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4-Traders Homepage  >  Equities  >  MOSCOW INTERBANK CURRENCY EXCHANGE  >  NK Lukoil PAO    LKOH   RU0009024277

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Statoil to drill with Rosneft on Russian shelf

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05/05/2012 | 09:47pm CET

Norway's Statoil (>> Statoil ASA) will drill in Russian Arctic waters thought to contain 2 billion metric tons (2.20 billion tons) of oil (>> Rosneft' NK OAO) in partnership with Rosneft, marking the third deal of its kind for the Russian state company.

Norway's Statoil (>> Statoil ASA) will drill in Russian Arctic waters thought to contain 2 billion metric tons (2.20 billion tons) of oil (>> Rosneft' NK OAO) in partnership with Rosneft, marking the third deal of its kind for the Russian state company.

The agreement, signed on Saturday, provided a showcase for president-elect Vladimir Putin, serving out his final days as prime minister before a May 7 inauguration, and Deputy Prime Minister Igor Sechin, in charge of energy and industrial policy.

As a legacy of their time in government, the three deals secure capital and expertise for a push into some of the world's potentially most energy-rich regions.

Rosneft President Eduard Khudainatov said Statoil in turn invited his firm to partner up and bid in Norway's coming licensing rounds.

That offers an entry ticket to one of the world's most developed offshore oil and gas sectors, aiding the government's goal of building its top companies into respected global players.

Output from Russia's Soviet-era oil provinces is declining and the country faces high costs and technological challenges at remote new fields to retain its status as the world's top crude oil producer.

For Sechin, viewed as likely to relinquish a formal cabinet post when Putin returns to the Kremlin, the deals strengthen his political clout and secure his dominance over Russia's energy industry.

Statoil will be a minority partner with Rosneft in the latest venture, which is modeled on deals struck in the last month with U.S. oil major ExxonMobil (>> Exxon Mobil Corporation) and Italian oil firm Eni (>> Eni S.p.A.).

"The terms for everyone are the same," Khudainatov told reporters after the briefing.

The agreement covers a block in the Barents Sea, the Perseyevsky, and three fields in the Sea of Okhotsk, with overall prospective recoverable resources of 2 billion metric tons of oil and 1.8 trillion cubic meters of gas, Rosneft said.

The four blocks' resources are far from the largest in Rosneft's portfolio. Lund, speaking to reporters after the signing, called the projects prospective, with a high risk/reward ratio.

"It falls exactly in line with the strategy," he said.

Statoil will own 33.3 percent of a joint exploration venture and finance its geological exploration activities. It will also reimburse historical expenses incurred by Rosneft and 33.3 percent of expenses incurred acquiring the license.

Khudainatov said that if the fields' resources were confirmed, exploration costs for all four could total $2.5 billion.

"The resource base (of Perseyevsky) is 1.4 billion metric tons, according to current estimates. If that is confirmed (total investment) could be $35-40 billion," Khudainatov said.

"For Magadan-1, Lisyansky and Kashevarovsky (in the Sea of Okhotsk) we estimate $10-$20 billion, depending on confirmation of resources and difficulty of extraction. I took a minimum number here so as not to scare you."

Statoil CEO Helge Lund, speaking to journalists later, declined to confirm potential costs, saying they depended on many factors.

Statoil may also pay Rosneft one-off bonuses for each commercial oil and gas discovery depending on the terms of a final agreement, Rosneft said. They intended to place orders for ice-class vessels and drilling platforms with Russian shipyards.

SHTOKMAN PROGRESS

The Statoil deal was widely expected after Lund received support from Putin at a meeting in late March to try to work out a way forward with the Shtokman gas project in the Barents Sea, after nearly two decades of false starts with two investor groups.

The Gazprom-led Shtokman Development consortium, which also counts Total (>> TOTAL) as a partner, is revamping plans for the field, which holds more gas than all of Norway's continental shelf, into a liquefied natural gas project and will unveil it in late June, sources have said.

Progress on Shtokman was seen as key to Statoil's access to Russia's Arctic offshore oil reserves. Rosneft had a total of five blocks in the Barents Sea, near the recently defined maritime border with Norway.

Sources said the Barents Sea blocks were among the most coveted by potential foreign investors. Two of them - with combined prospective resources of around 28 billion barrels of oil equivalent - went to Eni. Two remain. Rosneft also has two blocks in the Sea of Okhotsk.

ENOUGH FOR ALL

Merrill Lynch estimated in a recent research report the top Russian oil company - holder of the world's largest oil reserves - had 309 billion barrels of hydrocarbon resources in its Arctic offshore license areas.

Rosneft has several more Arctic fields yet to be assigned partners, and Khudainatov re-iterated he had invited Russian companies to such partnerships as well as foreign oil companies.

Sechin said on Friday the government had formed working groups with two Russian companies on shelf projects.

"Concerning Russian companies, as you know, I made offers to all Russian companies wishing to work on the shelf. They were LUKOIL (>> Neftyanaya kompaniya LUKOIL OAO), Bashneft (>> Bashneft' ANK OAO), and TNK-BP <TNBP.MM>."

"From two companies, TNK-BP and LUKOIL, I received confirmation of the wish to work with us on these projects," Khudainatov said, adding: "They have to agree to all terms of my offers."

An attempt by BP (>> BP plc) to tie up with Rosneft in a venture to develop Arctic offshore zones on the Kara Sea fell apart because of resistance from its local partners in TNK-BP, who said TNK-BP should assume BP's role in the deal.

Efforts to buy out the Russian shareholders failed, and ExxonMobil eventually won the deal.

(Additional reporting by Gleb Bryanski; Writing by Melissa Akin; Editing by John Stonestreet)

By Melissa Akin and Vladimir Soldatkin

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Financials ($)
Sales 2016 80 896 M
EBIT 2016 7 200 M
Net income 2016 4 699 M
Debt 2016 7 003 M
Yield 2016 5,68%
P/E ratio 2016 10,45
P/E ratio 2017 7,44
EV / Sales 2016 0,62x
EV / Sales 2017 0,53x
Capitalization 43 555 M
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Mean consensus OUTPERFORM
Number of Analysts 12
Average target price 52,6 $
Spread / Average Target 2,8%
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NameTitle
Vagit Yusufovich Alekperov Chairman-Management Board, President & Director
Valery Isaakovich Grayfer Chairman
Alexander Kuzmich Matytsyn Senior Vice President-Finance
Ravil Ulfatovich Maganov Director, First EVP-Exploration & Production
Victor Vladimirovich Blazheev Independent Director
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1st jan.Capitalization (M$)
NK LUKOIL PAO43 555
PETROCHINA COMPANY LIM..-8.98%193 653
TOTAL10.87%122 681
PETROLEO BRASILEIRO SA..139.70%67 285
NK ROSNEFT' PAO--.--%58 573
STATOIL ASA20.86%56 523
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