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By Oliver Griffin

Shares in a number of U.K. mid- and small-cap energy companies fell Friday after Norway's government recommended its $1 trillion oil fund stop investing in exploration and production equities.

Norwegian Finance Minister Siv Jensen said the objective is to reduce Norway's vulnerability to a permanent oil-price decline.

The government recommended that the Government Pension Fund Global, which is currently worth more than 8.90 trillion Norwegian Kroner ($1.02 trillion), start selling shares in companies that explore and produce oil and gas.

The finance minister said organizations classified as exploration and production companies by the index provider FTSE Russell will be excluded from the fund's benchmark index and investment universe.

Companies defined as exploration and production businesses in the fund include Tullow Oil PLC (TLW.LN) and Premier Oil PLC (PMO.LN), in which the oil fund holds respective 2.1% and 1.8% stakes.

The oil fund holds around $37 billion in oil-and-gas stocks, and Ms. Jensen said a permanent reduction in the oil price will have long-term implications for public finances.

The exclusion of energy stocks in the fund will serve to further reduce the oil-price risk, the government said.

However, Norway won't look to pull out of integrated companies that have businesses throughout the value chain of the oil-and-gas industry.

Examples of integrated U.K. oil-and-gas companies include Royal Dutch Shell PLC (RDSB.LN) and BP PLC (BP.LN).

Ms. Jensen said almost all the growth in listed renewable energy over the next decade will be driven by companies that do not have renewable energy as their main business.

"The fund should be able to participate in this growth," she said.

The Norwegian government isn't planning to sell shares relating to its direct interest in Equinor ASA (EQNR.OS), Ms. Jensen said.

At 1350 GMT shares in Tullow Oil and Premier Oil were down 3% and 3.8% respectively at 220.20 pence and 76.45 pence each.

Write to Oliver Griffin at oliver.griffin@dowjones.com; @OliGGriffin

(END) Dow Jones Newswires

March 08, 2019 09:22 ET (14:22 GMT)

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