Equinor reduces stake in Lundin. Beefs up Johan Sverdrup ownership

July 8, 2019, by Offshore Energy Today

Norwegian oil and gas company Equinor has agreed to divest a 16 percent shareholding in Lundin Petroleum for a direct interest of 2.6 percent in the Johan Sverdrup offshore oil field in Norway and a cash consideration of around $650 million.

The Johan Sverdrup field in the North Sea. (Photo: Equinor ASA)

Under the terms of the agreements, Equinor will divest around 54.5 million shares in Lundin at a price of SEK 266.4 per share. Total consideration for the divestment of shares in Lundin amounts to around $1.56 billion. Equinor will acquire a 2.6% direct ownership share in the Equinor operated Johan Sverdrup field for a cash consideration of $910 million.

Following the completion of the transactions, Equinor will have a 42.6 percent ownership share in the Johan Sverdrup field and own a 4.9 percent shareholding in Lundin Petroleum, and Lundin will decrease its stake in the Johan Sverdrup development project from 22.6 percent to 20.0 percent.

Eldar Sætre, President and CEO of Equinor said: “Johan Sverdrup is truly a world-class field. We are on track to start production in November this year, and an increased direct ownership share gives us the opportunity to create even more value for our shareholders.”

The agreement includes a contingent payment of up to USD 52 million payable to Lundin in 2025 if Johan Sverdrup proves to be at the upper end or above the indicated resource range of 2.2 – 3.2 bn boe. In agreement with Lundin, the transaction is being executed through a total return swap agreement, where the Lundin shares will be acquired by Sparebank1 Markets and subsequently redeemed.

Sætre said: “Since 2016 we have more than doubled the value of our investment in Lundin. This transaction gives us the opportunity to capitalize on this value creation, and at the same time increase our direct ownership in the Johan Sverdrup field.”

Lundin said in a statement: “With the start-up of Johan Sverdrup expected in November this year and with the ongoing outperformance from the existing production base, as well as the Company’s busiest year for exploration and appraisal; 2019 is a pivotal year for Lundin Petroleum. The Board is recommending this transaction to all shareholders as a unique opportunity to redeem a substantial minority shareholding in the business at an attractive valuation and at a time when the business is positioned for another period of substantial operational and financial growth,”

Ian H Lundin, Chairman of Lundin Petroleum, commented: “The chance to redeem the majority of Equinor’s holding in Lundin Petroleum at a discount to the market and before the pivotal start-up of the Johan Sverdrup development project in November this year, was an opportunity which rarely comes along. The Transaction provides us with a rationalized shareholder structure and all shareholders with enhanced leverage to the ongoing success of Lundin Petroleum, at a time when we continue to unlock further upside potential from our existing asset base and execute on our proven organic growth strategy.

“We set out a progressive dividend strategy at the AGM this year and I am pleased to note that the strategy will remain unchanged following this transaction, as we look to distribute sustainable returns to our shareholders in the years ahead. With the prospect of all shareholders having increased exposure to Johan Sverdrup and the growth potential across our portfolio, I and the Board unanimously recommend that shareholders support this value accretive transaction at the EGM later in July.”

Closing of the Johan Sverdrup 2.6 percent asset transfer agreement upon receipt of regulatory approval is expected by Q4 2019.