Norway is one of the world’s largest exporters of oil and gas, and that shapes Oslo Børs. Energy companies make up a large part of the exchange’s total value, and the oil price affects the whole index. For investors this means plenty of choice, but also that a Norwegian share portfolio easily becomes heavily exposed to one commodity.
Three types of oil stocks
Exploration and production
These companies find, develop and produce oil and gas. Revenue follows commodity prices almost directly. Equinor is the largest, and the Norwegian state owns 67 per cent. Aker BP, with Aker and BP as its largest owners, and Vår Energi, with Eni as its largest owner, are major producers on the Norwegian shelf. DNO operates in Kurdistan and the North Sea, OKEA is a mid-sized company on the Norwegian shelf, and BlueNord produces gas in the Danish North Sea.
Equinor ASAEQNR419.40 NOK+0.4%BUY
Aker BP ASAAKRBP353.20 NOK−0.1%HOLD
Vår Energi ASAVAR53.40 NOK+0.4%BUY
DNO ASADNO19.80 NOK+1.3%BUY
OKEA ASAOKEA43.60 NOK+2.2%BUY
BlueNord ASABNOR587.00 NOK+0.2%BUYLive prices from the latest close. Signals are model-based, not recommendations.
Oil services and suppliers
Suppliers depend on oil companies investing: in seismic, wells, subsea installations and platforms. Aker Solutions and Subsea 7 deliver field development solutions, and TGS sells seismic data used in exploration. Earnings depend on the oil companies’ investment, which often lags the oil price by one to two years.
Aker Solutions ASAAKSO41.48 NOK+0.5%HOLD
Subsea 7 SASUBC341.00 NOK+0.7%HOLD
TGS ASATGS138.50 NOK+2.6%BUYLive prices from the latest close. Signals are model-based, not recommendations.
Rigs and drilling
Drilling companies rent out rigs to oil companies. Day rates rise when rigs are scarce and fall when there is overcapacity. Odfjell Drilling and Borr Drilling are examples on Oslo Børs. Drilling companies often carry high debt, and the shares can be volatile.
Live prices from the latest close. Signals are model-based, not recommendations.
What drives oil stocks
Oil and gas prices
The oil price, usually measured as Brent, is the single most important factor for producers. For Norwegian companies the gas price is also very important. Norway is among the largest suppliers of gas to Europe, and several companies produce more gas than oil.
The dollar
Oil and gas are priced in dollars. A strong dollar against the krone means higher revenue in kroner, and many Norwegian oil companies report both results and dividends in dollars.
Production, costs and reserves
Two companies can earn very different amounts at the same oil price. Low production costs per barrel, a strong project portfolio and reserves that last many years give more robust earnings.
Petroleum tax
Income from production on the Norwegian shelf is taxed at 22 per cent corporate tax and a 56 per cent special tax, 78 per cent in total. At the same time, companies get deductions for investment. The system means the state takes a large share of both gains and costs, and changes to it affect the companies’ investment plans.
The investment cycle
When the oil price has been high for a while, investment rises and suppliers win more work. When prices fall, investment is cut, and suppliers feel it with a delay. Oil services and drilling are therefore often in a different phase of the cycle than the producers.
Comparison
| Type | What drives earnings | Typical risk |
|---|---|---|
| Exploration and production | Oil and gas prices, production and costs | Commodity prices, tax and project delays |
| Oil services | Oil companies’ investment | Order drought and price pressure |
| Rigs and drilling | Day rates and utilisation | High debt and overcapacity |
Dividends from oil companies
Several producers pay high dividends quarterly. Equinor and Aker BP have declared dividends in dollars. Because earnings follow commodity prices, dividends can also change quickly. Many companies combine a base dividend with extra dividends or share buybacks in good years.
Responsibility and the energy transition
Many investors also consider how the companies deal with climate risk and the energy transition. Several Norwegian oil companies invest in offshore wind, carbon capture and other low-emission projects. How the transition affects long-term demand for oil and gas is a key uncertainty for the sector.