Lundin Chairman Clings to Sverdrup Stake in Bid to Catch Tullow

Lundin Petroleum AB (LUPE), a partner in Norway’s biggest oil find in decades, pledged to keep its stake and help develop the deposit as it targets growth in Europe.

“We have the financial capability and resources to follow through,” Chairman Ian Lundin said in an interview. “We don’t want to reduce our growth profile for short-term benefits.”

Analysts at HSBC Holdings Plc have raised concerns the Swedish company risks getting mired in cost overruns and delays at the Johan Sverdrup field and may do better to sell its stake. Yet Lundin sees participation in the deposit, which holds as much as 2.9 billion barrels of oil, as central to its ambition to be Europe’s largest independent owner of oil licenses.

“There is no pressure at all to sell anything,” Chairman Lundin said in Paris. “We are in the business to develop and produce, we’re not in the business to buy and sell.”

The company is the biggest owner of oil licenses in Norway after Statoil ASA, and in Europe is second to Tullow Oil Plc (TLW) among the independents, or companies that don’t have refineries.

“We would like to be the first,” Ian Lundin said. To leapfrog Tullow “would be a tight race but we want to be at least biting at their tail.”

Discovered in two parts by Lundin in 2010 and Statoil (STL) in 2011, Sverdrup renewed optimism in Norway’s oil industry following a decade of dwindling North Sea output. The find may be Norway’s largest since Statfjord in 1974 and could supply as much as 25 percent of its oil production 10 years from now.

Stake Sale

The first phase of Sverdrup’s development is estimated to cost as much as 120 billion kroner ($20 billion), with a planned startup in 2019.

Lundin should sell some, or all, of its stake in the field, which has become the “elephant in the room” and risks becoming more expensive than planned and overshadowing future exploration success at the company, HSBC said in a March 13 report.

Lundin owns 40 percent in one of three licenses covering Sverdrup and 10 percent of another. Talks with partners Statoil, Det Norske Oljeselskap ASA (DETNOR), Petoro AS and A.P. Moeller-Maersk A/S (MAERSKB)’s oil unit on the division of the field will be completed before the development and operation plan is ready in the first quarter of next year, Ian Lundin said.

The chairman is the second child of Adolf Lundin, who started to build the family’s energy and mining fortune after working at Royal Dutch Shell Plc (RDSA) as a petroleum engineer. Stockholm-based Lundin Petroleum is 31 percent owned by the family.

Reserves Tripling

The company said in January that operating cash flow will exceed $1 billion this year, while reserves will increase more than threefold on submission of the Sverdrup development plan. Its 2014 program includes starting output at Norway’s Brynhild field and at Bertam in Malaysia.

“We feel very comfortable with the cash flow,” the chairman said last week. “We have significant funding for all these developments.” He cited a credit line of as much as $4 billion from a syndicate including the biggest French banks.

The company plans 19 exploration wells in 2014 -- when total investment will rise to $2.13 billion from $1.73 billion - - and is also on the lookout for new assets.

“If anything we would be in a more acquisitive mode than a disposal mode,” the chairman said. “We don’t have anything specific today but if the opportunity came up to acquire interests in new fields we would take a serious look at it in our existing geographic areas of Europe and Southeast Asia.”

Lundin Petroleum is the biggest owner of oilfield licenses in Malaysia after Petroliam Nasional Bhd., he said.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Amanda Jordan, Tony Barrett

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