Lundin Petroleum (LUPE), a Swedish oil exploration company with most of its assets in Norway, fell the most in three weeks in Stockholm trading after UBS AG advised clients to sell the shares, saying the stock may be overvalued.
The shares dropped as much as 1.4 percent to 143.9 kronor, their steepest intraday decline since July 25 and lowest price since Aug. 7, and traded down 1.2 percent at 12:39 p.m. local time. Volume on the stock was 73 percent of the average traded daily over the past three months.
UBS started coverage of Lundin today with a sell rating and a share-price estimate of 120 kronor. The company is now rated sell by 12 percent of the 26 analysts that cover the stock while 54 percent advise clients to buy the shares.
A growing proportion of Lundin’s capital expenditure is being directed to development of oil wells rather than exploration and UBS said the market may start valuing the company more as a producer than as a “high-performing explorer.” Lundin is entering a transition phase where its “share price may stutter,” according to UBS.
The stock has lost 3.5 percent so far this year, giving Lundin a market value of 45.8 billion kronor ($7.1 billion).
“Underpinned by the world class Johan Sverdrup field, it is positioned to deliver a decade of high-margin production growth” and “we view its heavy concentration of asset value in Norway -- a stable and secure free market in the context of an industry increasingly pushed to more hostile investment climates -- as an attractive attribute,” UBS said. “The current valuation suggests, though, that the equity market is well up to speed with the quality of Lundin’s business.”
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