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Statoil (STO) to Sell Kai Kos Dehseh Oil Sands to Athabasca
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Norwegian major Statoil ASA recently inked an agreement to sell its 100% stake in Kai Kos Dehseh (“KKD”) oil sands projects in the Canadian province of Alberta to Athabasca Oil Corporation. The impact of this news on the company’s stock price is yet to be gauged. Statoil’s price chart reveals that it has underperformed the Zacks categorized Zacks sub industry Oil & Gas- International Integrated Market, year to date. While shares of Statoil have gained 29.1%, the broader Oil & Gas – Integrated International has increased by 17.7%. Statoil does not find the oil sands project to be feasible and suitable for its portfolio. Concerns relating to profitability have forced the company to divest its KKD assets in the Alberta oil patch and incur a loss of about $500–$550 million.
The assets to be divested include the producing Leismer demonstration plant and the undeveloped Corner project, along with a number of midstream contracts related with Leismer’s production. On completion of this transaction, Statoil will no longer operate any oil sands assets and Athabasca will gain operatorship of Leismer and Corner.
The deal with Athabasca Oil comprises two oil sands leases – a 24,000 barrel a day test project and a greenfield facility that was projected to yield 40,000 barrels a day. The latter was abandoned by Statoil in 2014.
In 2007, the Norwegian oil company entered KKD by purchasing North American Oil Sands Corporation. In 2011, PTTEP farmed in to an interest of 40%, and in 2014 Statoil and PTTEP agreed to divide their respective interests in KKD. Since then, Statoil has been the owner-operator of the Leismer and Corner projects.
Statoil is expected to receive a total consideration of about CAD 832 million from this transaction. Of the total, a cash consideration of CAD 435 million and CAD 147 million are to be received in the form of 100 million common shares in Athabasca. Statoil will gain a 20% stake in Athabasca Oil that will be managed as a financial investment. Additionally, about CAD 250 million will be paid in a series of contingent payments. In total, about 80% of the consideration will be in cash elements.
The effective date of the transaction is Jan 1, 2017.
The transaction is in sync with Statoil’s strategy of portfolio optimization to improve financial flexibility and focus capital on main activities worldwide, including offshore Newfoundland, Canada. Since 2007, the company has continuously improved its operational performance, maintained a good safety record and delivered strong production from Leismer.
Statoil is not the only company to have pulled out investments from Canadian oil sands. Other companies like Total SA , Royal Dutch Shell plc and ExxonMobil Corporation (XOM - Free Report) have also done the same earlier.
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Statoil (STO) to Sell Kai Kos Dehseh Oil Sands to Athabasca
Norwegian major Statoil ASA recently inked an agreement to sell its 100% stake in Kai Kos Dehseh (“KKD”) oil sands projects in the Canadian province of Alberta to Athabasca Oil Corporation. The impact of this news on the company’s stock price is yet to be gauged. Statoil’s price chart reveals that it has underperformed the Zacks categorized Zacks sub industry Oil & Gas- International Integrated Market, year to date. While shares of Statoil have gained 29.1%, the broader Oil & Gas – Integrated International has increased by 17.7%.
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Statoil does not find the oil sands project to be feasible and suitable for its portfolio. Concerns relating to profitability have forced the company to divest its KKD assets in the Alberta oil patch and incur a loss of about $500–$550 million.
The assets to be divested include the producing Leismer demonstration plant and the undeveloped Corner project, along with a number of midstream contracts related with Leismer’s production. On completion of this transaction, Statoil will no longer operate any oil sands assets and Athabasca will gain operatorship of Leismer and Corner.
The deal with Athabasca Oil comprises two oil sands leases – a 24,000 barrel a day test project and a greenfield facility that was projected to yield 40,000 barrels a day. The latter was abandoned by Statoil in 2014.
In 2007, the Norwegian oil company entered KKD by purchasing North American Oil Sands Corporation. In 2011, PTTEP farmed in to an interest of 40%, and in 2014 Statoil and PTTEP agreed to divide their respective interests in KKD. Since then, Statoil has been the owner-operator of the Leismer and Corner projects.
Statoil is expected to receive a total consideration of about CAD 832 million from this transaction. Of the total, a cash consideration of CAD 435 million and CAD 147 million are to be received in the form of 100 million common shares in Athabasca. Statoil will gain a 20% stake in Athabasca Oil that will be managed as a financial investment. Additionally, about CAD 250 million will be paid in a series of contingent payments. In total, about 80% of the consideration will be in cash elements.
The effective date of the transaction is Jan 1, 2017.
The transaction is in sync with Statoil’s strategy of portfolio optimization to improve financial flexibility and focus capital on main activities worldwide, including offshore Newfoundland, Canada. Since 2007, the company has continuously improved its operational performance, maintained a good safety record and delivered strong production from Leismer.
Statoil is not the only company to have pulled out investments from Canadian oil sands. Other companies like Total SA , Royal Dutch Shell plc and ExxonMobil Corporation (XOM - Free Report) have also done the same earlier.
Statoil currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>