Statoil ASA (STO) announced plans to divest majority of its stake in the Gassled joint venture for 17.35 billion kroner, or about $3.25 billion, in an effort to streamline its portfolio. The deal is subject to approvals from the Norwegian Ministry of Petroleum and Energy as well as the Ministry of Finance.
Under the agreement, the Norwegian oil company intends to sell 24.1% of its share in the European natural gas transport venture Gassled. The stake has been sold to a holding company, Solveig Gas Norway AS, which is held 45% by Canada Pension Plan Investment Board, 30% by Allianz Capital Partners, a subsidiary of Allianz SE and 25% by Infinity Investments SA, a unit of the Abu Dhabi Investment Authority sovereign-wealth fund.
Statoil will retain its 5% stake in the pipeline venture, which owns the gas-transportation and processing plants on the Norwegian Continental Shelf. Last year, about 100 billion cubic meters of gas was piped to Britain, Germany, Belgium and France from the shelf.
Gassled’s largest shareholder is Norwegian state-run oil company Petero, which holds 45.8% interest. Royal Dutch Shell PLC (RDS.A) holds 5% interest, ConocoPhillips (COP) has a 1.67% stake, while Italy's Eni SpA (E) enjoys 1.27%. Last year, ExxonMobil Corp. (XOM) offloaded its 8% stake in the Gassled for about six billion kroner and now Total SA (TOT) is also planning to sell its 6.43% stake.
The divestment will provide Statoil with financial flexibility, for deployment in higher yielding projects or share buybacks. The company also intends to invest $16 billion this year in Norway and overseas. Again, in March 2011, Statoil highlighted its objective to invest about $3 billion in exploration activity for this year, for operations in the Gulf of Mexico and off the coasts of Brazil, Tanzania, Indonesia and Norway.
Production growth from international operations is a key component of the company’s overall annual upstream growth plans over the next few years. The company has a growing upstream presence in the emerging basins of the Caspian Sea, West Africa and the deepwaters of the U.S. Gulf of Mexico.
However, the Norwegian state’s concentrated ownership in the company significantly reduces the stock’s liquidity and attractiveness, relative to other European integrated names.
We maintain our long-term Neutral recommendation for the company. Statoil currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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