March meeting between Sodra & the Falklands Government....
Report for the financial year 1 January 1999-31 December 1999
RESULT AND CASH FLOW
The Group
Sodra reports a group net result for year ended 31 December 1999 of TSEK 4,054 (TSEK -201,030 as at December 1998) corresponding to SEK 0.05 per share (SEK -2.48). Sodra incurred administration expenses of TSEK 4,557 (TSEK 3,255) during the year. Net financial income and expenses were TSEK 8,611 (TSEK 12,086). Included was interest received of TSEK 8,261 (TSEK 7,744) and net currency exchange loss of TSEK 32 (profit of TSEK 10,061).
Parent Company
The parent company reported a net result for the year ended 31 December 1999 of TSEK -1,324 (TSEK -213,682). The loss was the result of service income of TSEK 2,847 (TSEK nil) offset by net financial income of TSEK -49 (TSEK -210,555) and administration costs of TSEK 4,122 (TSEK 3,127). Service income is the fee charged to operated joint ventures based on the levels of expenditure within the joint venture in accordance with the production sharing agreements to offset corporate expenditure.
GROUP STRUCTURE
Sodra is the parent company of the group also consisting of Sodra's 100%-owned subsidiary Sodra Petroleum BV, a company registered in the Netherlands. Sodra in its turn is more than 50% owned by Lundin Oil AB.
The Sodra Group does not have any employees. Ongoing management and administration is carried out by Lundin Oil AB according to a management agreement.
FINANCING AND LIQUIDITY
Liquid assets at 31 December 1999 amounted to TSEK 7,946 (TSEK 68,916).
Sodra has entered into a loan agreement with its associated company Lundin Oil AB (Lundin Oil) under which Lundin Oil can borrow up to MUSD 12 from Sodra. The loan is callable with a two week notice period. Under the terms of the loan agreement Lundin Oil is prohibited from securing assets not currently secured under its existing MUSD 125 bank facility. Under the loan agreement, MUSD 10.8 were outstanding at the year end.
Parent Company
Liquid assets at 31 December 1999 amounted to TSEK 1,749 (TSEK 33,850).
INVESTMENTS
During the period, investment in oil and gas assets have been made to an amount of TSEK 19,505 (TSEK 209,861). This represented Sodra's share of ongoing exploration/appraisal expenditure offshore the Falkland Islands.
Whilst the Group records exploration expenditure under the full cost method of accounting whereby exploration costs would only be written-off when an area is relinquished, management decided to write-off the costs incurred offshore the Falkland Islands during 1998 given the disappointing drilling result and the high level of costs incurred to that date. Expenditure of MSEK 19.7 has been capitalised against the Falkland Islands concession during 1999. The Robertson Research report has been completed and management believes that further write-offs in the Falklands are not currently warranted.
Parent Company
Shares in subsidiaries at 31 December 1999 amounted to TSEK 106,013 (TSEK 106,013).
OPERATIONS
Sodra holds an 87.5% interest in six exploration and production licences covering an area known as Tranche F in Falkland Island territorial waters. The remaining 12.5% interest in these licences is held by Sodra's joint venture partner Desire Petroleum plc, a company quoted on the Alternative Investment Market (AIM) of the London Stock Exchange. Sodra is the operator of Tranche F which is held through Sodra's Dutch subsidiary Sodra Petroleum BV.
On the drilling operations, demobilisation of the Borgny Dolphin and the reconciliation of the operations contract has continued during the year. Analyses of geological data from the completed 14/24-1 well were completed and final reports were received and sent to partners.
A study of the North Falkland Basin was commissioned to Robertson Research in the first quarter of 1999. This study attempts to analyse all the existing data acquired through our own study and through trade with adjoining operators to assess the hydrocarbon potential of Tranche F and the rest of the Basin. The North Falkland Basin Study was completed in Q4 of 1999. The results of the study indicate that a source rock is present in the North Falkland Basin. In Tranche F, this source rock is generally not buried deep enough to have expelled any substantial quantities of hydrocarbons. This is not true of other Tranches (A, B, C and D) where the source rock is buried deeper than in Tranche F. The problem remains that no reservoir rocks are known to be present in the area around the deeper parts of the basin to trap this oil. A meeting with the Falkland Islands Government has been set for March 2000 in Stanley to discuss Sodra's work programme and exploration strategy for 2000.
Sodra has one commitment well outstanding which must be completed by October 2001. Sodra's Annual General Meeting of shareholders on May 20, 1999 changed the bylaws of the company to enable Sodra to look for oil in any part of the world. On February 3, 2000 the company said that it continues to evaluate the Falkland concession as well as other business opportunities.
SHARE DATA AND OWNERSHIP
The total number of shares in Sodra amount to 81,012,976 divided into two classes of shares, ordinary shares and convertible shares. There are 40,506,500 ordinary shares outstanding and 40,506,476 convertible shares outstanding. The convertible shares can be exchanged for shares in the parent company Lundin Oil according to the ratio 12 convertible shares of Sodra for one new B share of Lundin Oil at the nominal price of SEK 0.50. The exchange may take place in November 2001. All ordinary shares are owned by Lundin Oil, corresponding to just above 50% of the share capital.
Sodra's second largest shareholder is its Chairman Adolf H. Lundin holding 10,214,834 convertible shares, corresponding to 12.6% of the share capital.
BOARD OF DIRECTORS
At the Annual General meeting all the directors were reelected.
DIVIDEND
The Directors propose that no dividend be declared for the year.
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