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Lundin Energy announces total resource additions of 200 percent of 2021 production

Lundin Energy announces total resource additions of 200 percent of 2021 production

Lundin Energy announces total resource additions of 200 percent of 2021 production

21 January 2022

Lundin Energy AB (Lundin Energy) is pleased to announce that as at 31 December 2021, its proved plus probable net reserves (2P reserves) are 639 million barrels of oil equivalent (MMboe1,2) and its proved plus probable plus possible net reserves (3P reserves) are 799 MMboe. 2P reserves plus best estimate net contingent resources (total resources) are 1,019 MMboe, with a total resource replacement ratio3 for 2021 of 202 percent.

Lundin Energy’s 2P reserves include a positive revision of 39 MMboe, and the 3P include a positive revision of 44 MMboe compared to year end 2020. The best estimate net contingent resources (2C resources) as at 31 December 2021 are 380 MMboe, which is an increase of 105 MMboe from year end 2020. The total resources as at 31 December 2021 are 1,019 MMboe, which reflects additions of 144 MMboe from year end 2020, including asset acquisitions.

 

2P Reserves3P ReservesTotal Resources
2P + 2C
End 2020670.9826.0946.4
  – Produced 471.071.071.0
  – Sales/+Acquisitions+136.9
  + Revisions/Discoveries+39.3+44.4+6.9
End 2021639.1799.41,019.2
Reserves replacement ratio 3,555%63%202%

 

The increase in 2P reserves relates primarily to the Edvard Grieg and Solveig fields. The Edvard Grieg reservoir continues to outperform and together with a successful infill well campaign, reserves have increased by 17 percent. The gross ultimate recovery for Edvard Grieg is now 379 MMboe, which is an increase of over 100 percent since the PDO. Drilling results and early production performance on the Solveig phase 1 development has resulted in an increase of 20 percent in 2P reserves. Overall, the Greater Edvard Grieg Area has a gross ultimate recovery of 450 MMboe with a 97 percent replacement ratio of its production in 2021.

The Johan Sverdrup field continues to exceed expectations, with high uptime, increased processing capacity, excellent reservoir performance and well productivities. The Company’s 2P reserves at year end 2021 includes for the first time a contribution from eight infill wells (previously contingent resources), extending the plateau production period. The Company recognises that there is upside reserve potential in several parts of the field which will be realised through further infill drilling, optimized reservoir management and increased facilities capacity. The technical work to define this upside will be completed by mid 2022.

In October 2021, Lundin Energy announced the acquisition of a further 25 percent working interest in the Wisting oil discovery located in the Southern Barents Sea, taking the total working interest to 35 percent. Equinor, the operator of Wisting, is targeting a PDO by end 2022, to benefit from the temporary tax incentives established by the Norwegian Government in June 2020. The transaction adds 2C resources of 131 MMboe.

Based on 2021 exploration results on Iving and further evaluation of the stranded assets in the Barents Sea, Lundin Energy has concluded that these should be excluded from the 2C contingent resources as of year end 2021.

The reserves estimates have been audited by ERCE, a third-party independent reserves auditor, and have been calculated using the 2018 Petroleum Resource Management System (SPE PRMS) Guidelines of the Society of Petroleum Engineers (SPE), World Petroleum Congress (WPC), American Association of Petroleum Geologists (AAPG) and Society of Petroleum Evaluation Engineers (SPEE). The contingent resource estimates associated with the Edvard Grieg, Alvheim area, Johan Sverdrup, Solveig and Rolvsnes assets have been audited by ERCE. For the other assets, the contingent resource volumes are based on management estimates.

Daniel Fitzgerald, COO of Lundin Energy, commented:
“2021 has been another year of great performance with resource additions of over 140 MMboe representing a resource replacement ratio of over 200%. The Edvard Grieg area has continued to increase its reserves base and is now more than double the size compared to the original PDO estimates, and I am convinced that we will continue to grow in this area. We have many exciting opportunities and projects being worked through the course of 2022 and are planning to sanction three projects in the Edvard Grieg area in late 2022, as well as planning for the next phase of infill drilling on Edvard Grieg.

“Johan Sverdrup is truly a world class asset and we are only just starting to see the potential from this field. We have included infill wells into the 2P reserves base for the first time which extends the plateau production period and we still see significant opportunities to continue to not only grow the reserves, but to accelerate production and extend the plateau.”

1 BOE’s may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf : 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent the value equivalency at the wellhead.
2 The reserves were calculated using a nominal Brent oil price of USD 75 in 2022, 71 in 2023, 69 in 2024, 70 in 2025, 71 in 2026, 73 in 2027, 74 in 2028, 76 in 2029, 77 in 2030, 79 in 2031 and increasing by 2 percent per year thereafter.
3 Total resource replacement ratio is the sum of 2P reserves revisions and 2C Contingent resources revisions including assets transactions divided by the yearly production.
4 Reserves are measured in saleable quantities (saleable oil, natural gas liquids and dry gas converted to oil equivalents), which may differ from production volumes provided in corporate reports which are given in wellhead production quantities (oil and rich gas converted to oil equivalents).
5 As per industry standards the reserves replacement ratio is defined as the ratio of reserves additions to production during the year, excluding the effect of acquisitions and dispositions.

 

Update on fourth quarter 2021 financial results and webcast details for the presentation on 1 February 2022

Update on fourth quarter 2021 financial results and webcast details for the presentation on 1 February 2022

Update on fourth quarter 2021 financial results and webcast details for the presentation on 1 February 2022

19 January 2022

Lundin Energy AB (Lundin Energy) will publish its financial report for the fourth quarter 2021 and host a webcast presentation for the 2021 year end results and a 2022 business update on Tuesday, 1 February 2022. For the fourth quarter 2021, Lundin Energy will expense pre-tax exploration costs of approximately MUSD 20, and recognise a net foreign exchange loss of approximately MUSD 84.

AkerBP transaction
On 21 December 2021, Lundin Energy announced that it had entered into an agreement (the transaction) with AkerBP whereby AkerBP will absorb Lundin Energy’s E&P business through a cross-border merger in accordance with Norwegian and Swedish law. Before completion of the cross-border merger, the shares in the company holding Lundin Energy’s E&P business will be distributed to Lundin Energy shareholders. Consequently Lundin Energy will present its E&P business as discontinued operations in the consolidated Income Statement and will present the asset and liabilities associated with the E&P business as assets and liabilities held for distribution.

All the items included in this update on the fourth quarter 2021 financial results relate to Lundin Energy’s E&P business unless stated otherwise.

Continuing operations
Once the transaction with AkerBP is completed, the renewable business, which is reported as continuing operations, will be debt free and have a cash balance of MUSD 130, to cover capital expenditure and other working capital items. The renewable business is expected to be free cash flow positive from late 2023, when the renewable portfolio has been fully built out and all projects are operational.

Exploration costs
It is the Company’s policy to capitalize costs associated with its exploration activities and when it is determined that a commercial discovery has not been achieved, the associated exploration costs are charged to the income statement. For the fourth quarter of 2021, Lundin Energy will incur pre-tax exploration costs of approximately MUSD 20, which will be charged to the income statement and offset by a tax credit of approximately MUSD 16. The exploration costs are mainly related to the Dovregubben well in PL976, the Lyderhorn well in PL1041 and relinquished licenses.

Net debt and foreign exchange loss
The net debt position of Lundin Energy at 31 December 2021, amounted to USD 2.7 billion, resulting in available liquidity of USD 2.0 billion within its existing credit facility and cash balances held.

Lundin Energy will recognise a net foreign exchange loss of approximately MUSD 84 for the fourth quarter of 2021. The Norwegian Krone was stable against the US Dollar and the Euro weakened by approximately two percent against the US Dollar during the fourth quarter of 2021. The foreign exchange loss is largely non-cash and mainly relates to the revaluation of loan balances at the prevailing exchange rates at the balance sheet date.

Hedging effectiveness
As a result of the AkerBP transaction, part of the outstanding foreign currency contracts and interest rate swap contracts are no longer considered as effective hedges under hedge effectiveness testing. The mark-to-market fair value of these ineffective contracts will be recognized as a non-cash item in the income statement for discontinued operations during the fourth quarter of 2021.

Change in inventory and under/overlift balances
Lundin Energy recognises income based on its sold volume (sales method). Consequently, changes in inventory and under/overlift balances are reported as an adjustment to cost valued at production cost, including depletion. During the fourth quarter of 2021, Lundin Energy was overlifted by 4.5 Mboepd.

Revenue from the crude oil sales from third parties
Lundin Energy markets its own crude oil production and at times markets crude oil from third parties. For the fourth quarter 2021, revenue from the sale of crude oil from third parties amounted to MUSD 72.8 offset by the purchase of crude oil from third parties of MUSD 72.5, resulting in a gross profit of MUSD 0.3 on third party activities for the fourth quarter 2021. The third party crude oil sales and purchase will be reported under discontinued operations.

2021 year end results and 2022 business update
Lundin Energy’s financial report for the fourth quarter 2021, will be published on Tuesday, 1 February 2022 at 07:30 CET.

As a result of the announcement on 21 December 2021, in relation to the proposed transaction with Aker BP, Lundin Energy will no longer be hosting a 2022 Capital Markets presentation, instead the management team will present the financial results for the full year 2021 and a 2022 business update via a webcast at 14.00 CET on the 1 February 2022. Please follow the event live at www.lundin-energy.com or dial in using the following telephone numbers with the pin code shown below:

UK/International:       +44 3333000804
Sweden:       +46 856642651
Norway:         +47 23500243
USA:       +1 6319131422
Access Pin:      17161382

Webcast link: https://edge.media-server.com/mmc/p/ifchzb4n


The fourth quarterly dividend instalment of USD 0.45 per share will amount to SEK 4.09 per share (December 2021)

The fourth quarterly dividend instalment of USD 0.45 per share

The fourth quarterly dividend instalment of USD 0.45 per share will amount to SEK 4.09 per share

29 December 2021

Lundin Energy AB (Lundin Energy) announces that the fourth quarterly dividend instalment of USD 0.45 per share will amount to SEK 4.09 per share, with a total amount of MSEK 1,164, corresponding to approximately MUSD 128.

Information about the fourth quarterly instalment of the dividend:

Amount per share
(SEK)
Total dividend amount
(MSEK)
Ex-dividend dateRecord dateExpected payment date
4.091,1644 January 20225 January 202211 January 2022

The Annual General Meeting of Lundin Energy held on 30 March 2021 resolved on a dividend for 2020 of USD 1.80 per share, to be paid in quarterly instalments of USD 0.45 per share.

According to the dividend resolution, before payment, each quarterly dividend of USD 0.45 per share shall be converted into a SEK amount based on the USD to SEK exchange rate published by Sweden’s central bank (Riksbanken) four business days prior to each record date (rounded off to the nearest whole SEK 0.01 per share) and the exchange rate used for the conversion is 9.0788.

Information about the approved dividend is available on www.lundin-energy.com.