North Energy ASA (NORTH), an explorer based in northern Norway, fell the most in almost two months in Oslo trading after saying a Talisman Energy Inc. (TLM) well at the Frode prospect in the Norwegian Sea failed to find hydrocarbons.
Shares in the Alta-based company dropped as much as 9.1 percent to 5 kroner, the biggest intraday decline since May 2. The stock pared losses to 5.40 kroner as of 11:55 a.m. local time. About 35,000 shares have been traded so far today, 53 percent more than the average daily volume during the last three months.
Talisman is the operator of license 299 where the Frode prospect is located. The well will be plugged and abandoned after failing to find oil or gas, North Energy said in a statement today. The company has a 10 percent stake in the license, having agreed to sell 10 percent to Spike Exploration Holding AS on May 3. The sale is awaiting government approval.
North Energy jumped to a 10-month high on June 24 after an appraisal well at the Norvarg discovery in the Barents Sea encountered hydrocarbons. The company was also awarded stakes in six licenses in the latest Norwegian licensing round, announced on June 13.
“Although the ongoing appraisal well at Norvarg showed positive results, we continue to believe North’s timeline contains few triggers with only one firm well,” Teodor Sveen Nilsen, an analyst at Swedbank First Securities, said in an e-mail. While developments at Norvarg and the results of the licensing round were positive for North Energy, the stock has “very limited upside potential over the next few months,” he said.
Sveen Nilsen, who has a neutral rating on North Energy, cut his price target on the stock to 4.5 kroner from 5 kroner.
“The value in Norvarg will be our key focus over the next month,” RS Platou Markets AS analyst Alex Gheorghe said in an e-mailed note today. Norvarg represents about 50 percent of North Energy’s share price “on a conservative basis,” he wrote in a separate e-mail on June 24.
Talisman is the operator of license 299 with a 31.5 percent stake. Capricorn Norge, a subsidiary of Cairn Energy Plc (CNE), owns 28.5 percent and Dong E&P Norge, a unit of Dong Energy A/S, has 20 percent.
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