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Equinor Divests Lundin Interest, Adds Johan Sverdrup Stake

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Equinor ASA (EQNR - Free Report) 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.

Price Performance

Equinor has lost 27.5% in the past year compared with 10.8% collective decline of the stocks belonging to the industry.

Zacks Rank & Stocks to Consider

Currently, Equinor has a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy space are TOTAL S.A. , Murphy USA Inc. (MUSA - Free Report) and Par Pacific Holdings, Inc. (PARR - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TOTAL’s 2019 earnings per share are expected to rise 7.3% year over year.

Murphy USA beat earnings estimates thrice in the trailing four quarters, with a positive surprise of 21.7%.

Par Pacific’s 2019 earnings per share are expected to rise 46.2% year over year.

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