REPORT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2000: Record Profit
Dear Shareholders
RECORD PROFIT
Your Company ended the third quarter with a record profit after tax of MSEK188.6 (US$18.8 million) corresponding to SEK2.04 (US$0.20) per share. For the same period
last year the Company recorded a profit of MSEK0.2 (US$19,900).
The average working interest production for the period was 13,828 boepd compared to 13,699 boepd for the same period last year. The average realised oil price was
US$24.41 per barrel, after accounting for the effects of hedging, versus US$15.85 in the first nine months of 1999. Production was affected negatively in the third
quarter by maintenance shut-downs in the UK North Sea during the summer.
Current production has, however, recovered to approximately 14,600 boepd, particularly as a result of the completion of maintenance programmes in the UK North Sea
and the implementation of production enhancement projects in Malaysia/Vietnam.
In Malaysia/Vietnam gross production from the Bunga Kekwa Field increased from approximately 13,500 bopd to 15,000 bopd during October. Two additional
development wells will be drilled on the eastern flank of the Bunga Kekwa Field during the first half of 2001 which should allow production to be increased further.
Meanwhile, work on Phase-II of the PM3 CAA development project is progressing well with basic engineering completed and tenders for the major contracts circulated
to bidders.
In Libya, the Company resumed exploration drilling on Area NC177 in September and the first of the two-well programme is now approaching its planned total depth of
approximately 3,500 metres. The development of the En Naga North and West Field passed another milestone in early September when the order for 94,500 metres of
pipeline that will carry the oil from the Field to Libya's national export system was placed. Two major construction contracts are awaiting final approvals to be awarded.
The Field was expected to come on-stream at the end of the first quarter of 2001. Once the construction contracts are awarded a revised start up date later in the
same year will be announced.
The Company has signed a US$50 million project loan facility with Arab Banking Corporation (BSC) and Arab Petroleum Investments Corporation in order to fund the
majority of the Company's development costs in Libya.
In Sudan the construction of the all-weather road on Block 5A is progressing well and drilling and testing operations should resume in the first quarter of next year, as
previously planned.
Finally, in Albania the first exploration well to be drilled on Block 2 will commence during November. The planned total depth is over 4,500 metres which will take
approximately 6 months to reach.
In summary, the Company is producing at record levels, the oil price remains high and we are, as a result, generating strong cash flow and profit. We expect to
continue to increase production as our oil and gas reserves in Malaysia and Libya are developed. We also continue to have exposure to exploration drilling in Libya,
Sudan, Albania and Malaysia on prospects with large reserves potential.
Yours sincerely
Ian H Lundin
President
LUNDIN OIL AB (publ): REPORT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2000
RESULT AND CASH FLOW
The Group
The Lundin Oil AB Group (Lundin Oil or the Group) reports a profit after tax for the nine months ended 30 September 2000 of MSEK 188.6 (MSEK 0.2 for the
corresponding period during 1999) corresponding to SEK 2.04 per share (SEK 0.0 per share). The nine month result was positively affected by a non-recurring deferred
tax write back of MSEK 30.4 recognised as the result of restructuring the UK group of companies and currency exchange gains of MSEK 37.3 on loan balances
denominated in US and Canadian dollars.
Operating cash flow for the nine months ended 30 September 2000 was MSEK 404.7 (MSEK 244.0) corresponding to SEK 4.37 per share (SEK 3.01 per share). The
operating cash flow for the nine month period has increased from the same period in the prior year due to higher revenue as a result of higher oil prices and production.
Oil and gas related income for the nine months ended 30 September 2000 amounted to MSEK 705.2 (MSEK 502.2) and relates to Lundin Oil’s assets in the UK North Sea
and Malaysia which generated operating income of MSEK 452.6 (MSEK 341.3) and MSEK 248.6 (MSEK 156.6) respectively.
Net financial income and expenses for the nine months ended 30 September 2000 were MSEK 18.2 (MSEK –14.4). Included within the nine months ended 30 September
2000 was interest income of MSEK 19.1 (MSEK 4.0) offset by interest expenses of MSEK 35.4 (MSEK 35.6) arising primarily from bank debt. The nine month period
ended 30 September 1999 also included the gain of MSEK 16.4 resulting from the sale of shares in Talisman Energy Corporation. Currency exchange gains for the nine
months ended 30 September 2000 were MSEK 37.3 (MSEK 3.0).
Parent Company
The net profit for the parent company for the nine months ended 30 September 2000 amounted to MSEK 13.0 (net loss of MSEK 11.3). The profit resulted mainly
currency exchange gains of MSEK 33.0 (MSEK –0.7) and interest income of MSEK 4.3 (MSEK 3.6) offset by administration charges of MSEK 12.2 (MSEK 10.0) and
interest expense of MSEK 13.6 (MSEK 13.4).
PRODUCTION
Production for the nine months ended 30 September 2000 on a working interest basis amounted to 3,775,176 (3,744,808) barrels of oil equivalents of which 3,338,384
(3,369,595) were barrels of oil. This corresponds to a production of 13,828 (13,699) barrels of oil equivalents per day (boepd) for the nine months ended 30 September
2000 including production from the UK North Sea and Malaysia of 8,101 (8,379) boepd and 5,727 (5,339) boepd, respectively. Production allocated for the nine months
ended 30 September 2000 from Malaysia on an entitlement basis after government share amounted to 1,077,886 (1,021,218) barrels, corresponding to 3,948 (3,741)
bopd. The production for the quarter ended 30 September 2000 was 12,287 boepd (14,187 boepd). The reduction from the previous year and the first half of 2000 was
primarily due to maintenance shutdowns in the United Kingdom.
FINANCING AND LIQUIDITY
Liquid assets at 30 September 2000 amounted to MSEK 372.3 (MSEK 217.8). The exercise of warrants in the company raised MSEK 1.4. The exercise of warrants in a
subsidiary company raised MSEK 27.6, net to Lundin Oil.
Parent Company
Liquid assets at 30 September 2000 amounted to MSEK 2.1 (MSEK 2.4).
INVESTMENTS
During the nine months ended 30 September 2000, the Group has made investments in oil and gas assets of MSEK 206.8 (MSEK 207.9). A further MSEK 189.1 has been
allocated to the Libyan cost centre as the result of the excess acquisition price over the book value of the minority interest in Red Sea Oil Corporation.
FINANCIAL INSTRUMENTS
The Group entered into interest rate hedging contracts commencing on 1 January 1999 to tie the LIBOR based floating rate for part of the Group’s USD borrowings to a
fixed rate of interest for a period of three years. The contracts are in the amount of USD50.0 million with an interest rate fixed at 5.87%.
The Group has also entered into an oil price hedge for part of its oil production from the UK North Sea. From 1 January 2000 to 31 December 2000, 4,000 bopd of
production have been fixed at an average dated Brent price of USD 18.58 per barrel.
The Group has brought a put option set at USD 19.00 for Dated Brent in respect of 5,000 bopd for the calendar year 2001. This transaction ensures that should the
average monthly oil price for Dated Brent fall below USD 19.00 per barrel, Lundin would receive USD 19.00 per barrel for 5,000 bopd for such month. This transaction
does not affect the Group’s ability to achieve a higher oil price.
Subsequent to period end, the Group has entered into an oil price hedge for part of its oil production. From 1 January 2001 to 31 December 2001, 2,750 bopd of
production have been fixed at an average West Texas Intermediate price of US$28.55 per barrel. This oil price hedge represents approximately 30% of the Group's
forecast oil entitlement production for the calendar year 2001.
CHANGES IN THE BOARD OF DIRECTORS
At the AGM on 4 May 2000 all serving Directors were re-elected and Carl Bildt was newly elected to the Board.
SHARE DATA
Lundin Oil AB’s share capital at 30 September 2000 amounts to SEK 51,430,642 represented by 102,861,283 shares of nominal value SEK 0.50 each. The shares are
divided into 678,200 A shares with 10 votes each and 102,183,083 B shares with one vote each.
In addition, outstanding at 30 September 2000 are 3,400,000 warrants with an exercise price of SEK 0.50 expiring in November 2001, to Sodra Petroleum AB.
Under the Group incentive program for employees 1,250,000 incentive options with a strike price of SEK 49 expiring on 15 May 2001 are available for issue. A further
1,150,000 incentive options with a strike price of SEK 24 expiring on 11 March 2002 are available for issue. At the AGM on 4 May 2000 shareholders approved a new
series up to a total of 1,200,000 warrants to be available for issue. The strike price was subsequently calculated at SEK 23.00. This series of warrants expire on 22
May 2003.
On 5 May 2000, 48,237 B shares were registered. These shares were subscribed for under the warrants that expired on 31 March 2000, contributing MSEK 1.35 to the
company.
Under the terms of the arrangement for the acquisition of Red Sea Oil Corporation, Lundin Oil issued 16,999,075 series B shares to RSO shareholders and an additional
374,513 series B shares to RSO employee stock option holders bringing the total shares issued to 17,373,588, equal to 20.2% of the shares outstanding at that date.
The shares issued for the acquisition were valued at a price equal to the ten day average prior to the announcement of the intention to acquire the minority
shareholding. This price amounted to SEK 23.94 and resulted in additional shareholders equity of SEK 415,923,697. The investment in RSO was subsequently transferred
to a subsidiary company in exchange for a loan.
RED SEA OIL CORPORATION
During January 2000, 26,223,544 warrants in Red Sea Oil Corporation ("RSO") were exercised at C$1.50 per warrant resulting in the issuance of 13,111,772 shares for
proceeds of approximately C$ 19,667,658. Lundin Oil subscribed for 10,167,050 shares at a cost of C$ 15,250,575.
FINANCIAL INFORMATION
The company expects to publish its financial results on the following dates:
Annual Report 2000 23 February 2001
First Quarter Report 2001 10 May 2001
Second Quarter Report 2001 9 August 2001
Third Quarter Report 2001 8 November 2001
Stockholm, 14 November 2000
Ian H. Lundin
President
For additional information, please contact:
Ian H. Lundin, telephone: +41 22 319 66 00
Magnus Nordin, telephone: +41 22 319 66 00
Ashley Heppenstall, telephone: +41 22 319 66 00
lundinoil.com |
