Statoil's New Licenses off Canada - Analyst Blog

Statoil ASA (STO) has been awarded interests in four new licenses offshore Canada. Late last month, Statoil also won two large exploration blocks in the Baffin Baybid program in West Greenland in partnership with Royal Dutch Shell (RDS.A) and GDF Suez. Production growth from international operations is a key component of Statoil's overall annual upstream growth plan over the next few years.

The new licenses include a Significant Discovery License (SDL) and three Exploration Licenses (ELs) off the coast of Newfoundland. The new acreages highlight the company's strong focus in Canada. Statoil has significant presence in Newfoundlandand enjoys operatorship in several licenses. At the end of 2009, Statoil held 279K acres of oil sands leases in Alberta.

The Statoil-operated Mizzen well was discovered in 2009. The SDL is an extension of this Mizzen license. Statoil is operator with a 65% interest and has Husky Oil Operation Limited as its partner.

Two ELs are located in the Flemish Pass Basin/Central Ridge region, approximately 500 kilometers offshore Newfoundland. For the license located in the vicinity of the Mizzen SDL, Statoil is the operator with a 65% interest and has Husky Oil as its partner. For the license situated in the northern part of the FlemishPassBasin, Statoil is the operator with a 75% interest and partners with Repsol.

The third EL is located in the Jeanne d'ArcBasin, approximately 250 kilometers offshore Newfoundland. Statoil Canadahas a 50% interest and Husky Oil is the operating partner. Oil sands represent a long-term investment for the company.

Although uncertainties remain, we are optimistic on Statoil's ability to develop the project successfully. The company will also capitalize on its 40-year experience in marine operations in the offshore sector. Statoil holds a Zacks #3 Rank (short-term Hold rating). Our Neutral recommendation remains unchanged for the company.