March 7 (Bloomberg) -- Det Norske Oljeselskap ASA rose to a 4 1/2 month high in Oslo after an exploration well confirmed an oil column in an extension of the Johan Sverdrup discovery, which could be Norway’s biggest in almost 40 years.
The Trondheim, Norway-based company gained as much as 2.5 percent to 91.8 kroner a share, the highest intraday level since Oct. 19, and traded up 2.2 percent as of 12:30 p.m. local time. More than 273,000 shares have been traded so far today, equivalent to about 95 percent of the average daily volume during the last three months.
A well in production license 502 in the North Sea confirmed a 14-meter (46-foot) oil column in a southern extension of the Sverdrup area, Det Norske said in a statement today. Final results of the exploration well aren’t yet available, it said.
The Johan Sverdrup discovery, which could hold as much as 3.6 billion barrels according to operators Statoil ASA and Lundin Petroleum AB, has rekindled interest in the Norwegian North Sea, where crude production from maturing fields has dropped by half since peaking in 2000.
The discovery spans two licenses, PL265 and PL501. Det Norske, which holds 20 percent of PL265, last month increased its estimate for that part of the find to 1.23 billion to 1.95 billion barrels of oil. That’s up from a previous estimate of 1.04 billion to 1.77 billion barrels.
Det Norske’s well is the first to test an extension of Sverdrup into license PL502, and the company had given a pre-drill estimate of 40 million to 85 million barrels of oil equivalent.
“Based on the pre-drill volumes, we estimate a fair value of the discovery of 2 kroner to 5 kroner a share,” said Swedbank First Securities analyst Teodor Sveen Nilsen in a note to clients. Swedbank has a buy recommendation on Det Norske with a price estimate of 135 kroner a share.
“Our valuation of the company increased with 4 kroner per share on the back of today’s announcement,” ABG Sundal Collier Holding ASA analyst Anders Holte said in an e-mailed note. ABG has a buy rating on Det Norske with a 122 kroner price target.
Statoil, Norway’s largest oil and gas producer, has a 44.4 percent stake in license 502, while Petoro AS, which manages Norway’s direct stakes in its oil and gas assets, owns 33.3 percent. Det Norske has the remaining 22.2 percent.
Det Norske’s well in license 502 is also positive for Sweden’s Lundin, which operates PL501 and last month said resources may be at the lower end of its 800 million to 1.8 billion barrels of oil estimate range, ABG’s Holte said.
“We believe the downside risk is somewhat reduced,” he said. “We would use today’s news to buy more” Lundin shares.
Lundin rose as much as 0.6 percent to 149.5 kronor in Stockholm and traded 0.2 percent higher as of 12:45 p.m. local time. ABG has a buy recommendation on the stock and a 12-month price target of 213.7 kronor.
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