Big Changes in Store for Statoil

Bottom Line: Big changes are in store for Norway’s state-run oil giant, Statoil: After winning parliamentary elections last week, Norway’s new Conservative-led government may move to divest 16% of its stake in Statoil to raise $11 billion, while the Norwegian oil giant prepares to sell some of its North Sea assets to Austria’s OMV, and the head of the country’s energy union calls for the resignation of the Statoil CEO after a report reveals significant security gaps ahead of the terrorist attack and hostage incident at the Amenas facility in Algeria early this year.   

Analysis: The Conservative Party of Norway may cut its stake in Statoil from 67% to 51% after winning parliamentary elections last week. The coalition won 96 seats out the total 169 seats to defeat Prime Minister Jens Stoltenberg’s Labor-led coalition. The Conservatives took the majority position within the new coalition, with 48 seats.  It ran on a platform of reducing its economic footprint in Norway by divesting some of its stakes in a range of companies. At the same time, Statoil is also planning to sell some of its stakes in the Gudrun and Gullfaks oil fields offshore Norway, reducing both to a 51% stake—from 75% for Gudrun and 70% for Gullfaks. The assets will go to Austria’s OMV for $2.65 billion. OMV will also buy Statoil’s 30% stake in the Chevron-led Rosebank discovery offshore UK (off the Shetland Islands).  In total, Statoil oil is selling about 2% of its production in 2014.

Recommendation: The sale of the government’s Statoil shares would probably be a discount, and while the process will be a lengthy one, interest should start forming now. There are also predictions that Statoil will rise 13% over the next year. So far this year, though the stock has fallen 4.4%. The government had only played a passive role in Statoil, so the sale should not bring about any significant changes. The Conservative parliamentary victory, as we mentioned in an earlier briefing, could also translate into forward movement on drilling off the Lofoten islands, which would give Statoil access to the estimated 3.4 billion barrels of oil in these waters. This is all positive news for Statoil, but it is on some level being overshadowed by the security disaster in Algeria in January as a result of a report in which Statoil admitted that it relied too heavily on the Algerian military for security ahead of the attack that saw five Statoil employees killed, sparking outside calls for the resignation of Statoil’s CEO.