Statoil ASA (STO)

[Timothy Smith]

Statoil is not ludicrously undervalued compared to its peers when we consider the company's after tax income compared to its theoretical buyout price.

Therefore, it does appear that the tax rate that the company has to pay is indeed a major reason why it is selling at an enormous EV/EBITDA discount to its peers.

However, that only considers the past performance of the company and does not consider its future potential. As I have discussed several times in the past, Statoil retains the ambition to increase its average daily production to 2,500 mboe by 2020.

This gives the company relatively strong forward growth. In the third quarter, Statoil had average daily equity production of 1,852 mboe. Therefore, growing its average daily production to 2,500 mboe would represent an increase of 35.00% over its current levels.

This is undoubtedly going to result in growing revenues, net income and cash flow barring a significant future decline in oil prices (which seems unlikely).