Norway’s Statoil ASA (STO) and Brazilian state-run energy giant Petroleo Brasileiro (PBR), aka Petrobras, signed a letter of intent (TOI) to extend their joint exploration venture in emerging oil acreages.
Under the TOI, the companies intend to explore prospective oil projects from new acquisitions in areas of mutual interest and thereby expand technology cooperation. The exploration process will be done only through joint bidding in public bid rounds. Furthermore, the two national companies aim to initiate a joint screening study to evaluate possible operational synergies. They also seek joint exploration with regard to the Indra prospect and its neighborhood.
Lately, the Norwegian company also officially opened the Peregrino oil field, located 85 kilometers offshore Brazil in the Campos basin at about 100 meters under water in licenses BMC-7 and BMC-47. The Statoil-Petrobas tie-up came on the heels of this opening ceremony.
Statoil enjoys its first largest international operatorship of the Peregrino field, which confers it the second-largest operatorship in Brazil given the field’s full capacity. Peregrino field commenced production last month and is expected to have reserves of 300 million to 600 million barrels of oil equivalent with significant upside potential.
The first development phase of the Peregrino field comprises two drilling and wellhead platforms and a large floating production, storage and offloading vessel. The company is currently drilling an exploration well at Peregrino South and is in constant attempt to undertake overseas expansion and thereby boost reserves.
Although we find Statoil’s venture to improve recovery of resources in mature fields commendable, the company expects its 2011 equity production to be steady with or lower than 2010. Earlier, management highlighted that it would deliver a compound annual production growth rate of around 3% between 2010 and 2012.
Hence, given our concerns related to the near-term production outlook, 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.
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
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