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Norwegian energy giant Statoil ASA (STO - Analyst Report) has contracted three rigs – Bideford Dolphin, Stena Don and Scarabeo 5 – for about NOK 9.17 billion ($1.62 billion). The rigs will be deployed in the Norwegian Continental Shelf (NCS - Analyst Report) to drill numerous fast-track developments as well as for spudding and completion.

The Bideford Dolphin rig – owned by Dolphin Drilling AS – has been contracted at an estimated value of NOK 2.96 billion for fixed period and is scheduled to begin operations in the first quarter of 2014 through the first quarter of 2017. It will be used to drill the Tordis, Vigdis and the Statfjord field in the North Sea. Additionally, Statoil has gained a potential two-year option for the rig.

The Stena Don rig – owned by Stena Drilling – has been contracted at an estimated value of NOK 3.11 billion for fixed period. The rig is likely to come online from the fourth quarter of 2013 and extend its operations till the fourth quarter of 2016. It will be used for production drilling on the Troll field as well as on the Fram H-Nord in the North Sea. Additionally, Statoil has secured a potential option for one year.

Lastly, the Scarabeo 5 rig – owned by Saipem – will be employed on various NCS fields for drilling and completion of production wells. The rig will be operational from the third quarter of 2014 till the third quarter of 2017. The contract, with an estimated value of NOK 3.10 billion for the fixed period, holds a potential one-year option.

Statoil has engaged these rigs for operations in the NCS as the medium-term drilling plans ramp up. The new rig capacity will assist Statoil to achieve its production targets by 2020. We appreciate Statoil’s endeavor to improve recovery of resources in mature fields. The rigs will improve drilling and well maintenance, which will further contribute to improved recovery and thus provide impetus to future growth.

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 on the stock.

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