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Statoil Acquires Stakes in Two Fields From Total for $1.45B

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Statoil ASA has entered into an agreement with Total SA (TOT - Free Report) to acquire equity interests in two fields — Martin Linge and the Garantiana— from the latter for a total consideration of $1.45 billion. The fields are located in the Norwegian continental shelf (NCS).

Statoil will acquire a 51% stake in the Martin Linge field and 40% in the Garantiana discovery.

About Martin Linge

Martin Linge is an oil and gas field under development. Located to the west of the Oseberg field in the North Sea, it is estimated to have recoverable resources of more than 300 million barrels of oil equivalent. The production lifetime is expected to extend into the 2030s.

Development of the oil field is being done via a manned wellhead platform. The installation of a jacket substructure in the North Sea has been completed. The topside is being concluded at the Samsung yard in South Korea and is expected to be transferred to Norway by early 2018.

The field faced a number of schedule postponement and cost increments owing to deferred topside engineering, construction and currency impact along with a disastrous accident at the yard. The current operator anticipates the field to come online in the first half of 2019. Since the formation of Plan for Development and Operation, there has been an increase in recoverable resources owing to additional discoveries.

In order to lower expenditures, operations will be controlled remotely from an onshore digital operations centre. Electrification will be achieved via a 160 kilometer cable from shore, the longest AC power link in the world. This will enable CO2 emissions to decline 200,000 tons per year. On completion of the transaction, Statoil’s holding in the field will increase to 70% from 19%.

When in operation, Martin Linge will be a modern production facility with low production cost and low carbon footprint. Per the transaction, Statoil will also receive remaining tax balances with a nominal post-tax value of over $1 billion.

About Garantiana

An oil discovery — Garantiana —  is located north of the Visund field in the North Sea. The field is estimated to have recoverable resource potential in the range of 50-70 million barrels oil equivalent. Currently, development concepts are being assessed.

Per the applicable legislation including required information and consultation process, Statoil will take over important employees from Total.

The agreed purchase price is based on an effective date of Jan 1, 2017. The amount payable is subject to adjustment on completion of the transaction in 2018. Statoil will become the operator of the field once the transaction is concluded in 2018.

Price Performance

Shares of the company have gained 8.1% compared with the industry’s rally of 9.8% in the last three months.


Zacks Rank & Other Key Picks

Statoil currently carries a Zacks Rank #2 (Buy). Other prospective players in the energy sector include BP plc (BP - Free Report) and ConocoPhillips (COP - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A major exploration and production company, BP, delivered an average positive earnings surprise of 26.80% in the last four quarters.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It delivered an average positive earnings surprise of 152.34% in the last four quarters.

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