Worth of Statoil dropped due to drop in prices and overambitious growth philosophy

Jun 23, 1999 02:00 AM

A new valuation of Statoil, commissioned by the Department of oil and energy, shows disastrous figures for the Norwegian oil giant. In just one year, the worth of Statoil has dropped by a staggering NOK 25 bn ($ 3,3 bn), due to drop in crude prices, but also due to an "overambitious" growth philosophy, analysts Warburg Dillon Read (WDR) say.
The analysts also criticise the structure of the Statoil organisation, saying that far too much is wasted because different Statoil departments fail to cooperate.
Warburg Dillon Read strongly recommends that Statoil finds a partner for its projects outside of Norway. Prior to the BP Amoco merger, BP was such an ally. Among the projects shared by BP and Statoil are the Chirag field off Azerbaijan, the Angolan offshore projects and exploration off Vietnam and Nigeria.
"Statoil now has to concentrate more on making money, and less on expanding abroad", the WDR warn. An estimated NOK 27 bn ($ 3,5 bn) has to be invested abroad the next 7 years to achievean average daily production of 200.000 barrels, which is still one third short of the goal of 300.000 bpd by 2005.
"Statoil should seek to merge its foreign interests with a company that holds a more mature license portfolio, possibly in exchange for shares in Norwegian projects", the analysts recommend.
Azerbaijan and Angola are the success stories abroad this far, and WDR states that these are the areas most likely to yield both production volume and profit for the next years. Venezuela, the U.K. and China are characterised as "less successful".
The Lufeng project in China has proven to be a most costly lesson for Statoil. A negative cash flow of NOK 250 mm ($ 33 mm) so far hurts, but WDR still recommends that Statoil should continue producing until the field is empty in 2001.
WDR estimates that Statoil's foreign assets have a remaining value of NOK 10,5 bn ($ 1,4 bn), where the Azerbaijan projects alone stand for NOK 3 bn.

Source: IINX via Iinoil
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