Exit from "big oil"

I decided to exit from Chevron and Statoil.

I felt Chevron was ripe to be sold and Statoil was tossed out in the same decision making process.

This means that the only direct stake left in oil & gas industry is Fred Olsen Energy - a position, which has been also trimmed downwards.

Overall these moves mean it will be just matter of time that we exit from the whole sector.

Proceeds have been diverted mostly to small-to-medium publicly-listed companies in Finland in multiple sectors.

Our portfolio grows with Statoil

I decided to add Statoil (OSE: STL, NYSE: STO) to our portfolio after following some time the overall decline in the oil-related stocks. A while back I wrote an article about Statoil to Seeking Alpha and the conclusion was that I wasn’t overly excited about the stock, but thought that it is certainly worth to consider Statoil as an oil & gas play.

Chart courtesy of StockCharts.com.


The reason why I finally decided to add Statoil was simply that it was time to grow the portfolio with an additional company from oil and gas sector to complement Chevron (producer), Noble Corporation (drilling rig provider) and Fred Olsen Energy (drilling rig provider). I don’t expect that one can really find bargains in companies of this size. They are all equally fairly priced in the market. It would seem rather stupid to assume anything else. Even more stupid would be to expect that I would be the one spotting a true bargain. Therefore, the main drivers behind the decision were the fact that the company was high in my short list for this sector and the fact Statoil is a Norwegian company. Not quite local (i.e. Finnish), but close.

Statoil is already taxed quite heavily. Therefore, I do not believe that the tax burden will grow from the current level unlike what can happen to companies elsewhere in the world. Given that the state of Norway has majority of the shares it is unlikely that resources would be nationalized. They pretty much already are (given the combination of government ownership and taxation). Despite of this the company offers dividend yield which is among the best in the industry as well as healthy net income. Also, given that most of the production happens near Norway Statoil seems like a very safe play in this sector.

The company is much smaller than Exxon and other giants in terms of market cap and revenue. Therefore, it is easier to get a meaningful growth rate. The gross margin of the company is among the best in the whole industry so the company can afford to invest. They have technical skills to operate in tough environments and have experience in exploiting ever harder-to-find and harder-to-drill pockets of oil and gas. They are also tapping into unconventional oil deposits (tar sands) in Canada as well as shale gas in USA.

As always, I started with as small position as it is meaningful to have given the size of the overall portfolio and the transaction costs related to buying stocks. As I don’t believe in timing the market, I continue to add to existing positions regularly and especially if there is a good buying opportunity (and if I happen to have cash available at the time ;-).

Statoil: The Goose That Lays the Golden Eggs for Norway

Full article at Seeking Alpha: http://bit.ly/h58wfp


Statoil (OSE: STL, NYSE:STO) is an international energy company primarily focused on upstream oil and gas operations. The company is headquartered in Norway and employs over 30,000 people worldwide in 42 countries. The Norwegian state is the largest shareholder in Statoil, with a direct ownership interest of 67%.

Statoil has 40 producing oil and gas fields and is one of the world's largest net sellers of crude oil. It is also the second-largest exporter of gas to Europe. Approximately 80% of oil and gas production of the company comes from Norway. The rest of the operations are scattered throughout the rest of the world.

Strategically, Statoil is positioned as a technology-driven upstream energy company. Currently some 80% of oil and gas production of the company comes from Norway, but in the long run this is likely to change. While the production outlook remains stable towards 2020 in Norway, according to Statoil, it's looking for growth elsewhere in the world.

The Norwegian state benefits immensely from Statoil. It is the largest shareholder in Statoil and also imposes high taxes on the profits (above 70%). Therefore, Statoil is the goose that lays the golden eggs for the state of Norway. Looking at the key figures and the peer review, Statoil is a good choice also for an individual investor. It offers an excellent alternative to US- and UK-based oil giants in a stable region.
I have no position in Statoil.