Norwegian oil giant Statoil ASA (STO) entered into an agreement with U.K. based oil firm, Tullow Oil, to buy 30% participating interest of the latter in offshore Block 47 in Suriname, a country situated on the northeastern coast of South America. The financial terms of the deal were not disclosed.
Located in the Guyana basin, about 167.8 miles to the north of mainland Suriname, the block lies in water depth of 4265.1 feet to 9842.5 feet. Tullow Oil is slated to commence seismic survey on the field in the coming days, with drilling expected to begin in 2014, following the study results.
The Guyana basin represents a prospective exploration ground with rich hydrocarbon potential that has attracted many international companies such as Royal Dutch Shell plc (RDS.A), Total SA (TOT) and ExxonMobile Corp. (XOM).
London stock exchange listed Tullow Oil will continue to act as the operator of the concession with the remaining 70% stake. The deal is pending approval from the state oil company Staatsolie Maatschappij Suriname.
This acquisition marks Statoil’s foray into the Suriname energy sector, strengthening its foothold on the South American soil. The company enjoys exploration operations in the neighboring Brazil and Venezuela. We appreciate Statoil’s endeavor to explore potential and fertile oil and gas plays across the globe.
We believe that Statoil is well positioned to sustain its production growth over the next few years on the back of its growing upstream holdings in the emerging basins of the Caspian Sea, West Africa and the deepwaters of the U.S. Gulf of Mexico.
Additionally, Statoil is concentrating on the still-unexplored areas of the Norwegian Sea, and intends to recover 4.2 billion barrels of oil equivalent in the coming years. This will enhance the company’s volume growth going forward.
However, Statoil remains exposed to the volatile oil and gas fundamentals, international business risks and operational disturbances. We remain on the sidelines due to the company’s weak reserve replacement ratio and lower production target.
Hence, we maintain a Neutral recommendation on the stock for the long run, supported by a Zacks #3 Rank (short-term Hold rating).
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
STATOIL ASA-ADR (STO): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment