Statoil ASA (STO - Free Report) has extended its contract with Aker Solutions for its operated fields as well as mobile drilling units on the Norwegian Continental Shelf (NCS). This option comprises the first of two potential two-year contract options Statoil holds on the existing initial three-year agreement signed back in 2009.
Per the latest deal, the Norwegian energy giant chose to extend the mechanical wireline services of Aker Solutions for Statoil operated fields that include Heidrun, Njord A, Brage, Grane, Gullfaks A, B and C, Heimdal, Huldra, Kvitebjørn, Oseberg B and C, East and West, Troll A, Veslefrikk, Visund A and Volve.
Additionally, it covers mechanical wireline work for mobile drilling units on the NCS. The company intends to utilize these services at its subsea fields in the North Sea, comprising Gullfaks satellites, Heidrun satellites, Hyme, Kristin, Mikkel, Norne, Oseberg, Tune, Snorre UPA, Snøhvit, Statfjord satellites, Tordis, Troll, Vega, Vigdis, Visund, Yttergryta and Åsgard.
Furthermore, Aker is also entitled to supply onshore operational support to Statoil's field centers at Stavanger, Bergen, Stjørdal and Harstad. For Aker, this two-year extension will generate revenues of up to NOK 700 million to NOK 800 million and it will maintain around 400 of its workforce in employment, 60% of which will support Statoil offshore.
Well intervention services carried out on an oil or gas well aim at maximizing production as well as escalating the recovery rate of hydrocarbon. Statoil occupies the leading position with regard to recovery rates for offshore oil and gas properties worldwide. The continuation of mechanical wireline services is expected to augment its production level in a more cost-effective way.
During the third quarter, equity and entitlement production of Statoil increased 3% annually, based on enhanced output from Gullfaks South Brent, production ramp up at existing fields as well as higher gas sales.
Statoil, which recently contracted Schlumberger Limited (SLB - Free Report) for electric wireline logging services on the NCS, holds a Zacks #2 Rank (short-term Buy rating). Our long-term Neutral recommendation remains unchanged.