Norwegian oil and natural gas giant Statoil ASA (STO) anticipates that its high impact discovery in Peregrino, offshore Brazil, is likely to reach its peak output at around 100,000 barrels per day. This is expected to occur around mid-August as two new wells are scheduled to come online in the coming weeks.
The Oslo-based firm has faced some obstacles at Peregrino – the largest offshore project outside Norway – with the completion of three wells postponed due to equipment troubles at the site. Currently, Peregrino’s daily yield averages around 75,000 barrels of heavy crude.
Statoil targets to boost worldwide company output to 2.5 million barrels per day by 2020 from its current output level of a little less than 2 million barrels a day. Per the company’s strategy, most of the growth is expected from international operations. Included in its growth plan is the yield derived from Peregrino and a string of recent offshore oil discoveries made by Statoil and its Brazilian partners.
Statoil has holdings in seven offshore exploration blocks in Brazil. It encompasses stakes in the most coveted pre-salt region. Statoil, the operator of the Peregrino field with a 60% stake, is in the middle of a five-year investment plan of $5–$10 billion in Brazil.
Statoil’s exploration track record over the last three years comprises eight oil discoveries in 12 wells. It intends to spud another 5–7 new wells over the next 2 years. The company plans to commence drilling on two wells — appraisal wells in the Espirito Santo Basin's BM-ES-32 block and at the Peregrino South prospect in the Campos Basin's BM-C-47 block — within the next few weeks.
Additionally, Statoil – together with Repsol Sinopec and Petroleo Brasileiro (PBR) or Petrobras – is likely to provide the assessment plan for the high potential block BM-C-33 in the Campos Basin to the local authorities in August. Initial estimates for the block, as revealed by the companies, were for recoverable reserves of 1.24 billion barrels of oil equivalent.
With a handful of high potential discoveries in its portfolio and further attempts to expand its operation worldwide, Statoil is well positioned to achieve its 2020 production target.
Statoil holds a Zacks #3 Rank, equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.
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