Norwegian oil giant Statoil ASA’s (STO) stock price surprised with a 2% drop in the trading session that followed the announcement of its deal with the Thai exploration and production company PTTEP.
The agreement relates to the division of their interests in the Kai Kos Dehseh (KKD) oil sands project in Alberta, Canada.
Subsequent to the completion of the transaction, Statoil will continue to operate Leismer and Corner development projects with 100% ownership, while PTTEP will completely own the Thornbury, Hangingstone and South Leismer areas.
Per the transaction, Statoil will pay a balancing amount of $200 million to PTTEP, along with a working capital adjustment effective from Jan 1, 2013. The transaction is expected to close by the third quarter of 2014 and is subject to customary regulatory approvals.
Statoil got access to KKD through the acquisition of North American Oil Sands Corporation in 2007. Later, in 2011, PTTEP purchased a 40% stake in KKD, with Statoil continuing as the operator.
The Leismer project is the first phase of the steam-assisted gravity drainage full field development of KKD. Currently, Leismer is in production with an operating capacity of 20,000 barrels per day. Initially, a final investment decision for the Corner project was planned for the first part of 2014. However, both the parties have decided to delay this until the transaction is wrapped up.
The decision to execute the transaction rests on the duo’s commitment to enhance shareholder value. It also gives them the choice to develop the assets at their own pace.
Statoil carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include NGL Energy Partners LP (NGL), Cheniere Energy Partners L.P. (CQP) and Northern Tier Energy LP (NTI). All these stocks hold a Zacks Rank #1 (Strong Buy).
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