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Statoil May Sell U.S. Gulf Assets After Canada Tar Sands Stake

Statoil May Sell U.S. Gulf Assets After Canada Oil Sands Stake
November 23, 2010, 8:40 AM EST

By Marianne Stigset

Nov. 23 (Bloomberg) -- Statoil ASA, Norway’s biggest energy company, said it may divest holdings in the Gulf of Mexico after selling a stake in its oil sands project in Canada for $2.28 billion to PTT Exploration & Production Pcl.

Statoil is selling stakes in fields where it has 100 percent ownership to reduce risk and raise funds for projects. The Stavanger-based company will retain 60 percent of Canada’s Kai Kos Dehseh project in a transaction that will take effect Jan. 1, it said in a statement today. The transaction follows Statoil’s sale of a 40 percent stake of its Peregrino field off Brazil to Sinochem Group for $3.1 billion in May.

“We’re sitting on a few exploration licenses where we have 100 percent and where it’s also our intention to bring in partners,” Statoil’s head of international development and production Peter Mellbye said by telephone today. “We have a few licenses in the Gulf of Mexico in which we still hold 100 percent.”

Statoil, which operates 80 percent of Norway’s oil and gas production, is expanding abroad to counter dwindling output from ageing North Sea fields. It has said it wants to expand its portfolio in shale gas and is seeking opportunities in China, and also wants to buy more assets off Brazil. It is the fourth- largest lease holder in the Gulf of Mexico, where it wants to become operator of a field.

Statoil rose 2.2 kroner, or 1.8 percent, to 126.7 kroner as of 12:17 p.m. in Oslo, capping this year’s decline at 12 percent and valuing the company at 404 billion kroner ($67 billion).

Good Deal

“They got a better price than what most people would have valued that oil sand project at,” Gudmund Halle Isfeldt, an analyst at DnB NOR ASA with a “buy” recommendation said on the phone today. “I don’t quite know why they’re selling these assets when Norwegian oil production is in decline. But the deal is a good one, so there’s nothing wrong in what they’ve done.”

Mellbye said while Statoil doesn’t provide its own reserve estimates for the Kai Kos Dehseh project in Canada, “third parties involved” in the sale process estimated the reserves at 2.5 billion to 3.7 billion barrels, valuing the transaction at $2.28 per barrel to $1.54 per barrel.

“There’s still uncertainty surrounding this, which means there’s upside potential to those figures,” Mellbye said. Statoil has not decided on what it will do with the capital raised from the sale, he added.

Demonstration Plant

Statoil in 2007 bought North American Oil Sands Corp. for about $2 billion to tap an area estimated to hold the largest oil reserves outside Saudi Arabia. It has since invested an estimated $1.5 billion to construct project facilities and related infrastructure at the Leismer project, according to Arctic Securities ASA analyst Trond Omdal. The company plans to start production at the 20,000 barrel-a-day Leismer demonstration plant in the first quarter and reach full capacity by end of 2011, Mellbye said.

Production of the project’s next phase, the so-called Corner phase, may start in 2016, should the investment plan for it be approved, Mellbye said. The company’s target of reaching 200,000 barrels a day wouldn’t happen until after 2020, he said.

Statoil’s Canada project has faced high costs, technological, environmental and political challenges. The company has had to defeat several shareholder motions to withdraw from the project at its annual general meetings. Mellbye said that while the company maintained an “open mind” with regards to Canadian oil sands and saw “potential” in it, it had no immediate plans to expand its portfolio in that area.

“We plan to develop the asset we now have and we have no concrete plans for further expansion of that area of our business,” Mellbye said.

--Editors: Will Kennedy, Randall Hackley.


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