Equinor Divests Lundin Interest, Adds Johan Sverdrup Stake
Zacks Investment Research | Jul 08, 2019 09:46PM ET
Equinor ASA (NYSE:EQNR) recently announced that the company will sell a 16% interest in Lundin Petroleum AB for a total consideration of around $1.56 billion. As part of the capitalization deal, Equinor will receive a 2.6% stake in the company-operated Johan Sverdrup field and $650 million in cash. The Johan Sverdrup field stake is valued at $910 million.
The company more than doubled its investment value in Lundin since 2016, when it invested 121 Swedish krona per share. Now, Equinor intends to divest around 54.5 million shares for 266.4 Swedish krona ($28.12), a 9.6% discount on Lundin’s closing price on Jul 5. Norwegian investment bank, Sparebank1 Markets will acquire Lundin’s shares to be divested.
Norwegian energy major Equinor will retain a 4.9% stake in Lundin. Through this deal, it plans to capitalize on value creation and boost direct ownership in the Johan Sverdrup field. The deal is expected to increase Equinor’s stake in the Johan Sverdrup oilfield, wherein production is scheduled to start this November, to 42.6%. Amplifying its stake in the oilfield is expected to enable the company to create more value for investors.
Per the deal, Equinor will be liable to pay $52 million to Lundin in 2025, in the event that the oilfield holds resources at the upper limit or beyond the 2.2-3.2 billion barrels of oil equivalent range. The oilfield stake acquisition is expected to close within fourth-quarter 2019.
Notably, the first phase of the Johan Sverdrup field development is approaching completion, while the second phase is already underway. It is one of the largest discoveries in the Norwegian Continental Shelf. Equinor has plans to operate the field with electrical power generated onshore, which will be a significant step to reduce offshore emissions.
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Equinor has lost 27.5% in the past year compared with 10.8% collective decline of the stocks belonging to the Zacks Investment Research
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