Statoil acquires stake in Lundin Petroleum

On 14th January, Statoil announced that it had acquired 37.1 million shares in Lundin Petroleum, corresponding to 11.9% of the company. Statoil says that it paid c.SEK4.6 billion for the shares, which equates to a price of SEK120/share or a 28% premium to the share price close as of yesterday at SEK97. Statoil purchased the shares over the past few weeks and says it is supportive of Lundin management, its board of directors and strategy, but there is currently no plan to increase its shareholding in the company.

Statoil says "this is a long term shareholding. The Norwegian Continental Shelf is the backbone of Statoil's business, and this transaction indirectly strengthens our total share of the value creation from core, high value assets on the NCS". Despite the longer term strategic rationale, the move is unexpected. Lundin is one of the more expensive E&P stocks and the transaction further increases Statoil’s exposure to the giant Johan Sverdrup development. Questions are now being asked by the market on whether Statoil can continue to pay its dividend.

From an E&P sector perspective, the move is encouraging as it demonstrates industry interest in the subsector, and the news should help shore-up Lundin’s share price. Nevertheless, corporate activity is likely to remain muted until the oil price starts to recover and confidence returns to the sector.