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Lundin: An Undervalued Hidden Gem With A Game-Changing Asset

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Street Smart Investor


  • Johan Sverdrup, the game-changing asset, on track to deliver first oil in 2019.
  • Cash flows swelling on low cash cost, and the company is well financed for big investments in Johan Sverdrup.
  • Now a NCS pure play after spin-off of international assets.
  • A 24-30 month investment horizon can deliver stellar returns.

Thesis Overview

Lundin Petroleum (OTCPK:LNDNF) has been in my research radar since February 11, 2014, and my last coverage on the stock was on September 6, 2016, when I designated a rating of “Strong Buy” for this Norwegian continental shelf focused exploration stock.

By January 3, 2017, the stock has delivered 33% returns, but correction and sideways movement ensued, and Lundin Petroleum is currently higher by 13% from September 6, 2016, levels.

The primary reason for follow-up coverage on the stock is to update investors on key developments since the last thesis and its impact on the stock going forward.

Based on the discussion to follow, I maintain a "Strong Buy" rating for Lundin Petroleum, and I see the decline from all-time highs as an opportunity to accumulate this hidden gem.

Investors should consider buying Lundin Petroleum from the Stockholm Exchange where the company trades with ticker "LUPE" and the stock trades with ample liquidity.

Update On Johan Sverdrup

In the next 3-5 years, Johan Sverdrup will be the game changing asset for Statoil (STO) and Lundin Petroleum.

The key development in the asset is that Phase 1 construction has commenced and the project is on schedule for first oil in late 2019. Lundin Petroleum has 22.6% stake in the asset that has gross resources in the range of 2.0 to 3.0 billion barrels of oil equivalent.

Johan Sverdrup valuation also needs another relook and my last coverage pegged per barrel valuation at $6.75. This was based on average analyst valuation of Johan Sverdrup at $3.5 to $10.0 per barrel of oil equivalent (based on 15 analyst reports between December 2015 and February 2016).

With more than 15 months to this estimate, the following factors are triggers to per barrel valuation upside:

  1. Since the submission of phase one PDO, the capital

This article was written by

Street Smart Investor profile picture
Street Smart Investor is a quantitative analyst with over 5-years of experience in the investment industry with a focus on value investment themes from a long-term perspective

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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