LUNDIN OIL: REPORT FOR THE THREE MONTHS ENDED 31 MARCH 2001
PROFITS BOOSTED 47% - LUNDIN OIL CONTINUES TO GROW
* Profit after tax MSEK 52.1 (SEK 0.51 per share)
* Acquisition of a new Block offshore Vietnam
* Successful production enhancement program i Malaysia/Vietnam
* A major oil discovery in Sudan
Dear fellow Shareholders,
Your Company ended the first quarter with a profit after tax of MSEK 52.1
(MUSD 5.3) corresponding to SEK 0.51 (USD 0.05) per share representing a
47% increase over the same period last year in which the Company
recorded a profit of MSEK 35.5 (MUSD 4.1).
The average working interest production for the period was 13,586 boepd
compared to 14,539 boepd for the same period last year. The average
realised oil price was USD 25.49 per barrel (USD 22.97 per barrel).
The average production figures for the period do not reflect the recent
increase in production in Malaysia / Vietnam to approx. 18,000 barrels of oil
per day (bopd)(net working interest production of approx. 7,300 bopd) which
compares to an average net working interest production of 5,762 bopd
during the first quarter.
In order to introduce Lundin Oil to new investors and, following up on record
year end profits and growth the Company is currently embarked on a major
roadshow throughout North America.
It has been a very active quarter in Malaysia and Vietnam with:
* Phase I production enhancement project successfully completed in PM-3
CAA resulting in a production increase up to approx. 18 000 bopd.
* Phase II of the development project (PM-3 CAA) reaching the stage of
major contract award.
* Operations on the East Bunga Raya-1 exploration well commenced.
* A sales and Purchase Agreement was signed in April för Block 46 (which
includes the Cai Nuoc Development Area or CNDA) with the Company is
taking a 33,154% working interest. The CNDA is being developed in
conjuction with Phase II referred to above.
All in all, Lundin Oil’s production and asset base in South East Asia is
growing in size and value and we expect more exciting news from that part of
the world in the future.
In Africa, it has also been a very active period with the development of the
En Naga field on NC177 (onshore Libya) passing the last major hurdles
before production startup. These milestones included the award of the
construction contracts and the delivery of approximately 100 km of line
pipe. The field is now set to be on stream at an initial rate of at least 15,000
barrels per day by the end of the year.
n Sudan, the Thar Jath-1 well (on Block 5A) flowed 4,560 barrels of oil per
day on test and represents our first major success in that country. The
Jarayan-1 well was drilled subsequently on a separate structure but
encountered only sub-commercial quantities of oil. The drilling rig has been
moved back to Thar Jath and is now drilling the first appraisal well on the
Thar Jath Field. A 3D seismic survey has also commenced covering the
whole Thar Jath structure.
The Company has faced some heavy criticisms mainly in the Swedish media
about its involvement in Sudan. Those criticisms are misplaced and based
on unreliable information. The involvement of foreign oil companies in Sudan
has, on the contrary, had a very positive impact on the overall economy in a
very short period of time. Through our community development and
humanitarian assistance program (CDHAP) we are responding to some of the
immediate needs of the population. we are also addressing the long term
needs through capacity building and training.
We are committed to our Code of Conduct which will ensure that any
investments made by us anywhere in the world take into account both
environmental and social considerations to prevent any negative impact. We
have faced many challenges in our quest for oil and gas, and we are now well
established "oil finders". But no amount of success would be satisfying
unless we felt we were improving the lives of the people within the areas of
our operations.
Yours sincerely,
Ian H Lundin
President
RESULT AND CASH FLOW
The Group
The Lundin Oil AB Group (Lundin Oil or the Group) reports a profit after tax
for the three months ended 31 March 2001 of MSEK 52.1 (MSEK 35.5 for
the corresponding period during 2000) corresponding to SEK 0.51 per share
(0.40 SEK per share). The first quarter result has benefited from continued
high oil prices and sustained levels of production.
Operating cash flow for the three months ended 31 March 2001 was MSEK
137.4 (MSEK 139.8) corresponding to 1.34 SEK per share (1.64 SEK per
share). The operating cash flow for the first quarter is at the same levels as
for the same period in the prior year.
Lundin Oil received an average price on its crude oil sales of USD 25.49
(USD 22.97) per barrel for the quarter after the effects of the oil price hedge
during 2001. The average price received for crude oil sales for the quarter
without the effects of the hedge was USD 25.52 (USD 26.67). The average
price achieved for the year ended 31 December 2000 after the effects of the
oil price hedge was USD 24.35.
Oil and gas related income for the three months ended 31 March 2001
amounted to MSEK 306.9 (MSEK 201.7) and relates to Lundin Oil’s assets
in the UK North Sea and Malaysia which generated operating income of
MSEK 180.2 (MSEK 136.1) and MSEK 126.7 (MSEK 65.6) respectively.
Production cost in the first quarter included an amount of 11 105 for
non-recurring well work-over cost in Malaysia. The benefit for these costs
will be increased production in subsequent quarters. The depletion charge on
oil and gas assets for the three months ended 31 March 2001 was MSEK
64.9 (MSEK 62.4).
Net financial income and expenses for the three months ended 31 March
2001 were MSEK –8.2 (MSEK –9.8). Included within the three months
ended 31 March 2001 was interest income of MSEK 4.6 (MSEK 4.5) offset
by interest expenses of MSEK 9.1 (MSEK 9.7) arising from bank debt.
Tax for the three months ended 31 March 2001 was MSEK 49.1 (MSEK
47.6). The current corporation tax charge for the three months ended 31
March 2001 was MSEK 40.0 (MSEK 20.3) and current Petroleum Revenue
Tax, PRT, was MSEK 9.1 (MSEK 8.6). The increase in current tax charges
were due to the higher income generated in the UK during the current period
and a current corporation tax charge in Malaysia. The deferred corporation
tax charge for the three months ended 31 March 2001 was MSEK 3.2 (MSEK
15.0) relating primarily to the Malaysian operation. The reduction in deferred
corporation tax charge reflects the current corporation tax charge for
Malaysia.
Parent Company
The net loss for the parent company for the three months ended 31 March
2001 amounted to MSEK 8.5 (net loss of MSEK 6.6). The loss resulted
mainly from administration charges of MSEK 7.1 (MSEK 3.4) and interest
expense of MSEK 4.0 (MSEK 4.7) offset by a foreign exchange gain of MSEK
1.9 (MSEK –1.1).
PRODUCTION
Production for the three months ended 31 March 2001 on a working interest
basis amounted to 1,222,770 (1,308,543) barrels of oil equivalents of
which 1,069,802 (1,127,222) were barrels of oil. This corresponds to a
production of 13,586 (14,539) barrels of oil equivalents per day (boepd) for
the three months ended 31 March 2001 including production from the UK
North Sea and Malaysia of 7,824 (8,704) boepd and 5,762 (5,835) boepd
respectively. Production allocated for the three months ended 31 March
2001 from Malaysia on an entitlement basis after government share
amounted to 357,102 (361,774) barrels or 3,968 (3,976) bopd.
FINANCING AND LIQUIDITY
The Group
Liquid assets at 31 March 2001 amounted to MSEK 424.9 (MSEK 378.3).
Parent Company
Liquid assets at 31 March 2001 amounted to MSEK 12.4 (MSEK 36.6).
INVESTMENTS
During the three months ended 31 March 2001, investments in oil and gas
assets have been made in an amount of MSEK 147.7 (MSEK 69.9). These
primarily relate to ongoing exploration costs in Libya of MSEK 9.8, Sudan of
MSEK 37.8 and Albania of MSEK 10.4, and development costs in Malaysia
of MSEK 57.1 and Libya of MSEK 12.2.
FINANCIAL INSTRUMENTS
The Group entered into interest rate hedging contracts 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 expiring December 2001. The contracts
are in the amount of USD50.0 million with an interest rate fixed at 5.87%.
The Group had bought a put option set at USD 19.00 for Dated Brent in
respect of 5,000 bopd for the calendar year 2001. The put option was sold in
April 2001.
The Group entered into forward oil price sales that are tied to forecast
production from the UK and Malaysia/Vietnam. From 1 January 2001 to 31
December 2001, 2,750 bopd of production have been fixed at a West Texas
Intermediate price of USD28.55 per barrel and from 1 April 2001 to 31
December 2001, 2,500 bopd of production have been fixed at an average
Dated Brent price of USD 26.505 per barrel.
Lundin Oil AB has entered into a share swap agreement with Skandinaviska
Enskilda Banken AB (SEB) under which SEB has purchased 2.3 million
Lundin Oil AB B shares to hedge Lundin Oil AB’s obligation under the 1999
and 2000 employee stock option programs. In the event that the Lundin Oil
share price falls below the purchase price at which the shares were acquired
by SEB, Lundin Oil will be responsible for any financial exposures resulting
therefrom. In the event that employees exercise under these programs, it is
expected that SEB will deliver shares purchased under this swap agreement.
As a result, if such options are exercised, Lundin Oil will not need to issue
new shares for which the Company has existing shareholder approval.
SHARE DATA
Lundin Oil AB’s share capital at 31 March 2001 amounts to SEK
51,430,641.50 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 31 March 2001 are 3,400,000 warrants with an
exercise price of SEK 0.50 exercisable between 5 and 23 November 2001,
to Sodra Petroleum AB. Subject to the approval of the Sodra and Lundin Oil
shareholders at the Annual General meetings of the companies the
convertible shares will also be exchangeable for shares in Lundin at the ratio
of 11 convertible shares of Sodra for one new B share of Lundin at the
nominal price of SEK 0.50. The conversion period for this exchange, if
approved, would be between 21 May and 14 June 2001. A further 282,406
warrants will have to be issued to facilitate the conversion.
Under the Group incentive program for employees 1,250,000 incentive
options with a strike price of SEK 49 expiring on 15 May 2001, 1,150,000
incentive options with a strike price of SEK 24 expiring on 11 March 2002
and 1,200,000 incentive options issued at a strike price of SEK 23.00
expiring on 22 May 2003 are outstanding.
ACCOUNTING PRINCIPLES
This interim report has been prepared in accordance with the Swedish
Financial Accounting Standards Counsel’s recommendation RR 20 interim
financial reporting.
CHANGE IN ACCOUNTING POLICY
The accounting principles used in the preparation of this interim report are
consistent with those used in the preparation of the annual accounts for the
year ended 31 December 2000 except for the method of valuing
hydrocarbon inventories. Inventories of hydrocarbons have been valued at
cost whereas previously they have been valued at market prices prevailing
at the balance sheet date. The effect of this change in accounting principle is
a reduction in profit for the year ended 31 December 1999 from TSEK
12,622 to TSEK 8,505, a reduction in the profit for the three months ended
31 March 2000 from TSEK 37,877 to TSEK 35,496 and a reduction in the
profit for the year ended 31 December 2000 from TSEK 225,503 to TSEK
224,754. The comparative financial statements have been restated in this
report. |
