One Reason Statoil (STO) Stock Closed Lower Today

NEW YORK (TheStreet) -- Shares of Statoil ASA (STO) closed down 2.32% at $18.10 today on data that shows global oil and gas exploration projects worth more than $150 billion are likely to be put on hold next year as plunging oil prices render them uneconomic, potentially curbing supplies by the end of the decade, Reuters reports.

Statoil's Johan Castberg field in the Barents Sea, which was expected to get its financial investment decision in 2015, seems unlikely to get the go-ahead at the moment, given it has an estimated project cost of $16 billion to $19 billion, Raymond James analyst Bertrand Hodée said.

Statoil said that the final project design is due in the summer of 2015.

The Norway-based oil and gas company this week also said it had postponed until next October a decision to invest $5.74 billion in the Snorre field in the Norwegian Sea, as its profitability was under threat, Reuters added.

Next year, companies will make final investment decisions on a total of 800 oil and gas projects worth $500 billion and totaling nearly 60 billion barrels of oil equivalent, according to data from Norwegian consultancy Rystad Energy.

Additionally, crude-oil prices fell hard again Friday, dragging down the sector, with the U.S. benchmark settling at a fresh five-year low.

On the New York Mercantile Exchange, crude futures for delivery in January dropped by 97 cents, or 1.5%, to settle at $65.84 a barrel, marking the lowest settlement for a front-month contract since July 29, 2009.

Separately, TheStreet Ratings team rates STATOIL ASA as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate STATOIL ASA (STO) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • 36.25% is the gross profit margin for STATOIL ASA which we consider to be strong. Regardless of STO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STO's net profit margin of -4.99% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 142.5% when compared to the same quarter one year ago, falling from $2,402.71 million to -$1,021.89 million.
  • Net operating cash flow has decreased to $3,471.92 million or 48.86% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: STO Ratings Report

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