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Analyst Blog

On Mar 18, 2014, we issued an updated research report on Statoil ASA (STO - Analyst Report). The company’s strong balance sheet, exit from low-profit generating operations and broadened international asset base indicate a promising future.
 
The Norway-based major international integrated oil and gas company reported mixed financial results for the fourth quarter of fiscal 2013 with the bottom line beating the Zacks Consensus Estimate but the top line missing it.

This Zacks Rank #4 (Sell) company failed to deliver positive earnings surprise in three of the last four quarters, with an average beat of negative 1.96%.

In recent times, Statoil has delivered strong exploration results, adding significantly to its resource base by making several high impact discoveries. The latest finds give the company access to new regions of Norway, Russia, Azerbaijan, Tanzania as well as Australia. These strengthen the company’s position and pave way for long-term growth.

Statoil aims to achieve an equity production of above 2.5 million barrels of oil equivalent in 2020. The growth is expected to come from new projects from 2014 to 2016 that would result in a compound annual growth rate (CAGR) of 2% to 3% for the period 2012 to 2016. The second stream of projects is expected within the 2016−2020 period that would likely lead to a CAGR of 3% to 4%. The state-controlled explorer intends to invest about $20 billion per year from 2014 to 2016, down 8% from earlier estimate. The lower investment plans reflect increased capital efficiency.

On the downside, management remains cautious about uncertainties in gas value over volume, start-up and ramp-up, and operational regularity. In 2013, both equity and entitlement production decreased 4% annually due to the decline of mature fields. Further, management believes that the scheduled maintenance is likely to have a negative impact on equity production of about 10 MBoe/d in the first quarter of 2014. Divestitures are also likely to adversely impact output in 2014. Thus, it was unclear about its growth target.

Stocks That Warrant a Look

Other stocks in the oil and gas industry include Helmerich & Payne, Inc. (HP - Analyst Report), Warren Resources Inc. (WRES - Snapshot Report) and Patterson-UTI Energy Inc. (PTEN - Analyst Report). All three stocks sport a Zacks Rank #1 (Strong Buy).

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