The Board of Directors of Norwegian oil major Statoil ASA (STO) has decided to spin off the group’s energy and retail (E&R) business for creating a new ownership structure. The company said that the step will strengthen this business with the new company’s direct access to the capital markets. Statoil hopes the listing of the new company on the stock exchange to be in the fourth quarter this year.

The E&R business includes 2,300 service stations in eight countries, besides units that supply lubricants, aviation and marine fuels. Statoil said it will initially be the major owner of the new company and afterwards, the ownership position will be gradually evaluated as per the company’s development needs.

While Statoil holds nearly one-fourth market share in the Scandinavian service station sector, net income from this segment in the first three quarters of the last year had been negligible.

Since investing in a business segment with low returns is not a healthy choice, Statoil’s decision to split the company with independent access to the capital markets is a wise move, in our view.

This apart, Statoil is focused on its upstream activities. Though the company is quite active in the Norwegian Continental Shelf region, it is also looking for the development of various international assets. The recent stake increase in the Iraqi super giant West Qurna Phase 2 oil field and intention to start production at the Peregrino heavy oil field in Brazil are a few cases in point. We are currently Neutral on Statoil ADRs.

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