Massive oil discovery pushes Norwegian assets higher

Confirmation by Norway’s Statoil and partner Sweden’s Lundin Petroleum that they have made one of the biggest oil discoveries in the North Sea since the 1980s has caused related Nordic stocks to rocket.

The world’s biggest find so far in 2011 holds between 500 million to 1.2 billion barrels of oil via two wells, according to early estimates.

However, further exploratory drilling is scheduled for the coming month on a third well, which could take the total find beyond 1.5 billion barrels.

Norway’s offshore services industry is rejoicing because it will take six to eight years to bring a find such as this to full production levels, but also because the size of the find means it will take many more years, perhaps decades, before it nears depletion.

“It is a fantastic vitamin injection for Statoil and the entire oil industry, and for the oil nation Norway. This is a big, big find,” Tim Dodson, executive vice president for Exploration at Statoil, said to Dagens Næringsliv.

Partners such as Sweden’s Lundin Petroleum have also benefitted from the news. The Swedish firm has a 40% interest in one of the two wells, Avaldsnes, and its shares gained 6% on the OMX exchange through the early afternoon of 16 August. It is jointly listed on Canada’s TSX, where shares were up over 7% by close the previous day.

Another partner, Det norske oljeselskap, saw its shares surge about 25% in Oslo trading to NOK39.2 by early afternoon local time on 16 August.

Statoil’s shares moved far less on the day, but were still up about NOK10 to NOK123 since a recent low on 10 August.

Norwegian funds

Data from FE throws up more than 60 funds with an exposure of more than 1% to Statoil ASA shares.

SSgA Norway Index Equity has 26.88% of its portfolio in the shares.

The figure for Nordea 1 Norwegian Equity is 7.33%, while Platinum Nordic has 6.71% of its money there.

Dexia Equities B Nordic has exposure of 4.2%, and Amundi ETF MSCI Nordic 4.14%. Other exchange traded products with an interest include Lyxor STOXX 600 Oil & Gas with 4.07% invested, and ETFX Dow Jones STOXX 600 Oil & Gas with 4% invested.

Shareholder data from Statoil itself shows that the Norwegian government, with its 67% stake, is the chief beneficiary from the news. Norwegian institutional and private investors hold a further 9.5% of the company. US investors in both Statoil shares and ADRs account for 9.3%, the rest of Europe excluding Nordic and UK investors holds 6.9%, and UK institutional and private investors hold 5.9%.

For Norwegian equity investors the find could be good news for the domestic market overall, given Statoil’s weighting in the market. The company accounts for 27.42% of the MSCI Norway, which lost -11.31% in the three years to 15 August 2011 – in gross return terms rebased in euros, data from FE shows.

That performance is bettered slightly by the MSCI Germany, down -10.26% over the same period. The MSCI France shed -14.14%, while MSCI Italy fell -35.14%. .

The past six months have seen the Norway index drop -12.98%, but this is far better than France (-17.11%), Germany (-18.28%) or Italy (-24.42%).

Oil and gas exploration may not necessarily be the best bets among Norway domiciled equity funds. FE data shows that of 58 such funds with a three year performance record, the top three are: DnB Nor Nordic Technology (up 45.12%), DnB Nor Telecom (25.94%) and Skagen KonTiki (25.41%)

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