RNS No 9470c
SODRA PETROLEUM AB
20th November 1998
Sodra Petroleum AB announces that its parent company, Lundin
Oil AB ("Lundin") has today issued the following announcement:
Report for the first 9 months
1 January 1998-30 September 1998
RESULT AND CASH FLOW
The Group
The Lundin Oil AB Group (Lundin Oil) reports a loss after
taxes and write-offs of oil and gas properties of MSEK 79.8
(profit after taxes and write-offs of oil and gas properties
MSEK 107.3) corresponding to -0.98 (1.33) SEK per share for
the first nine months of 1998. The loss before taxes and write-
offs of oil and gas properties was MSEK 19.9 (profit before
taxes and write-offs of oil and gas properties MSEK 159.9).
Operating cash flow was MSEK 191.8 (247.8) corresponding to
2.37 (3.06) 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 13.19 (USD 19.35) per barrel for the first nine months.
The average price for 1997 was USD 19.01 per barrel.
Oil and gas related income amounted to MSEK 445.2 (437.1) and
relates to Lundin Oil's assets in the UK North Sea and
Malaysia which generated operating income of MSEK 347.6
(341.4) and MSEK 90.6 (68.4) respectively. Depletion charge on
oil and gas assets was MSEK 174.3 (118.0), the increase being
primarily due to start-up of production from Malaysia and the
acquisition of the Sedgwick field.
Write off of oil and gas properties amounted to MSEK 35.8
(1.9) primarily as a result of the write off of the investment
in the Tanzanian concession following Lundin Oil's withdrawal
from this area.
Net financial income and expenses were MSEK -5.7 (-27.2).
Included were interest expenses amounting to MSEK 33.0 (30.0)
and net currency exchange gains of MSEK 23.5
(-4.4). 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 26.4 (53.0). Corporation taxes reduced in line
with lower oil prices to MSEK 10.4 (26.5). Petroleum Revenue
Tax, PRT, decreased to MSEK 16.0 (26.5). The effect of lower
oil prices was offset by a 1997 adjustment of MSEK 5.6.
The net profit for the financial year ended 31 December 1997
was MSEK 62.1.
Parent Company
The net loss after taxes for the parent company for the first
nine months of 1998 amounted to MSEK 30.6 (profit after taxes
MSEK 3.5). The loss was primarily due to the company's
operating income from Malaysia being transferred to a
subsidiary company.
PRODUCTION
Production for the first nine months on a working interest
basis amounted to 3,739,879 (2,518,906) barrels of oil
equivalents of which 3,317,259 (2,141,252) were barrels of
oil. This corresponds to a production of 13,699 (9,227)
barrels of oil equivalents per day (boepd) for the nine months
including production from the UK North Sea and Malaysia of
9,164 (7,629) boepd and 4,535 (1,335) boepd respectively.
Production for the first nine months from Malaysia on an
entitlement basis after government share amounted to 820,552
(459,997) barrels.
FINANCING AND LIQUIDITY
Liquid assets at 30 September 1998 amounted to MSEK 329.3
(247.5). The increase in liquid assets is primarily due to the
MSEK 188.4 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 593.0 (MSEK 313.4). These primarily
relate to the purchase of a 20% interest in the Sedgwick Field
in the UK North Sea, Malaysia development costs and
exploration / appraisal costs in Libya and offshore the
Falkland Islands.
OPERATIONS
The period under review marks the first nine 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 to
increase efficiencies and reduce costs.
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 marked the discovery of the En
Naga North oil field.
The appraisal programme on the En Naga North Field consisting
of two appraisal wells is now essentially complete. The two
appraisal wells B2-NC177 and B3-NC177 have confirmed the
continuity of the reservoirs and established oil / water
contacts in the main producing horizons. B2-NC177 was
suspended as a potential future water injection well and B3-
NC177 is currently being tested and is likely to be suspended
as a future oil production well.
In between the drilling of the two appraisal wells the rig re-
entered the J1-85 well which is located on a separate
structure 3km west of the B1-NC177 discovery well. J1-85
flowed at a stabilised rate of 2 203 barrels of oil per day
from the Lower Gir Formation. This new oil accumulation is
referred to as En Naga West and should be able to be developed
in conjunction with the En Naga North Field without any
substantial additional infrastructure.
The information obtained from the two appraisal wells and J1-
85 will be included and incorporated into a Field Development
Plan to be submitted to the Libyan National Oil Corporation in
early 1999. Current estimated recoverable reserves from the
discoveries is approximately 90 million barrels of oil.
The development concept currently envisaged is targeted at
achieving a plateau production rate of approximately 25,000
barrels of oil per day, within 12 months of the approval of
the Field Development Plan.
An excellent oil pipeline infrastructure is in place and the
Company will hook into one of the several gathering terminals
located within a radius of 75 kilometres from the En Naga
North Field. The oil will then be transported to export
terminals located along the Mediterranean coast. Here the oil
will be loaded into oil tankers and shipped to markets
primarily in Europe. The crude oil produced from the Field is
high quality and should attract premium prices. The Libyan
production sharing contract allows for fields to be developed
in a low oil price environment. The Company is therefore
confident that the current low oil prices will not affect the
decision to proceed with the development of the En Naga North
Field.
The total area of Block NC177 comprises 9,820 kilometres. The
full appraisal of the remainder of the Block is now underway
with the planned acquisition of the 1,600 kilometre of
regional 2D seismic which is targeted at firming up the
numerous other leads. To date, 1,200 kilometres of seismic has
been acquired and processed which has resulted in the
identification of several drillable prospects directly on
trend with and to the south of En Naga. Exploration drilling
will resume in early 1999.
Malaysia/Vietnam
Lundin Oil is the Operator of PM-3, the Commercial Arrangement
Area (PM-3 CAA) between Malaysia and Vietnam. The Block covers
an area of 1,407 sq km and is located offshore Penninsular
Malaysia in the South China Sea. To-date, 17 wells have been
drilled resulting in the discovery of seven oil and gas fields
of which one, Bunga Kekwa was brought on stream in July 1997
with an early production system consisting of a minimum
facilities platform, three production wells, and a Floating
Production Storage and Offloading vessel ("FPSO").
At the end of the third quarter, daily gross production was
approximately 13,500 bopd (Lundin Oil has a 41% interest), due
to the additional production from the recently completed BK-A5
well, which is contributing approximately 5000 bopd. A further
platform well BK-A6 has discovered new oil reserves situated
in substantial oil rims in the East Bunga Kekwa Field. Work is
on-going to assimilate the discovery into the development plan
and reserves base. The BK A-6 well is currently being
commissioned with a view to bringing it on production shortly.
In the first half of 1998, Lundin Oil drilled two exploration
wells, Bunga Manggar-1 and North Bunga Pakma-1. Bunga Manggar-
1 proved the northwesterly extension of the H4 channel sand
discovered by the Bunga Seroja-1 well in 1997. Although the H4
channel sand was wet at the Bunga Manggar location, it has
proved a gas column of approximately 1,000 feet based on
pressure data, and established additional proven reserves of
low-CO2 gas in the Bunga Seroja field. This discovery has had
a material effect on the plan for Phase II of the development
of the PM-3 complex, since it has made possible the deferral
of pre-investment in CO2 removal facilities (approximately
US$70 million) for up to eight years after "first gas".
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. The well results have upgraded reserves in the
Bunga Pakma and Bunga Orkid complex, and have significantly
upgraded the potential of several prospects on trend with the
discovery, including North West Pakma and North Orkid.
The exploration successes form part of a coordinated Area
Development Plan for the PM-3 CAA block. Negotiations are at
an advanced stage for the signing of a Gas Sales Agreement
(GSA) for a plateau gas sales rate of 250 million standard
cubic feet per day of net hydrocarbon gas, to both Malaysia
and Vietnam over a ten year period. All material commercial
issues relating to the terms of the GSA have now been agreed
between Lundin Oil, Petronas and PetroVietnam. Export of
40,000 bopd of oil and condensate is also planned, and de-
bottlenecking studies are in progress for raising the liquids
plateau rate to 60,000 bopd. Contracting is in progress for
construction of a central processing platform, satellite
platforms, and the lease of a floating storage and offloading
vessel, to allow first production by the end of the year 2000.
The total proven and probable reserves in the PM-3 CAA block
(not including the North Pakma discovery) currently stand at
in excess of 400 million barrels of oil equivalent, an
increase of 20% over 1997 year end certified reserves. This is
expected to be supported by a third party engineering study at
year end.
As of January 1998 the Lundin Oil AB 15% direct interest in
the Malaysia PM3 commercial arrangement area was transferred
to a newly formed wholly owned subsidiary of Lundin Oil AB
named Sands Malaysia AB.
Tanzania
Following the drilling of the two exploration wells on the
Mandawa Block, we have evaluated the remaining potential of
the area and the further additional seismic/drilling
investment required. As a result of this evaluation, we have
decided to focus our resources on our core areas, and have
therefore relinquished our 25% working interest in the Mandawa
and Rufiji Blocks onshore Tanzania.
Looking Forward
At the end of 1997 the Company's booked proved and probable
reserves stood at 161 million barrels of oil equivalents
(boe). Based on the Company's succesful wells in 1998 in
Malaysia and Libya, these reserves are expected to increase to
approximately 250 million boe.
Further discoveries in Libya or the Sudan would have a
material impact on this figure.
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, common shares and convertible shares. There are
40,506,500 common shares outstanding all of which are owned by
Lundin Oil and 40,506,476 convertible shares outstanding.
The convertible shares are traded on the New Market of the
Stockholm Stock Exchange and on the Alternative Investment
Market (AIM) in London.
Sodra is the 87.5% interest holder of Tranche F following a
farmout agreement, subject to government approval, entered
into by Desire Petroleum Plc in September. On September 16
Sodra commenced drilling an exploration well on the Braela
prospect in Tranche F. By October 12 the well had reached a
total depth of 2 983 metres below sea level. The geologic
formations at that depth were unfavourable for oil
accumulation or generation and it was decided to plug and
abandon the well. The data collected from the well are now
being analysed to determine the prospectivity of Tranche F.
Elsewhere in the Falkland Islands a total of four wells have
been drilled, with a fifth one in Shell's Tranche B currently
drilling. The combined results of the drilled wells have shown
the necessary elements for an oil accumulation to be present
in the basin but the right combination of these elements is
yet to be found. The results of Sodra's well together with
data from other wells are now being incorporated into the
overall analysis and evaluation of the area.
Shares in Arakis Energy Corporation
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 accepted the Talisman offer
which became effective October 8, 1998, when the shares were
valued at MSEK 155.5.
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 1 Jan 1 Jan
1998- 1997- 1997-
30 Sep 30 Sep 31 Dec
1998 1997 1997
9 months 9 months 12 months
Key Financial Ratios
Return on capital employed(1), % -5.4 8.2 4.6
Return on total assets(2), % -1.9 9.7 9.8
Equity ratio(3), % 61.8 63.8 64.3
Shareholders' equity SEK per 18.6 17.3 18.3
share(4)
Operating cash flow SEK per 2.4 3.1 4.2
share(5)
Earnings SEK per share(6) -1.0 1.3 0.8
Number of shares at the period
end 81,012,953 80,952,219 80,952,219
Weighted average number of 81,012,953 80,952,219 80,952,219
shares 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 1 Jan 1 Jan
Expressed in TSEK 1998- 1997- 1997-
Note 30 Sep 30 Sep 31 Dec
1998 1997 1997
9 months 9 months 12 months
Operating income
Net sales of oil and gas 387,926 380,175 526,754
Tariff income 50,270 48,960 66,933
Service income 6,989 7,923 9,511
----- ----- -----
445,185 437,058 603,198
Operating expenses
Production costs (1) -229,341 -139,965 -192,117
Depletion of oil and gas -174,268 -118,027 -172,054
properties
Site restoration charges -3,548 13,038 9,819
Write-off of oil and gas
properties -35,848 -1,861 -7,364
------- ------ ------
Gross profit 2,180 190,243 241,482
Other income 7,277 1,970 2,687
Gain on sale of oil and
gas properties, net - 60,885 63,411
Administration expenses -59,502 -65,752 -85,689
Participation in - -2,072 -2,072,
associated companies ------ -------
Operating profit -50,045 185,274 219,819
Financial income and -5,735 -27,200 -65,034
expenses, net ------ ------- -------
Profit before tax -55,780 158,074 154,785
Tax (2) -26,440 -52,981 -95,264
Minority interests 2,426 2,207 2,598
----- ----- -----
Net result -79,794 107,300 62,119
GROUP BALANCE SHEET IN SUMMARY
Expressed in TSEK Note 30 Sep 30 Sep 31 Dec
1998 1997 1997
ASSETS
Tangible fixed assets
Oil and gas properties (3) 2,024,188 1,584,693 1,678,342
Other fixed assets 6,966 6,298 8,396
----- ----- -----
Total tangible fixed 2,031,154 1,590,991 1,686,738
assets
Financial fixed assets (4) 333,355 296,921 333,930
------- -------- -------
Total fixed assets 2,364,509 1,887,912 2,020,668
Current Assets
Current receivables and
inventories 142,974 179,241 146,469
Cash and bank,
short term investments 329,340 247,534 266,773
------- ------- -------
Total current assets 472,314 426,775 413,242
------- ------- -------
Total assets 2,836,822 2,314,687 2,433,910
SHAREHOLDERS' EQUITY
AND LIABILITIES
Shareholders' equity
including net result for
the financial period 1,504,375 1,403,103 1,479,704
Minority interests 249,913 74,034 85,303
Provisions and long-term
liabilities 757,718 577,760 585,160
Current liabilities 324,817 259,790 283,743
------- ------- -------
Total shareholders' equity
and liabilities 2,836,823 2,314,687 2,433,910
Pledged assets (5) 921,733 847,203 890,673
Contingent liabilities 378 528 528
Note 1. 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
Production 30 Sep 1998 30 Sep 1997 31 Dec 1997
costs, TSEK
Costs of
operations -120,996 -92,347 -130,058
Tariff costs -61,828 -36,146 -49,546
United Kingdom -14,137 -14,627 -20,603
royalty
Changes in
inventories and
underlift/overlift
position -32,380 3,155 8,090
------- -------- -------
-229,341 -139,965 -192,117
Note 2. Tax 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
TSEK 30 Sep 1998 30 Sep 1997 31 Dec 1997
The tax charge
comprises
Corporation tax
- current -10,339 -28,811 -41,896
- deferred -72 2,316 -18,197
------- ------- -------
-10,411 -26,495 -60,093
PRT (Petroleum
revenue tax)
- current -13,750 -20,486 -27,434
- deferred -2,279 -6,000 -7,737
------- ------- -------
-16,029 -26,486 -35,171
------- ------- -------
Total charge to -26,440 -52,981 -95,264
income
Note 3. Oil Book Book Book
and gas value value value
properties, 30 Sep 30 Sep 31 Dec
TSEK 1998 1997 1997
United Kingdom 921,733 847,203 890,673
Malaysia 438,204 373,239 376,970
Libya 307,147 150,817 183,813
Falkland 164,340 25,567 33,405
Islands
Sudan 154,267 122,557 126,308
Papua New 32,607 29,349 29,705
Guinea
Others 3,555 6,139 4,927
Albania 2,335 0 116
Tanzania 0 29,822 32,425
--------- --------- ---------
2,024,188 1,584,693 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 Sep 1998 30 Sep 1997 31 Dec1997
9 months 9 months 12 months
Operating income
Net sales of oil and gas - 24,747 41,039
------ ------
Operating expenses
Production costs Note 1 - -7,356 -11,416
Depreciation of oil and gas - -5,059 -16,700
properties ------ -------
Gross profit - 12,332 12,923
Other income 1,032 505 456
Administration expenses -15,095 -12,774 -14,339
------- ------- -------
Operating loss -14,063 63 -960
Financial income and -16,500 3,435 -36,451
expenses, net ------- ------ -------
Result before tax -30,563 3,498 -37,411
Tax - - -8,510
------
Net result -30,563 3,498 -45,921
Note 1. 1 Jan 1998- 1 Jan 1997- 1 Jan 1997-
Production 30 Sep 1998 30 Sep1997 31 Dec 1997
costs, TSEK
Costs of
operations - -4,974 -14,095
Changes in
inventories and
underlift/overlift
position - -2,382 2,679
------- -------
- -7,536 -11,416
Stockholm, 20 November 1998
Ian H. Lundin
President
This report has not been subject to audit by the Company's
auditors.
For additional information, please contact:
Ian H. Lundin
Telephone: +41 22 319 66 06
Magnus Nordin
Telephone: +46 8 440 5450
Ashley Heppenstall
Telephone: +41 22 319 66 04
Judith Parry/Simon Rothschild
Millham Communications
Telephone: 0171 256 5756
Notes to Editors:
1. Lundin is the parent company of Sodra by virtue of its
holding of 40,506,500 Ordinary Shares of SEK0.50 each. The
40,506,476 Convertible Shares of SEK0.50 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 price 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 theStockholm Stock Exchange, Toronto Stock Exchange and
the Nasdaq National Market.
END
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