Valuation of Statoil ASA

Tony Sværk Stenbråten & Heine Sunde Nordnes

Student thesis: Master thesis


In recent years, the oil and gas industry has experienced a huge drop in commodity prices affecting many aspects of the world economy. Norway, among others, is heavily dependent on the petroleum revenue as a source of income. Much of this petroleum revenue is generated by the largest Norwegian petroleum company, Statoil ASA. Due to its large impact on Norwegian economy, we aim to investigate Statoil’s performance and outlooks by estimating the fair value of the firm as of December 31. 2015.
In order to estimate Statoil’s share price, a thorough strategic analysis is provided to identify both the industry challenges as well as Statoil’s strategic position. We find that the firm is positioned well to compete in future energy markets due to a well-established presence on the NCS and a growing presence globally. Moreover, as the world’s energy consumption changes and the environmental focus gains more attention, Statoil has engaged in projects within renewables, namely wind and tidal power. This supports a sustainable strategy and secures a solid position for the future.
A major challenge in estimating the value of a petroleum firm is to forecast a reasonable revenue stream. This industry is characterized by volatile commodity prices, mainly caused by the relationship between supply and demand. The strong forces on both sides make this a challenging task. Based on a stochastic model and a strategic approach, we have attempted to present a reasonable forecast of the commodity prices. This in turn is used when determining the future cash flow for the valuation.
Our estimate of the share price is 118.08 NOK which is slightly lower than what Statoil was publicly traded for at that time. Conclusively, we find that the share price of Statoil as of December 31, 2015 is close to fair value. Further, the results indicate that Statoil may not be sustainable if current levels of commodity prices remain constant. However, we acknowledge that the applied theory may, to some extent, be biased and that our valuation method suffers from limitations.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages166