Norwegian energy giant Statoil ASA STO has announced a reduction in its estimated cost for developing Norway's Johan Sverdrup oilfield. The investment cost for the first phase of the development has been lowered by NOK 5 billion to NOK 92 billion. The continuous effort to provide quality in project delivery and implementation has made this possible.
During the summer of 2017, the Johan Sverdrup development completed 50% and is currently 60% complete, ahead of plan and below budget.
The planned investments for Johan Sverdrup field has been lowered a number a times since its plan for development and operation (PDO) was approved by Norwegian authorities. Notably, this is the fourth time that the company has lowered its cost estimates. The company had predicted the cost to be around NOK220 billion at an early stage of the development. However, the estimates were lowered to a range of NOK 140–NOK170 billion in during Aug 2016. The overall development cost of the oilfield was then expected in the range of NOK137–NOK152 billion in Mar 2017. The oilfield, which is the largest North Sea discovery in decades, is anticipated to have a peak production level of 660,000 barrels of oil per day.
This emphasizes the strength of the project and boosts the value generated by the project for the shareholders. Currently, the assembly operation of the Johan Sverdrup drilling platform is going on in Klosterfjorden, near Haugesund in Norway. The drilling platform is one of four platforms which forms the planned field centre for Johan Sverdrup, with Aibel liable for the engineering, procurement and construction of the platform.
On completion of the assembly operation, the drilling platform will be transferred to Haugesund where work on hook-up of modules and commissioning will carry on until installation, which is planned for the middle of next year.
About Johan Sverdrup
Being one of the five biggest oil fields on the Norwegian continental shelf (NCS), Johan Sverdrup is estimated to hold resources of between 2.0 – 3.0 billion barrels of oil equivalent. To be developed in several phases, the field’s concept decision for Phase 2 was prepared earlier this year. The selected concept comprises of another process platform (P2), alteration to the riser platform and subsea wells.
During Phase 1, scheduled to commence in late 2019, the production capacity is projected at 440,000 barrels of oil per day. Phase 2 is slated to begin in 2022, with full field production anticipated at 660,000 barrels of oil per day. Peak production on Johan Sverdrup will correspond to 25% of the entire Norwegian petroleum production.
Statoil is the operator of the Johan Sverdrup oilfield development holding 40%. The other partners are Lundin Petroleum, Maersk Oil, Petoro and Aker BP holding 23%, 8%, 17% and 12%, respectively.
Price Movement
The company has operations in all major hydrocarbon-producing regions of the world, with an emphasis on the NCS. We believe that Statoil is well positioned to sustain its steady production growth over the next few years on the back of its large resource base at NCS. The continuous endeavor of the company to increase the shelf life is also reflected in its price chart. Shares of Statoil have gained 7.9% compared with the industry’s decrease of 0.5% over the last three months.
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Zacks Rank & Stock Picks
Currently, Statoil carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include TransCanada Corporation TRP, Transmontaigne Partners LP TLP and Range Resources Corporation RRC. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Calgary, Canada, TransCanada is a midstream energy firm in North America. The company delivered an average positive earnings surprise of 4.06% in the last four quarters.
Transmontaigne, headquartered in Denver, CO, involves in transporting and storing refined petroleum products. The firm delivered an average positive earnings surprise of 6.60% in the last four quarters.
Based in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of U.S. oil and gas resources. The company’s 2017 earnings are estimated to grow 1587.17%.
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