Sodra Petroleum AB - Parent Company's Final Rslts
February 26 1999 - 11:56AM
UK Regulatory
RNS No 2844q
SODRA PETROLEUM AB
26th February 1999
SODRA PETROLEUM AB
Sodra Petroleum AB announces that its parent company, Lundin Oil AB
("Lundin") has today issued the following announcement:-
26 February 1999
Lundin Oil AB (publ)
Report for the Financial Year ended 31 December 1998
RESULT AND CASH FLOW
The Group
The Lundin Oil AB Group (Lundin Oil) reports a loss after taxes and
write downs of oil and gas exploration and short term investments of
MSEK 370.4 (profit MSEK 62.1) corresponding to -4.41 (0.77) SEK per
share for the year ended 31 December 1998. The loss includes the
write off of oil and gas exploration expenditures of MSEK 242.5 (MSEK
7.4) (this write off is offset by the minority interests' share of
MSEK 103.1) and losses and write offs of MSEK 156.2 relating to the
original investment in Arakis Energy Corporation.
Operating cash flow was MSEK 248.0 (MSEK 341.8) corresponding to 3.06
(4.22) 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 during this period and negatively impacted
by lower oil prices.
Lundin Oil received an average price on its crude oil sales of USD
12.89 per barrel for the year. The average price for 1997 was USD
18.93 per barrel.
Oil and gas related income amounted to MSEK 559.0 (MSEK 603.2) and
relates to Lundin Oil's assets in the UK North Sea and Malaysia which
generated operating income of MSEK 429.7 (MSEK 459.0) and MSEK 120.6
(MSEK 114.7) respectively. Depletion charge on oil and gas assets was
MSEK 227.6 (MSEK 172.1), 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 242.5 (MSEK 7.4)
primarily as a result of the write-off of the exploration costs
incurred in the Falkland Islands and the Tanzanian concessions. Lundin
Oil through it's 50% owned subsidiary Sodra Petroleum AB continues to
actively work in the Falkland Islands reviewing the data from the
drilling campaign. However in view of the disappointing drilling
results, the high costs incurred to date and the current oil price
environment, management has deemed it prudent to write-off the costs
incurred to date of MSEK 206.1.
Net financial income and expenses were MSEK -178.2 (MSEK -65.0).
Included were interest expenses amounting to MSEK 45.2 (MSEK 38.7) and
net currency exchange gains of MSEK 16.2 (MSEK -7.4). 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. Also included are realised losses
of MSEK 30.5 incurred on the sale of Talisman Energy Corporation
shares and an additional MSEK 123.6 relating to the write down of the
remaining Talisman shares owned by Lundin Oil to the current market
value.
Taxes were MSEK 40.8 (MSEK 95.3). Corporation taxes reduced in line
with lower oil prices to MSEK 18.0 (MSEK 41.9). Petroleum Revenue Tax,
PRT, decreased to MSEK 19.0 (MSEK 27.4).
Parent Company
The net loss for the parent company for the year ended 31 December
1998 amounted to MSEK -167.8 (MSEK -45.9). The company's original
investment in Arakis Energy Corporation was exchanged for shares in
Talisman Energy Corp during the year. Subsequent to this exchange the
company has incurred realised losses of MSEK 30.5 and written down the
remaining investment to the current market value by MSEK 93.9.
PRODUCTION
Production for the year on a working interest basis amounted to 5 030
141 (3 679 868) barrels of oil equivalents of which 4 486 290 (4 434
530) were barrels of oil. This corresponds to a production of 13 781
(14 224) barrels of oil equivalents per day (boepd) for the year
including production from the UK North Sea and Malaysia of 9 128
(7 538) boepd and 4 653 (5 492) boepd respectively. Production for year
from Malaysia on an entitlement basis after government share amounted
to 1 242 477 (856 694) barrels of oil.
FINANCING AND LIQUIDITY
Liquid assets at 31 December 1998 amounted to MSEK 258.8 (MSEK 269.2).
The 50% owned subsidiary Sodra Petroleum AB raised approximately MSEK
304 through a share issue. These funds were applied to the expenditure
incurred drilling the well offshore the Falkland Islands. After the
completion of the well Sodra had funds remaining, of which up to MUSD
12.0 has been made available to Lundin Oil under a loan agreement. As
at 31 December 1998 MUSD 9.4 of the loan was outstanding.
INVESTMENTS
During the period, investments in oil and gas assets have been made in
an amount of MSEK 778.0 (MSEK 384.0). These primarily relate to
expenditure in the UK North Sea of MSEK 213.4 (MSEK 46.6) including
the purchase of a 20% interest in the Sedgwick Field, Malaysia
exploration and development costs of MSEK 160.4 (MSEK 179.3),
exploration / appraisal costs in Libya of MSEK 190.0 (MSEK 107.4) and
exploration offshore the Falkland Islands of MSEK 172.7 (MSEK 33.4).
OPERATIONS
1998 was the first year of activity since the business combination of
IPC and Sands. It was a very eventful year on all fronts but
especially on the drilling & seismic fronts.
The year started with the testing of the En Naga North discovery well
onshore Libya, which was followed by three successful appraisal wells
(including the re-entry of an existing well on En Naga West).
Drilling activity offshore Malaysia and Vietnam was also intense with
the completion of two successful exploration wells followed by two
successful development wells on Block PM3 CAA. Offshore Falkland
Islands a dry hole was drilled on Tranche F, the cost of which,
although contained, was significant. In addition, Lundin Oil
participated in several wells in the UK North Sea. Seismic
acquisition campaigns took place in Libya and Sudan. In Albania a new
concession was signed in partnership with Occidental of Albania and
Forrest Oil. A seismic campaign was subsequently initiated by
Occidental, which had to be suspended due to the political unrest in
that country.
In terms of performance criteria the year can be summarised as
follows:
- Total production was up by 37% on a working interest basis during 1998.
- Booked proven and probable reserves increased by 74% to 275
million barrels of oil equivalents. More significantly oil reserves
alone were up by approximately 230% to 147 million barrels, mainly due
to the booking of reserves in Libya and a significant increase of
reserves in Malaysia/Vietnam.
- The Company has delineated several large exploration targets
onshore Libya and onshore Sudan which are planned to be tested with
the drill bit during the first half of 1999.
- A development plan for the En Naga Field onshore Libya is ready
for submission to the Libyan National Oil Company which includes a
fast track production schedule of 12 months from the approval date.
On the more sobering issue of oil price, the current market
conditions, which can be described as the worst the industry has
experienced since the crash of ((73)) have had the following effects:
- Phase-II of the PM3 CAA development project offshore
Malaysia/Vietnam had to be postponed until conditions improve. This
phase of the project involved bringing on stream 250 million cubic
feet a day of gas and in excess of 40,000 barrels of oil.
- The Company's 1999 capital budget has been cut by 64% from 1998
to MSEK 320 and steps have been taken to significantly reduce G&A
expenses.
In spite of the above, the Company will maintain a significant
exposure to high potential exploration wells while managing the
increasing reserves and production base. This may involve the
disposal or farm out of a portion of the Company's interest in
Malaysia / Vietnam. An information campaign has been conducted and
interest assessments are currently being carried out with potential
partners. However, there is no assurance at this stage that acceptable
terms can be agreed with a buyer.
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 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, 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 farm out
agreement entered into by Desire Petroleum Plc in September. On 16
September Sodra commenced drilling an exploration well on the Braela
prospect in Tranche F. By 12 October 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 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 Talisman Energy Corporation (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 was completed on 8 October when
Lundin Oil received 982,480 shares in Talisman.
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.
DIVIDEND
The Directors propose that no dividend be paid for the year.
KEY FINANCIAL RATIOS
Year ended Year ended
31 December 31 December
1998 1997
Key Financial Ratios
Return on capital employed(1), % -27.0 4.6
Return on total assets(2), % -18.5 9.8
Equity ratio(3), % 57.5 64.3
Shareholders' equity SEK per 15.6 18.3
share(4)
Operating cash flow SEK per 3.1 4.2
share(5)
Earnings SEK per share(6) -4.6 0.8
Earnings SEK per share fully -4.4 0.8
diluted(7)
Operating cash flow / interest 5.5 8.8
ratio(8)
Number of shares at the period 81 012 953 80 952 219
end
Weighted average number of
shares for the period, fully 83 955 074 80 952 219
diluted
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.
7 Earnings SEK per share fully diluted is defined as the Group's net
result divided by the fully diluted weighted average number of shares
for the period. (The warrants to employees have an exercise price in
excess of the current share price and have therefore not diluted the
weighted average number of shares.)
8 Operating cash flow / interest ratio is defined as the Group's
operating income less production costs and less current taxes divided
by the interest charge for the year.
GROUP INCOME STATEMENT IN SUMMARY
Year ended Year ended
Expressed in TSEK Note 31 December 1998 31 December 1997
Operating income
Net sales of oil and gas 488 255 526 754
Tariff income 62 062 66 933
Service income 8 702 9 511
------- -------
559 019 603 198
Cost of sales
Production costs 1 -274 006 -192 117
Depletion of oil and gas -227 564 -172 054
properties
Site restoration charges -4 168 9 819
Write-off of oil and gas 2 -242 540 -7 364
properties -------- -------
Gross profit/(loss) -189 259 241 482
Other income 7 947 2 687
Gain on sale of oil and
gas properties, net - 63 411
Administration expenses -83 738 -85 689
Participation in - -2 072
associated companies
Operating (loss)/profit -265 050 219 819
Financial income and 3 -178 234 -65 034
expenses, net -------- -------
(Loss)/profit before tax -443 284 154 785
Tax 4 -40 796 -95 264
Minority interests 113 646 2 598
-------- -------
Net result -370 434 62 119
GROUP BALANCE SHEET IN SUMMARY
Expressed in TSEK Note 31 December 1998 31 December 1997
ASSETS
Tangible fixed assets
Oil and gas properties 5 2 001 424 1 678 342
Other fixed assets 9 693 8 396
--------- ---------
Total tangible fixed assets 2 011 117 1 686 738
Financial fixed assets 6 50 666 333 930
--------- ---------
Total fixed assets 2 061 783 2 020 668
Current Assets
Current receivables and 107 999 143 997
inventories
Cash and bank,
short term investments 258 803 269 245
-------- ---------
Total current assets 366 802 413 242
-------- ---------
Total assets 2 428 585 2 433 910
SHAREHOLDERS' EQUITY
AND LIABILITIES
Shareholders' equity
including net result for the year 1 261 921 1 479 704
Minority interest 138 451 85 303
Provisions and long-term 757 959 585 160
liabilities
Current liabilities 270 254 283 743
-------- --------
Total shareholders' equity 2 428 585 2 433 910
and liabilities
Pledged assets 7 930 134 890 673
Contingent liabilities 378 528
GROUP CASH FLOW STATEMENT IN SUMMARY
Expressed in TSEK Year ended Year ended
31 December 31 December
1998 1997
Cash flow from operations
Net result -370 434 62 119
Adjustment for depletion and other
non cash related items 529 246 131 090
Changes in working capital -8 987 -30 644
-------- -------
Total cash flow from operations 149 825 162 565
Investment in oil and gas -777 982 -384 018
properties
Investment in other fixed assets -6 664 -4 870
Investment in other shares - -318 715
Sale of other shares 36 109 -
Sale of oil and gas properties - 206 876
Other -13 468 3 360
-------- -------
Total cash flow used for -762 005 -497 367
investments
Increase in long-term liabilities 191 956 73 789
Proceeds from share issues 306 940 64 563
-------- -------
Total cash flow from financing 498 896 138 352
Other 497 18 481
Change in cash and bank -112 787 -177 969
-------- --------
Operating cash flow 248 046 341 751
(according to definition under
financial ratios)
Note 1. Production costs, Year ended Year ended
TSEK 31 December 31 December
1998 1997
Costs of operations -157 116 -130 058
Tariff expenses -88 009 -49 546
United Kingdom royalty -11 821 -20 603
Changes in inventories and
underlift/overlift
position -17 060 8 090
-------- -------
-274 006 -192 117
Note 2. Write-off of oil and Year ended Year ended
gas properties, TSEK 31 December 31 December
1998 1997
Falkland Islands -206 114 -
Tanzania -33 148 -
Others -3 278 -7 364
-------- ------
-242 540 -7 364
-------- ------
Note 3. Financial income and Year ended Year ended
expenses, net, TSEK 31 December 31 December
1998 1997
Interest income 18 572 15 064
Interest expense -45 164 -38 738
Write-down of short term -155 750 -
investments
Share issue and merger costs - -28 665
Exchange gains/(losses), net 16 236 -7 383
Other financial -12 128 -5 312
income/expense, net ------- -------
-178 234 -65 034
-------- -------
Note 4. Tax, TSEK Year ended Year ended
31 December 31 December
1998 1997
The tax charge comprises
Corporation tax
- current -17 992 -41 896
- deferred -5 004 -18 197
-------- -------
-22 996 -60 093
PRT (Petroleum revenue tax)
- current -18 976 -27 434
- deferred 1 176 -7 737
------- -------
-17 800 -35 171
------- -------
Total charge to income -40 796 -95 264
Note 5. Oil and gas Book value Book value
properties, TSEK 31 December 31 December
1998 1997
United Kingdom 930 134 890 673
Malaysia 471 506 376 970
Libya 392 086 183 813
Falkland Islands 0 33 405
Sudan 159 634 126 308
Papua New Guinea 33 231 29 705
Albania 11 457 119
Tanzania 0 32 425
Others 3 376 4 924
-------- ---------
2 001 424 1 678 342
Note 6. Financial fixed assets includes shares in Khanty Mansiysk Oil
Corporation.
Note 7. Pledged assets represent the UK North Sea assets.
PARENT COMPANY INCOME STATEMENT IN SUMMARY
Year ended Year ended
Expressed in TSEK Note 31 December 31 December
1998 1997
Operating income
Net sales of oil and gas - 41 039
------
Cost of sales
Production costs 1 - -11 416
Depletion of oil and gas - -16 700
properties -------
Gross profit - 12 923
Other income 1 245 456
Administration expenses -22 092 -14 339
------- -------
Operating profit/(loss) -20 847 -960
Financial income and 2 -146 495 -36 451
expenses, net ------- -------
Profit/(loss) before tax -167 342 -37 411
Tax -425 -8 510
------- -------
Net result -167 767 -45 921
Note 1. Production costs, Year ended Year ended
TSEK 31 December 31 December
1998 1997
Costs of operations - -14 095
Changes in inventories and
underlift/overlift position - 2 679
- ------
- -11 416
Note 2. Financial income and Year ended Year ended
expenses, net TSEK 31 December 31 December
1998 1997
Interest income 289 764
Interest expense -16 507 -9 226
Write-down of short term -125 434 -
investments
Share issue and merger costs - -25 090
Exchange gains/(losses), net -5 086 -3 891
Other financial 243 992
income/expense, net ------- -------
-146 495 -36 451
Stockholm, 26 February 1999
Board of Directors
The Annual Report will be distributed to shareholders in late April.
The Annual General Meeting of shareholders will be held on Thursday 20 May
1999. Report for the first three months 1999 will be published on Thursday
20 May 1999.
For additional information, please contact:
Ian H. Lundin
Tel: 0041 22 319 66 06
Magnus Nordin
Tel: 0046 8 440 5450
Ashley Heppenstall
Tel: 0041 22 319 66 04
Judith Parry/Simon Rothschild
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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