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Statoil keeps adding low (geopolitical) risk reserves

posted on January 7, 2013 at 4:57 pm
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Statoil (STO) isn’t just Norway anymore. (Statoil is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/

In recent months the company, 67% owned by the Norwegian government, has announced a raft of new discoveries and acquisitions in waters off Tanzania, in the Espirito Santo Basin off Brazil, and in the ocean off Newfoundland and Labrador. Add in continued expansion of the company in U.S. shale regions including the Bakken formation of North Dakota, Montana, and Saskatchewan; the Eagle Ford in Texas: and the Central Marcellus in the Eastern United States, and you can see one of the sturdy legs of the company’s global strategy.

The other leg is enhanced recovery—that is getting more of the oil and gas in the ground out of the ground–from the company’s existing wells on the Norwegian Continental Shelf. The company’s recovery from these fields has gone from a planned 30% to 50% in 2011 to a goal of 60%. That goal would add 7.5 billion barrels to Statoil’s reserves on the Norwegian Continental Shelf. Testifying to Statoil’s commitment to enhanced recovery is a budget that puts 50% of the company’s research spending into enhanced recovery.

The distribution of Statoil’s exploration and acquisition spending reflects the company’s sense that global market demand for oil on purely economic grounds is likely to stay relatively weak but that the geopolitics of oil means that a significant portion of global production comes from risky regions and countries such as Iran, Iraq, Sudan, Russia, and Venezuela. In that environment the goal is to expand production—up 10% at Statoil in the first nine months of 2012—while avoiding increases in geopolitical risk.

The New York traded ADRs closed at $25.15 today, January 7. Even with today’s 1.2% decline the price is toward the upper end of the recent range of a $23.58 low on November 16 and a September 14 high of $26.99. I would look to initiate or add to positions toward the lower end of that range—anything below $24 looks attractive to me. In Jubak’s Picks I have a target price of $29 an ADR by May 2013. Statoil pays a dividend yield of 4.24%.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Statoil as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/


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  • emanas on 7 January 2013

    JUBAK!,!!! You are crazy like a fox my man, lovin’ the appreciation in JUBAX, keep it up. Looking for 20% gain in the fund this year ( hey that’s only $12!!)
    You can do it, just stop holding on to the losers so long

  • sdchris on 8 January 2013

    What’s the foreign tax rate on this stock? It makes holding them in IRA/401k less valuable since you can’t write off those taxes. I learned this the hard way through TEVA and SAN ownership. They took a hefty chunk of cash with each payout. That makes ownership of these stocks less palatable.

  • Jim Jubak on 8 January 2013

    Norway’s withholding rate is 25%. The IRS rules allow you to apply for a tax credit amounts withheld in order to avoid double taxation of overseas dividends. There are limits to the tax credit. Most income tax software handles this problem very easily. Many investors don’t apply for the tax credit however.

  • sdchris on 8 January 2013

    Thank you, Jim. I’ll have to look into my turbotax filings the past 3 years and see if they took care of it for me.

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