For Statoil, Less Oil Production, More Shareholder Value

This article was originally published by TheStreet

By Sarfaraz A. Khan, Research assistant: Gohar Yousuf

March, 24, 2014
NEW YORK (TheStreet) -- It sounds crazy, but Norway's biggest energy firm Statoil (STO_)could boost shareholder return despite shrinking income.

The oil giant is focusing on increasing its buybacks and dividends, as it struggles to increase its output in the face of rising costs and a soft pricing environment. In order to do that, Statoil is strengthening its cash flows by selling its assets, reducing its production targets and cutting down on capital expenditures.

Statoil is concentrating on value creation, rather than producing record levels of output. The markets seem optimistic about Statoil's future, and the company's American depositary receipts are up 11.4% this year to $26.87.

The state-owned firm could continue going higher due to the new focus on cost discipline. The company, which has significant exposure to U.S. shale plays, could also benefit from strength in U.S. oil and natural gas prices. Moreover, a possible reduction in the government's stake could turn into an upward catalyst.