery from existing fields. The temporary suspension of Scarabeo5 will not impact Statoil’s production goals or planned exploration activities on the NCS.  

In the current year, the company still targets to drill 20–25 exploration wells on the NCS. Out of the this number, Statoil will remain the operator of about two-thirds of the wells.

Statoil’s endeavor to improve recovery of resources in mature fields is appreciable. 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 for the next few years on the back of its large resource base at NCS.

Moreover, the company’s continuous efforts to rightly place its rigs help to maximize shareholders’ value.

Statoil sports a Zacks Rank #1 (Strong Buy). Meanwhile, one could consider other players in the same sector like Encana Corp (ECA), Magellan Midstream Partners LP (MMP) and EQT Corp. (EQT), all of which have the same Zacks Rank as Statoil.

Read the Full Research Report on STO
Read the Full Research Report on MMP
Read the Full Research Report on EQT
Read the Full Research Report on ECA

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