A Little LUPEY- Lundin Petroleum Plans To Spin Off Non-Norwegian Assets

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Swedish oil company Lundin Petroleum (LUPEY) has today announced its intention to spin off all of its international operations and focus solely on Norway. Lundin shareholders will receive 1 share in a new entity called International Petroleum Corp (IPC) for every 3 shares currently owned. IPC will be listed on the Toronto Stock Exchange under the ticker IPCO as well as on the NASDAQ Stockholm.

The assets to be spun into IPC include oil production operations in Malaysia, France and the Netherlands with combined reserves of 29 million barrels of oil equivalent.

Ian H. Lundin, Lundin’s Chairman, said:

“The spin-off of our international assets into IPC creates an exciting new company with a strong balance sheet and a proven Board and management team. Their focus will be to create value at a time in the cycle when the industry remains under-capitalised and multiple opportunities are available as companies rationalise their portfolios. With the spin-off, Lundin Petroleum will become fully focused on Norway, which I am convinced will serve to further crystallise the value of our high-growth asset portfolio in the North Sea and the southern Barents Sea.”

Post the split, Lundin Petroleum’s management will “solely focus on maximising shareholder value from its Norwegian portfolio which has continuously grown in size and value since Lundin Petroleum entered Norway in 2004, with the Norwegian assets now accounting for 96 percent of Lundin Petroleum’s reserves and 88 percent of Lundin Petroleum’s 2017 production guidance”, according to today’s press release.

Lundin has a history of spinning off assets; in 2010 it separated its UK operations into EnQuest PLC (ENQUF) into which Petrofac also contributed its UK business.

The distribution of IPC shares will occur after receipt of all corporate and regulatory approvals.  An extraordinary general meeting will be held in March 2017 to request shareholder approval which seems inevitable after the Lundin family, which owns around 30% of Lundin Petroleum, committed today to vote in favour of the split.

Current Lundin CFO Mike Nicholson will become CEO of IPC and plans to use the company as an acquisition vehicle. While LUPEY will become a pure-play on Lundin’s Norwegian production assets with management’s focus squarely on organic growth. The market seemed to like this prospect, sending LUPEY shares to an all-time high in Stockholm this morning.

Disclosure: the author has no position in any stock mentioned