Lundin Petroleum (Sell, TP: SEK228.00) - Even quality can be too expensive
Lundin’s Q1 results are due on 2 May at 07.30 CET. We are 5% below consensus Q1 EBITDA. Our production estimate of 82kobed is in line with consensus, and at the high end of FY company guidance of 74k–82kboed. We like Lundin for its high-quality asset portfolio, and inherent upside risk to key assets Sverdrup and Grieg. However, the valuation is eye-watering, with an implied oil price of ~USD90/bbl based on our NAV. It is always painful to downgrade a high-quality company, but the rich valuation leaves us no choice but to downgrade to SELL (HOLD). We have increased target price to SEK228 (215) due to the weak SEK/USD and NAV rollover.Lundin Petroleum is an oil and gas company. Co. has a global portfolio of assets with two main areas located in Norway and South East Asia. As of Dec 31 2014, Co. held close to 70 licences in Norway, with activities across exploration, appraisal, development and production. Co. also operated within several geographical areas, including France, Netherlands, Malaysia, Indonesia, Russia, Sweden and other countries.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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