Norwegian operator Statoil ASA (STO - Analyst Report) has awarded Norwegian service provider Aker Solutions a frame agreement, spanning four years, to provide wireline tractor services on the Norwegian Continental Shelf (NCS).
Per the agreement, Aker will deliver wireline tractor services to the platforms that Statoil operates off Stavanger, Norway. It also covers platforms of Statfjord, Volve, Sleipner, Snorre, Gudrun, Dagny and Ermintrude.
The deal also includes certain fields in the Norwegian Sea - Morvin, Aasgard, Trestakk, Kristin, Heidrun, Norne, Njord, Tyrihans, Mikkel, Yttergryta, Alve, Urd, Aasta Hansteen, Snohvit and Hyme.
Besides the fixed awarded scope, the contract carries an option of delivering wireline tractor services from mobile drilling and light well intervention units functional in Stavanger, on contract with Statoil.
The frame agreement will be operational from 2013 through 2017. It carries two additional two-year options. Currently, Statoil has a recovery rate of 50% on their fields and aims to augment it by another 10% to reach 60%. The services of Aker are likely to assist Statoil in achieving its targets.
Statoil has been receiving wireline tractor services from Aker since 1996. The wireline tractor has replaced the requirement for more heavily equipped and costly well conveyance methods. It can press well intervention equipment several kilometers down the highly deviated and horizontal wells. Thus, it is more economical to use and considerably lowers the risk.
This new contract emphasizes Statoil’s belief in the exploration potential of the mature region of NCS.
We have a favorable outlook on Statoil’s long-term production growth, given the company’s growing upstream presence in the emerging basins of the Barrents Sea, West Africa and the deepwater U.S. Gulf of Mexico. We also believe that the growing share of natural gas in Statoil’s NCS volume mix and its extensive interests in infrastructure assets facilitates a leadership position in the European natural gas market.
Statoil, which recently contracted Schlumberger Limited (SLB - Analyst Report) for electric wireline logging services on the NCS, holds a Zacks #2 Rank (short-term Buy rating). Longer term, we maintain our Neutral recommendation.