Boston, MA 08/22/2014 (wallstreetpr) – It has been such that Lithuanians pay about 15% more for gas than their European counterparts because of their dependence on natural gas from Russia. However, that is now set to change with the entry of Statoil ASA(ADR) (NYSE:STO) in the country’s gas equation. Even for Statoil investors, there is so much to cheer in the natural gas deal with Lithuania.
Statoil and Litgas, Lithuania’s gas supplier, have entered a 5-year agreement in which the Norway’s energy giant will deliver about 540 million cubic meters of natural gas to the country annually. That deal commences next year. The development is expected to break Lithuania’s dependence on Russian gas, and that would even lead to better prices for the commodity. In fact, considering the country’s huge gas demand, the deal with Statoil could just be the beginning of a long-term business engagement. Lithuania’s annual gas demand is reported to be in the neighborhood of 3 billion cubic meters.
Besides the issues of prices, energy security has also been issues for Lithuania and Litgas’ agreement with Statoil ASA(ADR) (NYSE:STO) may just be the best thing for the country in addressing one of its major headaches. As for Statoil, more deals mean more business which also means more revenue. Growing revenue has been high on the agenda of the oil and gas bellwether and latest development market and important step in the right direction.
However, like with most other major oil and gas companies, issues of rising costs and expenses are also real at Statoil ASA(ADR) (NYSE:STO). That explains why the management needs to do more to see that the additional revenue expected from the deal with Litgas is felt on the bottom line as well throughout the deal duration.
In its most recent quarterly reporting, Statoil ASA (ADR) (NYSE:STO) reported earnings of $0.50 a share, falling short of the consensus estimate of $0.56 a share for the quarter.