Statoil ASA—Global Energy Company
Jan Muska, a financial analyst with Fidelity Investments, must evaluate Statoil ASA for possible inclusion in the company’s Energy Fund portfolio. During the period January 1, 2001 – September 15, 2006, Statoil’s stock, which was listed as an American Depositary Receipt (ADR) on the NYSE, outperformed the S&P 500 by a wide margin. In August 2006, an ING analyst issued a report changing the firm’s rating on Statoil from buy to hold. In October 2006, ValuEngine issued a market “outperform” rating and set a target price of $28.40 per share. With conflicting analyst opinions on Statoil’s value, Muska must prepare his own evaluation of Statoil’s financial performance and valuation and make a recommendation to the portfolio manage of Fidelity’s Energy Fund.
The Statoil case provides an opportunity for students to analyze a growth strategy using financial statement data. The case requires students to undertake a careful business strategy and financial analysis, including a valuation analysis, to evaluate the value of the company’s shares. The case provides historical financial data for Statoil as well as BP, a leading competitor in the oil and gas industry. The case also provides an opportunity for students to examine accounting choice issues by investigating the impact of inventory valuation methods, off-balance sheet lease financing, and oil and gas accounting. The case provides capital market data, e.g., Statoil’s beta, debt rating, etc., to compute the company’s weighted-average cost of capital for comparison to Statoil’s return on assets and return on equity. The case also provides supplemental oil and gas disclosures to evaluate the profitability of its exploration and producing activities and the company’s equity value. The case has been used successfully in a full-time MBA program as well as corporate valuation. The case is structured to be used as either (1) a financial analysis/valuation case, or (2) an accounting method/policy case. Case questions for both options are provided.