Statoil bucks big-oil blues

Unlike some of the other majors, the company sees a big boost in first-quarter production.

By Jim J. Jubak May 10, 2012 4:55PM
Image: Oil derricks (© Comstock/Corbis)Unless you compare the results to those of ExxonMobil (XOM), Chevron (CVX), and BP (BP), you may not realize exactly how unusual Statoil's (STO) first-quarter report was on May 8.

ExxonMobil, Chevron and BP all reported lower first-quarter production. That's a reflection of how tough it's become for the big international majors to find new reserves big enough to move their numbers.

Statoil, however, reported a 12% increase in production from the first quarter of 2011. The company started production at new projects in Brazil, Angola, and the Norwegian sector of the North Sea. Enhanced production technologies, the company added, boosted production from its mature Norwegian fields. (In addition in the quarter, Statoil made three big oil and gas discoveries in Norway, Brazil, and Tanzania.)

The bottom-line result of this increase in production was record first-quarter earnings of $10.1 billion, a 14% increase from the first quarter of 2011, on a 34% increase in revenue.

All this good news came with a bit of a warning, of course. Investors shouldn't expect this kind of increase in production for the rest of 2012, the company said. In fact, because of delays in the startup of the Skarv field, a field off the Norwegian coast and operated by partner BP, production might come in below forecast.

But just so investors don't get too gloomy, Statoil also announced a breakthrough exploration deal with Russia's Rosneft that gives Statoil access to what are projected as big new reserves in the Russian Arctic. For a while now, I've been preaching that Statoil's experience in exploration and production in hostile environments was a huge advantage to the company. The finds in Brazil's deepwater South Atlantic and the deal with Rosneft are good examples of that.

The only problem I can see with Statoil's shares is that they aren't cheap -- well, the story isn't exactly a secret. My 12-month target price for Statoil is $29, about 7.5% above the May 9 closing price for the New York-traded ADRs. Even with the 4.4% yield that might not be enough upside for your portfolio. But then again, in this market it might be.

As of May 10, I'm adding these shares of my Jubak's Picks portfolio with a target price of $29 by May 2013.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. post. The fund did own shares of Statoil as of the end of December. For For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here.
2Comments
May 13, 2012 10:40AM
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Yea I like Statoil too. But now I'm thinking I should sell it. Besides your nice article they have entered into a deal with Russia.

 

Then, beyond that, MSN does such a wonderful job of screening my comments when I curse about Obozo but you don't do so good at screening out comments that have absolutely nothing about the article or investment under discussion. Like dating old men? Hey I'm an old man, I start medicare this month and SS next year. Are these girls hookers? How much for a petite Brunette 25 year old with a pretty face, uplifting tatas and a delightful tush? I got money baby!

 

Certainly I am LMFAO!

 

Jim Jubak, you got 2 comments on this article one intelligent and one totally unrelated. You better watch out or somebodies gonna call the cops. And you know Jim, by your pic, you look to be about my age. Is older men date a related party web site?

May 10, 2012 11:18PM
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Smile Umm, buy at $25.74 take the $1.15 dividend and you're in at $24.59 and it goes to $27-28 or higher you make 10%+. That's not bad for a market that's not doing that great.
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