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Norwegian oil giant Statoil ASA (STO - Analyst Report) and engineering group Aker Solutions have decided to call off their pact for charter of category B (Cat B) rig.

A contract worth $1.9 billion was entered into by Statoil and Aker in Apr 2012. Per the deal, Aker would provide a semi-submersible rig capable of well-intervention services on the Norwegian Continental Shelf (NCS) capable of operating all round the year. It also included services such as charter of the necessary equipment and services to perform well intervention, sidetrack drilling, ROV operations, well testing and cementing.

The rig was expected to commence operations in 2015 and was extended for a period of eight years with options of three times for two years for the category B service.

Since the signing of the contract, both the parties had been working together to identify and solve the technical challenges posed by the rig's subsea systems. Although considerable development had been made in dealing with these challenges, technological prerequisites still remained.

In view of the failure to meet the engineering challenges with the new concept, Aker Solutions decided to hold talks with Statoil with respect to the terms and conditions for the Cat B services. Subsequently, the parties agreed to terminate this contract. Both the companies are liable to bear its own project-related costs. However, Statoil is contemplating other approaches to the concept.

Statoil aimed to enhance recovery from existing fields through the use of Cat B concept. In 2012, average oil recovery rate from Statoil-operated fields had increased to 50% from 49%. The company has recently set a new goal of boosting recovery rate to 60% on the NCS by using new technology.

Statoil carries a Zacks Rank #4 (Sell). However, there are other Zacks Rank #1 (Strong Buy) stocks – Hornbech Offshore Services, Inc. (HOS - Snapshot Report), Newpark Resources Inc. (NR - Snapshot Report) and Gulfmark Offshore, Inc. (GLF - Snapshot Report) – that are expected to perform impressively over the short term.

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