Lundin Oil (LOILY, LOILB Sweden) Message Board

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Gold/Mining/Energy : Lundin Oil (LOILY, LOILB Sweden)

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To: Tomas who wrote (854)	11/23/1998 9:57:00 PM
From: balisurf	Read Replies (6) of 2742

Tomas, Your comments on timing seem valid; however, this issue on financing is no small matter to be swept under the carpet. In my opinion, a farm out right now, in the current business climate, would not deliver acceptable terms and therefore is unlikely, as is an acceptable farm out of PM-3. I've seen some very good acreage going for very cheap the past 5-6 months (companys under financial strain having to do a deal at any cost). The reality is that with present work commitments, Lundin is headed for, or in, a very serious cash squeeze and something is going to "fall off the table" here. I strongly feel forget about the financing with regard to PM-3. I believe PM-3 development is going to be way off schedule regardless of what is being said. Singapore will not take any gas from Malaysia (it is coming from Indonesia) and there may be a large surplus coming out of Myanmar if the Premier/Total contract is broken by Thailand (very possible) I could go on and on, but the point is that there is nowhere for this gas to go in the next 2-3 years. So what would you do? Put most of your efforts into maintaining oil production in PM-3 and exploring/developing Libya. Libya is the story for Lundin oil over the next 2 years with Sudan possibly a later addition. However, for Lundin, they are stuck with the nagging problem of a partner (Red Sea) who can not pay their bills and who is $7MM (about $.17/Red Sea share) in debt to them. I feel strongly now that Lundin will asset swap with Red Sea for a higher net interest to Lundin (exactly the way Oxy did with CanOxy in Yemen) or acquire it by further funding Red Sea. A share issue by Red Sea is dilution by any other name for Lundin and not the preferred method. At the same time Lundin can not afford to have the time table for the Libya project delayed by Red Sea's financial woes and any more money going towards PM-3 gas may as well go into a black hole over the next 1-2 years. So, what does it mean? Red Sea gets "screwed" by Lundin IF THE PLAY IS REALLY AS GOOD AS THEY SEEM TO THINK. Watch very closely what Lundin does over the next few months (in allocating expenditures) and not what they say. I'm getting very worried about this one strictly from a Red Sea point of view. Comments Tomas? Regards Balisurf

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