Lundin Energy sale would be better than a merger

Equinor's Johan Sverdrup oilfield platforms and accommodation jack-up rig Haven are pictured in the North Sea, Norway December 3, 2019. REUTERS/Ints Kalnins

LONDON, Nov 30 (Reuters Breakingviews) - Sweden’s Lundin family may be getting itchy feet again. Oil and gas company Lundin Energy (LUNE.ST), in which the family holds a 33% stake, is considering a sale or merger, Bloomberg said on Monday. The company’s vague statement that it will consider opportunities dampened some of investors’ enthusiasm, erasing the 10% gain in the $10 billion company’s stock price after the article.

The Lundin family has a history of savvy dealmaking, for example selling out of Red Back Mining for $7 billion in 2010. Now is a good time to cash in some chips. Lundin’s fields are efficient, with a pre-tax breakeven price of $18 per barrel, according to JP Morgan, and relatively clean; the company says its operations can be carbon neutral by 2023. That could make it attractive to a diversified energy major. Shareholders, however, may prefer a clean exit at a rich price over a messy merger with a less desirable partner. Lundin trades at 10 times 2022 earnings, more than double the industry median, according to Refinitiv data. Any buyer will need deep pockets. (By Dasha Afanasieva)

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