Norwegian energy giant Statoil ASA (STO - Analyst Report) has awarded contracts worth NOK 940 million ($163.8 million) to Welltec and Aker Well Service. Both the companies will provide wireline tractor services for well maintenance in over 40 installations on the Norwegian Continental Shelf (NCS).
The work scope of the four-year contract - beginning from February 1, 2013 through January 31, 2017 - comprises wireline tractor services for transport of well intervention equipment, such as logging tools and plugs, in horizontal wells.
This technology will help Statoil to boost yields from mature fields as well as facilitate remedial work to optimize output from wells. Maintenance and repair of wells forms a critical function for increasing recovery. In this context, wireline tractor services signify an essential and valuable tool for maintenance of wells.
Welltec’s contract forms 40% of the work scope and is valued at NOK 540 million. It consists of the installations operated from Gullfaks, Huldra, Kvitebjørn, Visund, Veslefrikk, Valemon, Oseberg, Brage, Troll, Grane, Heimdal, Gullfaks SAT, Oseberg SAT, Vega, Tune, Fram, Vestflanken (Troll), Vale, Vilje, and Bygve/Skirne.
Aker Well Service's contract forms 30% of the work scope and is valued at NOK 400 million. It will cover facilities including Stavanger, Stjørdal and Harstad: Statfjord, Volve, Sleipner, Snorre, Gudrun, Dagny (including Ermintrude) Morvin, Åsgard, Trestakk, Kristin, Heidrun/ SAT, Norne / SAT, Njord, Tyrihans, Mikkel, Yttergryta, Alve, Urd, Aasta Hansteen, Snøhvit, and Hyme.
The remaining 30% of the work scope is optional and will involve employment of rigs for drilling, completion and intervention that will be awarded to pre-qualified suppliers on a job-by-job basis.
The contracts received by the contractor pair are an extension of the existing deals, which are due to expire in January 2013. The new contracts will be executed in direct continuation of the existing contracts and will include two options of two years each.
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.