Sodra Petroleum AB - Lundin Oil - Interim Results
August 21 1998 - 9:16AM
UK Regulatory
RNS No 9641j
SODRA PETROLEUM AB
21st August 1998
SODRA PETROLEUM AB
Sodra Petroleum AB announces that its parent company, Lundin Oil AB
("Lundin") has today issued the following announcement:-
"Lundin Oil AB (publ)
Report for the first 6 months
1 January 1998 - 30 June 1998
RESULT AND CASH FLOW
The Group
The Lundin Oil AB Group (Lundin Oil) reports a loss after taxes of
MSEK 27.2 (profit after taxes MSEK 63.3) corresponding to -0.34 (0.78)
SEK per share for the first 6 months of 1998. The profit before taxes
was MSEK 7.5 (103.3).
Operating cash flow was MSEK 140.6 (130.6) corresponding to 1.7 (1.6)
SEK/share. The operating cash flow has been positively impacted by the
addition of production from Malaysia and the Sedgwick Field in the UK
North Sea acquired this period and negatively impacted by lower oil
prices.
Lundin Oil received an average price on its crude oil sales of USD
13.73 (USD 19.61) per barrel for the first six months. The average
price for 1997 was USD 18.93 per barrel.
Oil and gas related income amounted to MSEK 316.7 (259.2) and relates
to Lundin Oil's assets in the UK North Sea and Malaysia which
generated operating income of MSEK 236.2 (235.7) and MSEK 71.4 (nil)
respectively. Depletion charge on oil and gas assets was MSEK 123.5
(69.1), the increase being primarily due to start-up of production
from Malaysia.
Net financial income and expenses were MSEK 13.5 (-17.6). Included
were interest expenses amounting to MSEK 21.0 (22.1) and net currency
exchange gains of MSEK 24.3 (-1.6). The latter arose primarily as a
result of translating loans from USD to GBP and SEK as well as a gain
of MSEK 11.3 realised from the closing out of various forward foreign
exchange contracts.
Taxes were MSEK 32.4 (41.0). Corporation taxes reduced in line with
lower oil prices to MSEK 13.5 (20.4). Petroleum Revenue Tax, PRT,
decreased slightly to MSEK 18.9 (20.6). The effect of lower oil prices
on PRT in 1998 has been offset by an adjustment of MSEK 5.6 in the
current year relating to 1997.
The net profit for the financial year ended 31 December 1997 was MSEK
62.1.
Parent Company
The net profit for the parent company for the first six months of 1998
amounted to MSEK 2.8 (-5.7).
PRODUCTION
Production for the first six months on a working interest basis
amounted to 2,496,818 (1,451,486) barrels of oil equivalents of which
2,183,682 (1,234,212) were barrels of oil. This corresponds to a
production of 13,795 (8,019) barrels of oil equivalents per day
(boepd) for the six months including production from the UK North Sea
and Malaysia of 9,101 (7,623) boepd and 4,694 (nil) boepd
respectively. Production for the first six months from Malaysia on an
entitlement basis after government share amounted to 691,400 (nil)
barrels.
Overall production from the UK is in line with forecast whilst in
Malaysia production is below forecast primarily due to the delayed
start-up from one of the three Phase 1 Malaysia production wells which
came on stream during the period.
FINANCING AND LIQUIDITY
Liquid assets at 30 June 1998 amounted to MSEK 433.3 (303.4). The
increase in liquid assets is primarily due to the MSEK 220.3 cash
assets of subsidiary Sodra Petroleum AB.
INVESTMENTS
During the period, investments in oil and gas assets have been made in
an amount of MSEK 410.9 (MSEK 204.8). These primarily relate to the
purchase of a 20% interest in the Sedgwick Field in the UK North Sea,
Malaysia development and exploration in Libya and offshore the
Falkland Islands.
OPERATIONS
The period under review marks the first six months where Lundin Oil as
the combined entity of Sands Petroleum AB and IPC has been operating.
The company changed its name from Sands Petroleum AB to Lundin Oil AB
by resolution on an extraordinary meeting of shareholders on 17 March
1998. The organisation of the combined companies is being streamlined
and slightly altered the main change being that the Company's
operations and technical center will move to London to centralise work
and lower costs. The new London office is scheduled to be fully
operational by year end.
Operational highlights were as follows:
* Drilling and testing of the successful B1-NC177 well onshore
Libya.
* The completion in August of the appraisal well B2-NC177
* The signing of Blocks A, 2 and 3 onshore Albania.
* Seismic acquisition on Block 5A onshore southern Sudan commenced.
* The mobilisation of the Borgny Dolphin, semi-submersible drilling
rig to the Falkland Islands and the commencement of drilling
operations in the Falklands basin by Amerada Hess, Lasmo and Shell.
* The successful flotation of 50% of the shares in Sodra Petroleum
AB, the licence holder in Tranche F offshore Falkland Islands.
* The purchase of a 20% interest in the Sedgwick Field in the UK
North Sea from Texaco.
* The completion of the MUSD 15 seismic acquisition campaign
The drilling and testing of the Bunga Manggar well on Block PM3
CAA offshore Malaysia and Vietnam.
* The discovery of the North Pakma field by the well North Bunga
Pakma-1 on the same South East Asia Block.
* The signing of the preunitisation agreement concerning the Kekwa
field
Libya Exploration
The B1-NC177 well on Block NC177 onshore Libya was completed in
January and tested more than 6,000 barrels of oil per day from three
zones. This well marks the discovery of the En Naga North oil field
which is estimated to contain recoverable reserves of approximately 80
million barrels of oil.
The appraisal programme on the En Naga North Field commenced with the
spudding of the B2-NC177 well on 5 July 1998. Following the completion
of the B2 well, the rig will move over and re-enter the J1-85 well
prior to drilling the second appraisal well on the En Naga North
structure., B3-NC177. The J1-85 well was originally drilled in 1968
and is located 3 km from the En Naga North discovery on a separate
structure. Over 85 feet of gross pay has been identified within the
lower Gir/Facha formation which was not tested when the well was
originally drilled.
The full appraisal of the remainder of Block NC177 is now underway
with the commencement of the 1,600 kilometres regional 2D seismic
programme which is targeted at firming up the numerous other leads
which have been identified. Exploration drilling will resume in 1999.
The company currently has over 150 people working in the field on both
the drilling and seismic campaign.
Malaysia/Vietnam
In the first half of 1998 Lundin Oil and partners drilled two wells,
Bunga Manggar-1 and North Bunga Pakma-1. Bunga Manggar-1 confirmed the
north-westerly extension of the H4 channel sand discovered by the
Seroja-1 well in 1997. Although the H4 sand was water wet at the Bunga
Manggar location, it has proved up a total gas column of approximately
1,000 feet based on pressure data. The well, drilled 10 km from Seroja-
1, encountered the H4 sand 670 feet downdip.
North Bunga Pakma-1, was drilled to a total depth of 10,781 feet and
encountered 12 commercially significant hydrocarbon bearing reservoirs
with a total gross thickness of 400 feet. Production testing of four
representative sands from the J,K and I sequences yielded a combined
maximum flow rate of 111 million cubic feet per day and 2,036 barrels
per day of condensate. Apart from proving up significant additional
reserves, the well results have upgraded the potential of the North
West Pakma and North Orkid prospects which are adjacent to North Bunga
Pakma.
Development studies will now be carried out to incorporate the North
Bunga Pakma field into the Block's development plans. The full
development of the Block is based on the sales of 250 million standard
cubic feet of gas per day to both Malaysia and Vietnam as well as the
export of 40,000 barrels per day of oil. Provided that the gas sales
agreement is signed before the year end this production rate can be
achieved by the end of the year 2000.
The remaining two wells planned on the Block this year will be drilled
on the Kekwa field and will be tied into the existing production
facilities as soon as they are completed. The first of these, Bunga
Kekwa A-5 was spudded in mid August 1998.
As of January 1998 the Lundin Oil AB 15% direct interest in the
Malaysia PM-3 commercial arrangement area was transferred to a newly
formed wholly owned subsidiary of Lundin Oil AB named Sands Malaysia
AB.
SODRA PETROLEUM AB
On 27 February the Board of Directors decided to offer 50% of the
interest offshore the Falkland Islands, the Group's 100% share of
Tranche F, to Lundin Oil's shareholders through a share issue in the
single purpose subsidiary holding the Falkland interest, Sodra
Petroleum AB (Sodra). Shareholders were offered one new share of Sodra
for two shares held in Lundin Oil at a price of SEK 7.50 per Sodra
share. An EGM in Lundin Oil on 17 March approved the issue of a
maximum of 3,400,000 warrants to be transferred to Sodra to allow
Sodra shares to be converted back into shares of Lundin Oil in
November 2001 at the ratio 12 Sodra shares for one new share of Lundin
Oil.
The Sodra share issue was completed in May 1998 and all 40,506,476
convertible shares were placed including 3,000,000 shares taken up by
Lundin Oil. Through the new share issue Sodra raised MSEK 304 before
issue costs. 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 all of which
are owned by Lundin Oil and 40,506,476 convertible shares outstanding.
In connection with a listing of the Sodra convertible shares on the
Alternative Investment Market (AIM) in London Lundin Oil placed
3,000,000 convertible shares in Sodra originally taken up by Lundin
Oil. At the date of this report Lundin Oil owns just over 50% of
Sodra. The convertible shares are traded on the New Market of the
Stockholm Stock Exchange and as of 17 July 1998 on AIM in London.
Greig Middleton & Co. Ltd. acted as Nominated Broker and Adviser to
Sodra for the AIM-listing.
Sodra plans to drill an exploration well on Tranche F during the third
quarter of 1998. A well was recently completed on Tranche A, located
north of Tranche F, by the American oil company Amerada Hess. This
well encountered minor oil and gas shows although not of commercial
significance. The fact that hydrocarbons have been shown to be present
in the basin is however very encouraging for the continuing
exploration. In July the English oil company Lasmo drilled a well on
Tranche C, which was reported to penetrate potential reservoir
formations, but did not encounter hydrocarbons. At the date of this
report Shell is drilling on Tranche B. Sodra will take over the rig
after Shell completes its current well.
SHARES IN ARAKIS
On 17 August 1998 the Canadian oil company Talisman Energy announced a
public offer for all the outstanding shares in Arakis, offering to
exchange ten shares of Arakis for one share of Talisman. Lundin Oil
has agreed to accept Talisman's offer, which however is subject to
various regulatory approvals. Talisman closed at USD 20.75 on the New
York Stock Exchange on 20 August 1998.
CHANGES IN THE BOARD OF DIRECTORS
At the Annual General Meeting of Shareholders on 8 May 1998 Ashley
Heppenstall, Vincent Hamilton and Nigel McCue resigned. Lukas Lundin,
John Craig and William Rand were newly elected to the Board. The other
directors were re-elected.
In addition Ian H. Lundin was appointed Managing Director and the
former Managing Director, Magnus Nordin, was appointed Deputy Managing
Director. Ashley Heppenstall was appointed Finance Director and Alex
Schneiter Exploration Director.
SHARE DATA
Lundin Oil has 81,012,953 shares outstanding. 678,200 are A shares
representing 10 votes each and 80,334,753 are B shares representing
one vote each. Each share has a nominal value of SEK 0.50. The share
capital amounts to SEK 40,506,476. At the Annual General Meeting of
Shareholders approval was received to issue 1,250,000 warrants to
employees of the Company. In addition 3 375 540 warrants are
outstanding linked to the convertible Sodra share in order to enable
12 convertible shares of Sodra to be exchanged for one new share of
Lundin Oil at SEK 0.50.
KEY FINANCIAL RATIOS
1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
30 Jun 1998 30 Jun 1997 31 Dec 1997
6 months 6 months 12 months
Key Financial Ratios
Return on capital employed 1, % -1.8 4.9 4.6
Return on total assets 2, % 0.2 6.4 9.8
Equity ratio 3, % 63.6 62.8 64.3
Shareholders' equity SEK per share 4 19.8 17.2 18.3
Operating cash flow SEK per share 5 1.7 1.6 4.2
Earnings SEK per share 6 -0.3 0.8 0.8
Number of shares at the period end 81 012 953 80 952 219 80 952 219
Weighted average number of shares 81 012 953 80 952 219 80 952 219
for the period
Definitions
1 Return on capital employed is defined as the Group's net result
divided by the average capital employed (the average of the net
assets for the financial period).
2 Return on total assets is defined as the Group's result after
financial items plus interest expenses plus/less exchange differences
on financial loans divided by the average total assets (the average
total assets less non-interest bearing liabilities for the period)
3 Equity ratio is defined as the Group's shareholders' equity
including minority interest in relation to total assets.
4 Shareholders' equity SEK per share is defined as the Group's
shareholders' equity divided by the number of shares at the period
end.
5 Operating cash flow SEK per share is defined as the Group's
operating income less production costs and less current taxes divided
by the weighted average number of shares for the period.
6 Earnings SEK per share is defined as the Group's net result divided
by the weighted average number of shares for the period.
GROUP INCOME STATEMENT IN SUMMARY
1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
Expressed in TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
Note 6 months 6 months 12 months
Operating income
Net sales of oil and gas 272 507 222 295 526 754
Tariff income 35 061 33 099 66 933
Service income 9 152 3 771 9 511
------- ------- -------
316 720 259 165 603 198
Operating expenses
Production costs 1 -149 707 -86 738 -192 117
Depletion of oil and gas -123 478 -69 063 -172 054
properties
Site restoration charges -2 178 -6 705 9 819
Write-off of oil and gas -3 222 -4 790 -7 364
properties ------ ------ ------
Gross profit 38 135 91 869 241 482
Other income 1 575 1 431 2 687
Gain on sale of oil and gas
properties, net - 69 841 63 411
Administration expenses -45 634 -41 858 -85 689
Participation in associated - -409 -2 072
companies ------- ------- -------
Operating (loss)/profit -5 924 120 874 219 819
Financial income and expenses, 13 455 -17 577 -65 034
net ------ ------- -------
Profit before tax and minority 7 531 103 297 154 785
interests
Tax 2 -32 366 -41 006 -95 264
Minority interests -2 391 984 2 598
------- ------- -------
Net result -27 226 63 275 62 119
GROUP BALANCE SHEET IN SUMMARY
Expressed in TSEK
Note 30 Jun 1998 30 Jun 1997 31 Dec 1997
ASSETS
Tangible fixed assets
Oil and gas properties 3 1 991 863 1 615 783 1 678 342
Other fixed assets 8 134 7 090 8 396
-------- ---------
Total tangible fixed assets 1 999 997 1 622 873 1 686 738
Financial fixed assets 4 334 305 298 216 333 930
--------- --------- ---------
Total fixed assets 2 334 302 1 921 089 2 020 668
Current Assets
Current receivables and 143 405 108 622 146 469
inventories
Cash and bank,
short term investments 433 313 303 394 266 773
--------- --------- ---------
Total current assets 576 718 412 016 413 242
--------- --------- ---------
Total assets 2 911 020 2 333 105 2 433 910
SHAREHOLDERS' EQUITY
AND LIABILITIES
Shareholders' equity including
net result for the financial 1 603 828 1 388 957 1 479 704
period
Minority interests 246 096 76 686 85 303
Provisions and long-term 795 987 576 782 585 160
liabilities
Current liabilities 265 109 290 680 283 743
------- ------- -------
Total shareholders' equity and
liabilities 2 911 020 2 333 105 2 433 910
Pledged assets 5 1 023 600 917 879 890 673
Contingent liabilities 378 529 528
Note 1. Production costs, 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
Costs of operations -81 555 -55 968 -130 058
Tariff costs -41 771 -25 002 -49 546
United Kingdom royalty -6 245 -10 270 -20 603
Changes in inventories and
underlift/overlift
position -20 136 4 503 8 090
-------- ------- --------
-149 707 -86 737 -192 117
Note 2. Tax 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
The tax charge comprises
Corporation tax
- current -13 278 -24 769 -41 896
- deferred -182 4 394 -18 197
------- ------- -------
-13 460 -20 375 -60 093
PRT (Petroleum revenue tax)
- current -13 094 -17 092 -27 434
- deferred -5 812 -3 539 -7 737
------- ------- -------
-18 906 -20 631 -35 171
------- ------- -------
Total charge to income -32 366 -41 006 -95 264
Note 3. Oil and gas Book value Book value Book value
properties, TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
Libya 256 614 151 219 183 813
Tanzania 33 380 29 768 32 425
Papua New Guinea 32 217 29 342 29 705
Malaysia 389 161 336 589 376 970
Falkland Islands 105 395 22 152 33 405
Sudan 146 781 123 908 126 308
New ventures 4.715 4 926 5 043
United Kingdom 1 023 600 917 879 890 673
--------- --------- ---------
1 991 863 1 615 783 1 678 342
Note 4. Financial fixed assets includes shares in Arakis Energy
Corporation and Khanty Mansiysk Oil Corporation.
Note 5. Pledged assets represent the UK North Sea assets.
PARENT COMPANY INCOME STATEMENT IN SUMMARY
1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
Expressed in TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
6 months 6 months 12 months
Operating income
Net sales of oil and gas - - 41 039
- - ------
Operating expenses
Production costs Note 1 - - -11 416
Depreciation of oil and gas - - -16 700
properties - - -------
Gross profit - - 12 923
Other income 229 393 456
Administration expenses -9 642 -5 812 -14 339
------ ------ -------
Operating loss -9 413 -5 419 -960
Financial income and 12 237 -267 -36 451
expenses, net ------ ---- -------
Result before tax 2 824 -5 686 -37 411
Tax - - -8 510
- - ------
Net result 2 824 -5 686 -45 921
Note 1. Production costs, 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
TSEK 30 Jun 1998 30 Jun 1997 31 Dec 1997
Costs of operations - - -14 095
Changes in inventories and
underlift/overlift
position - - 2 679
- - -------
- - -11 416
Stockholm, 21 August 1998
Ian H. Lundin
President and Managing Director
AUDITORS' REPORT
We have performed a limited review of this six months interim report
at 30 June 1998 of Lundin Oil AB in accordance with a recommendation
issued by the Swedish Institute of Authorised Public Accountants
(FAR). This limited review is considerably less in scope than a full
audit. Nothing has come to our attention that caused us to believe
that this six months interim report at 30 June 1998 of Lundin Oil AB
does not comply with the requirements of the Swedish Annual Accounts
Act."
Stockholm, 21 August 1998
Lars Eklund Klas Brand
Authorised Public Accountant Authorised Public Accountant
Price Waterhouse Revisionsbyra KB
For additional information, please contact:
Magnus Nordin
Lundin Oil
Telephone: +46 705 766 555
Simon Raggett
Greig Middleton & Co. Limited
Tel: 0171 655 4000
Simon Rothschild/Judith Parry
Millham Communications
Tel: 0171 256 5756
Notes for editors:
1. Lundin is the parent company of Sodra by virtue of its holding of
40,506,500 Ordinary Shares of SEK0.05 each. The 40,506,476
Convertible Shares of SEK0.05 each in Sodra listed on the AIM market
are effectively convertible into the right to subscribe for B Shares
in Lundin in November 2001. Upon exercise of the conversion right,
for every 12 Convertible Shares, the holder will receive a warrant to
subscribe for 1 new Lundin B Share at the nominal value of SEK0.50.
2. Convertible Shares in Sodra are also listed on the New Market of
the Stockholm Stock Exchange. Lundin B Shares are currently quoted on
the Stockholm Stock Exchange, Toronto Stock Exchange and the Nasdaq
National Market.
END
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