Det Norske Falls as Gas Discovery Thwarted: Oslo Mover

(Corrects spelling of analyst’s name in 5th paragraph.)

Det Norske Oljeselskap ASA (DETNOR), fell to the lowest level in more than a month after it said a gas find in the Barents Sea can’t be developed profitably without the construction of a new pipeline and processing facilities.

Det Norske, based in Trondheim, Norway, declined as much as 3.6 percent to 90 kroner, the lowest intraday level since Aug. 30, making it the biggest loser on the Oslo Stock Exchange’s benchmark OBX index today.

Det Norske, which owns a stake in the Johan Sverdrup field, the biggest discovery off the coast of Norway in more than 30 years, climbed to a record on Sept. 10 after saying the Salina and Garantiana prospects contained hydrocarbons.

Earlier today it said that while the Salina discovery may hold recoverable reserves of six to eight billion cubic meters of gas, it can’t be exploited commercially with the current infrastructure in the area.

The share price decline is “an overreaction” given that expectations have been reduced during the past month, Swedbank First Securities analyst Teodor Sveen Nilsen said by phone from Oslo today. “I’m a little surprised. There had been a general understanding that if it was a discovery, it would be a small discovery.”

Italy’s Eni SpA (ENI) has a 40 percent stake in Salina, while Sweden’s Lundin Petroleum AB (LUPE), RWE-DEA AG and Det Norske each own 20 percent.

‘Total Madness’

Lundin fell as much as 2.3 percent in Stockholm, the biggest drop in three weeks, and a move that Sveen Nilsen described as “total madness.”

Det Norske traded 1.6 percent lower at 91.90 kroner as of 10:55 a.m. in Oslo, while Lundin was 1.2 percent weaker at 158.8 kronor as of the same time in the Swedish capital.

Det Norske and Lundin have said they fear gas finds in the Barents Sea will continue to be unprofitable if a south-bound export pipeline isn’t built, just as discoveries such as Skrugard and Havis have boosted interest for the area.

The Salina find needs “one or several more gas discoveries and the building of infrastructure, both processing facilities and a pipeline,” to make its development viable, Det Norske Chief Executive Officer Erik Haugane said in an interview today.

The size of the Salina discovery means it’s “not insignificant,” said Sveen Nilsen, who has a buy recommendation on both Det Norske and Lundin.

“It could be developed, but I don’t think the market would be willing to put value on it yet,” he said. “You would need more finds in the area and new infrastructure.”

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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