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Statoil (STO) Hires West Hercules Rig for Drilling Operations

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Statoil ASA and its license partners have inked an agreement with North Atlantic Norway Ltd for the utilization of the 6th generation rig, West Hercules.

West Hercules has been hired for drilling two exploration wells in the Barents Sea in 2018 and has options to drill another five exploration wells. The contract, which involves two permanent wells, is estimated in the range of $15-20 million.

The contract value includes mobilization and demobilization expenses. However, remotely operated vehicles and other services will be charged separately. The drilling is expected to commence in summer 2018.

Statoil has previously used this rig in the northern part of the Norwegian Continental Shelf (NCS) and in Canada. The rig is equipped for use in cold waters.

Statoil’s endeavors to improve recovery of resources in mature fields are commendable. The company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the NCS. We believe that the company is well positioned to sustain its stable production growth over the next few years on the back of a large resource base at NCS.

The company’s cost-control efforts amid weak oil and gas pricing environment are laudable. Statoil has increased its drilling plan for 2017 by about 30% compared with 2016. Statoil intends to drill about 30 exploration wells in 2017, of which more than 50% will be drilled on the NCS. This raises optimism and is likely to boost shareholder value as well.

Price Performance

In the last three months, Statoil’s shares have outperformed the industry. The company’s shares have gained 5.4% compared with the industry’s 2.6% rally.



Zacks Rank & Other Key Picks

Statoil flaunts a Zacks Rank #1 (Strong Buy).

Other top-ranked players in the same sector are EOG Resources (EOG - Free Report) , Pioneer Natural Resources Co. (PXD - Free Report) and Devon Energy (DVN - Free Report) . All these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based EOG Resources is a major independent oil and gas exploration and production company. The company delivered an average positive earnings surprise of 40.94% in the preceding four quarters.

Headquartered at Irving, TX, Pioneer Natural Resources is an independent oil and gas exploration and production company. The company delivered an average positive earnings surprise of 67.62% in the preceding four quarters.

Devon Energy, based in Oklahoma City, is an independent energy company engaged primarily in the exploration, development and production of oil and natural gas. The company delivered a positive earnings surprise of 13.77% in the preceding quarter.

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