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Orrön Energy — Interim / Quarterly Report 2007
Nov 14, 2007
2942_10-q_2007-11-14_7c4ef519-8c78-46f9-930e-1816ad9552f6.pdf
Interim / Quarterly Report
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Lundin Petroleum AB – Press release
Lundin Petroleum AB (publ) Hovslagargatan 5 Nordic Exchange: LUPE
Tel: +46-8-440 54 50 Fax: +46-8-440 54 59 E-mail: [email protected] 14th November 2007
SE-111 48 Stockholm Company registration number 556610-8055
INTERIM REPORT FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2007
| 1 Jan 2007- 30 Sep 2007 9 months |
1 Jan 2006- 30 Sep 2006 9 months |
1 Jan 2006- 31 Dec 2006 12 months |
|
|---|---|---|---|
| Production in mboepd | 36.8 | 28.1 | 29.7 |
| Operating income in MSEK | 4,062.0 | 3,275.9 | 4,414.5 |
| Net profit in MSEK | 732.9 | 598.5 | 794.4 |
| Earnings/share in SEK | 2.33 | 2.22 | 2.83 |
| Diluted earnings/share in SEK | 2.32 | 2.21 | 2.81 |
| EBITDA in MSEK | 2,411.6 | 2,172.6 | 2,731.5 |
| Operating cash flow in MSEK | 2,225.6 | 1,653.0 | 2,271.0 |
Listen to President & CEO Ashley Heppenstall and CFO Geoffrey Turbott comment on the report at the live broadcast presentation 14th November at 08.00 CET. To participate via conference call dial +44 20 88 17 93 01.
The live presentation and slides will be available on www.lundin-petroleum.com following the presentation.
Lundin Petroleum is a Swedish independent oil and gas exploration and production company with a well balanced portfolio of world-class assets in Europe, Africa, Russia and the Far East. The Company is listed at the Nordic Exchange, Sweden (ticker "LUPE"). Lundin Petroleum had existing proven and probable reserves of 176.4 million barrels of oil equivalent (mmboe) as at 1 January 2007.
For further information, please contact:
| C. Ashley Heppenstall, | Maria Hamilton, | |
|---|---|---|
| President and CEO | or | Head of Corporate Communications |
| Tel: +41 22 595 10 00 | Tel: +46 8 440 54 50 |
Visit our website: www.lundin-petroleum.com
Dear fellow Shareholders,
It is very pleasing that we were able to recently announce the Luno exploration discovery in Norway. Luno is the single largest oil discovery made in the Norwegian North Sea in the last 10 years. We have committed financial resources and invested in people to allow us to follow a proactive exploration strategy. It is good that this is already proving successful and I am confident that we will deliver further positive results with our ongoing exploration campaign.
In parallel we see record high oil prices driven by strong world demand and questionable supply. In my opinion high oil prices are here to stay with our industry facing an extremely difficult task in supplying the ever increasing demand for hydrocarbons. This creates many opportunities for companies such as Lundin Petroleum with a strong financial position and a team of technically strong industry professionals. We are committed to grow our business by investing heavily in exploration and the development of our existing reserves to grow the value of our business.
Financial Performance
Lundin Petroleum generated a net profit after taxes for the first nine months of 2007 of MSEK 732.9 (MUSD 106.7). Operating cash flow for the period was MSEK 2,225.6 (MUSD 323.9) and earnings before interest, tax, depreciation and amortisation (EBITDA) was MSEK 2,411.6 (MUSD 351.0).
Production
Production for the first nine months of 2007 was 36,100 barrels of oil equivalent per day (boepd), which was in line with expectations. Production from the Oudna field, offshore Tunisia and the Broom field, offshore United Kingdom both continued to exceed forecast. The production for the third quarter of 2007 was 32,500 boepd which was in line with forecast but down from production earlier in the year due to the expected production decline from the Oudna field.
Marathon, as operator of the Alvheim field, has announced further delays to the date of first production which will now be in the first quarter of 2008. The delays are related to the commissioning of the power generation and control systems on the Alvheim FPSO and whilst disappointing I believe that these problematic issues are now under control. The Alvheim field will reach plateau production in 2008 at a rate of 14,000 boepd net to Lundin Petroleum.
As previously advised our forecast production for 2007 will be approximately 34,000 boepd with Alvheim coming onstream in 2008.
Development
In Norway, in addition to Alvheim, the Volund development is progressing satisfactorily and will add further production growth in 2009. We are also busy with the appraisal drilling programmes on the Nemo field in PL148 later this year and on the South East Tor field in PL 006c next year which we hope will lead to further development activity.
In the United Kingdom, technical studies on the Peik gas/condensate field which straddles the UK/Norway border are moving forward with a view to making a development decision. At the Thistle field the 3-D seismic was successfully acquired in the third quarter and the rig reactivation programme is ongoing as part of the redevelopment of this field.
Exploration
Lundin Petroleum is well advanced with its major ongoing exploration programme.
In the North Sea we are very excited with the oil discovery on the Luno prospect in PL338 where we own a 50 percent working interest and are operator. We estimate that the discovery contains between 65 mmboe and 190 mmboe of recoverable reserves in this Jurassic reservoir with further upside in the Triassic reservoir. The discovery will be appraised during 2008 with at least one further well. What is very pleasing is that this discovery is based upon a new play concept developed by our technical team in Norway. We believe the play concept has the potential to lead to further discoveries in the adjoining acreage, blocks PL 359 and PL 410 where we have several leads and high equity interests. We believe that the Luno discovery and prospectivity in adjoining blocks have the potential to be the next Alvheim but where Lundin Petroleum is operator and has equity interests of 50 percent and above. The Alvheim field was discovered in 2003 and is due onstream shortly with gross recoverable reserves of close to 200 million barrels of oil equivalent.
In Russia, as I indicated was likely, we have had to postpone the drilling of the first well in the Lagansky block to the first half of 2008. However I am pleased that we have now received approval from the Russian licensing agency Rosnedra to our proposed amendment to the Lagansky licence. We are also making good progress in relation to receiving all the remaining outstanding approvals to allow us to obtain the final permit to drill. The agreement with Gazprom, whereby Gazprom has an option to acquire a 50 percent plus one share in the Lagansky block, has led to a close working relationship between Gazprom and Lundin Petroleum and is already facilitating the receipt of all outstanding approvals.
In Sudan, we are well advanced in relation to commencement of exploration drilling in Block 5B. The newly constructed drilling rig is undergoing final commissioning at our logistics base in Sudan and is expected to be ready to move to the first well location within the next few days. The well site at our first drilling location is completed. This plan is to use the new rig to complete the drilling of three new exploration wells in swamp locations. In tandem we will commence the drilling of an additional exploration well at a dry location on the western flank of the Nile in early 2008 with road access construction well advanced. The interpretation of newly acquired seismic is leading to the identification of further major prospects in Block 5B and I expect this will lead to an extended period of exploration drilling.
As I have previously mentioned the rights of Lundin Petroleum and our partners in Block 5B have been confirmed by the National Petroleum Commission, an organisation comprising the President of Sudan, the First Vice President of Sudan representing the Government of Southern Sudan and representatives of the national Government and the Government of Southern Sudan. Whilst we have agreed to accommodate the national oil company of the Government of Southern Sudan "NilePet" into the Block 5B consortium we have not yet completed the documentation in this respect. There have been various press comments in relation to the status of the Comprehensive Peace Agreement in Sudan between the southern and northern governments and how this may affect oil exploration and production activities. There is a possibility that these ongoing discussions may result in delays to the commencement of our exploration drilling programme. We continue to strongly believe that the hydrocarbon potential of Sudan, including Block 5B, is significant with the potential for further major oil discoveries. Such potential can create value for all stakeholders in Sudan. We are now ready to commence drilling operations to unlock this value and hope that the political process will allow an uninterrupted drilling programme to take place.
Elsewhere we continue to expand our exploration activities with a particular focus on Africa and South East Asia. In Africa we have signed new Production Sharing Contracts in Ethiopia, Kenya and Congo Brazzaville. In South East Asia we have signed new deals in Cambodia and Vietnam and are likely to expand our operations into further new areas. Our strategy is to grow our exploration business organically through the acquisition of new acreage in direct negotiation with governments.
Oil Markets
The oil price is close to USD 100 per barrel. Our belief in high oil prices, which we have reiterated for a number of years, is proving to be correct. The oil price is being driven by the fundamentals of supply and demand and not by speculation. The oil industry is finding it increasingly difficult, with limited access to areas of the world, to grow production. OPEC and most producing countries are at or close to full capacity. Our conclusion is that the world has to accept that high oil prices are here to stay.
I am very pleased with the development of Lundin Petroleum. Our exploration led strategy has started to pay dividends with our success in Norway and our forthcoming drilling campaigns in Sudan, Russia and the North Sea can have a major impact on our current reserves. In addition Alvheim will finally come onstream and increase our production levels, cash flow and profitability. In today's oil price environment the value of such new production and reserves clearly adds significant value to shareholders. Lundin Petroleum is well positioned for its next period of growth driven by such increases to reserves and production.
Best Regards
C. Ashley Heppenstall President & CEO
OPERATIONS
United Kingdom
The net production to Lundin Petroleum in the first nine months of 2007 was 14,700 barrels of oil equivalent per day (boepd).
Net production from the Broom field (Lundin Petroleum Working Interest (WI) 55%) averaged 8,500 boepd during the first nine months of 2007. Production was in excess of budget during the period as a result of good reservoir performance particularly from the BR-1 well. A further development well will be drilled on the Broom field in the fourth quarter of 2007 following the successful acquisition of 3D seismic over the Greater Heather area. However, as a result of the good reservoir performance this year, the planned additional water injection well into the Broom field in 2008 will not now be required.
Production from the Heather field (WI 100%) averaged 1,800 boepd in the first nine months of 2007. Production was below budget due to the lack of water injection resulting in underperformance of the wells, delays to the infill drilling programme and postponement of the Heather Triassic well. The planned shutdown of the Heather platform for approximately two weeks related to the installation of new topsides equipment will affect Broom and Heather production in the fourth quarter of 2007.
Net production from the Thistle field (WI 99%) averaged 4,400 boepd during the first nine months of 2007 which was slightly below expectations. A long term investment programme to redevelop the Thistle Field commenced in 2007. The redevelopment involves the reinstallation of the Thistle drilling rig as well as further facilities investment to ensure an extended life for the Thistle platform. In addition, new 3D seismic was acquired over the Thistle Field in the third quarter of 2007. The forward plan for Thistle involves new production well drilling and workover activity in 2008 and 2009 to enhance production levels.
Three of four exploration wells planned to be drilled on Lundin Petroleum licences in the UK North Sea during 2007 have been completed. The exploration well 41/10a-2z (WI 25%) targeting the "Lytham/Haupt" prospect in the southern North Sea and the exploration well 14/28a-5 (WI 10%) in the outer Moray Firth area were both plugged and abandoned as dry holes.
The exploration well 21/8-3 in Licence P1107 (WI 40%) targeting the Palaeocene Scolty prospect and the Jurassic Banchory prospect has recently been completed in the central North Sea. The Banchory prospect was dry and the Scolty prospect was an oil discovery. Whilst the likely recoverable reserves for Scolty are quite low the discovery proves the play concept based upon seismic amplitude anomalies for other prospects in Licence P1107. It is likely there will be further drilling activity in 2008 to prove up such prospectivity.
A further exploration well 12/17b-A (WI 30%) will be drilled in 2007 on the Ridgewood prospect in the outer Moray Firth following completion of the 21/8-3 well.
Earlier in 2007, Lundin Petroleum completed the acquisition of an approximate 40 percent net interest in the Peik gas/condensate field from Total. The Peik field which straddles the UK and Norwegian border is estimated to contain gross contingent resources of 27 mmboe.
Norway
Production from the Jotun field (WI 7%) offshore Norway averaged 700 bopd during the first nine months of 2007.
First production from the Alvheim field (WI 15%) is now expected in the first quarter of 2008 with the final commissioning of the Alvheim floating production, storage and offloading (FPSO) vessel well advanced. The delays to first production are related to problems associated with the commissioning of power generation and control systems. The subsea infrastructure is in place and development drilling is progressing satisfactorily with three production wells ready for production start-up. Net plateau production from the Alvheim field is still expected at in excess of 14,000 boepd.
A plan of development for the Volund field (WI 35%) was approved by the Norwegian Government in 2007. First production of oil is forecast in 2009 at a peak rate of more than 8,700 boepd net to Lundin Petroleum.
The drilling of the Luno exploration prospect in Licence PL 338 (WI 50%) operated by Lundin Petroleum was successfully completed as an oil discovery. The well discovered light oil in a Jurassic sandstone reservoir. The size of the discovery is estimated at between 65 mmboe and 190 mmboe of gross recoverable oil from the Jurassic reservoir with additional upside potential from the Triassic reservoir which was penetrated by the well. It is expected that the discovery will be appraised in 2008 with at least one appraisal well.
The exploration well on Licence PL 335 (WI 18%) was drilled in the third quarter of 2007 and was plugged and abandoned as a dry hole during the fourth quarter of 2007.
Further exploration drilling on the Pi North prospect in Licence PL 292 (WI 40%) will commence in the fourth quarter of 2007. In addition an appraisal well on the Nemo field in Licence PL 148 (WI 50%) will be drilled in the fourth quarter of 2007.
France
Production in the Paris Basin averaged 2,700 bopd during the first nine months of 2007 in line with expectations. The coiled tubing under-balanced drilling campaign involving four new horizontal production/injector wells in the Villeperdue field (WI 100%) has been successfully completed and the newly drilled wells are now contributing to the overall production in the field.
Following the receipt of Government approval, Lundin Petroleum has completed the acquisition of Carr Production France SARL. The assets acquired include the 20 percent minority interest in various Paris Basin producing fields where Lundin Petroleum already owns the remaining 80 percent interest. The acquisition adds 3 mmboe of 2P (proved and probable) reserves and contingent resources net to Lundin Petroleum.
In the Aquitaine Basin (WI 50%) production averaged 700 bopd for the first nine months of 2007. Production was below budget due to an oil spill at the Ambes terminal which resulted in the suspension of production for one month until alternative transportation and marketing solutions were put in place. Production has now returned to pre-shutdown forecast levels and is expected to remain there for the rest of the year.
Indonesia
Salawati Island and Basin (Papua)
The net production from Salawati (Salawati Island WI 14.5% and Salawati Basin WI 25.9%) was 2,700 boepd for the first nine months of 2007. Production was below expectations primarily due to well downtime on the Walio field in Salawati Basin.
Lematang (South Sumatra)
The approval of the plan of development for the Singa gas field (WI 25.88%) by the Indonesian regulatory authorities was received in 2006. In 2007 a gas sales agreement was signed with PT PLN (PERSERO), a major Indonesian electricity generating company to supply a gross contracted volume of 133 billion cubic feet. Commissioning and first gas from the Singa field is forecast for 2009 at production rates net to Lundin Petroleum in excess of 2,000 boepd.
In the first half of 2007, Lundin Petroleum completed the acquisition of an additional 10 percent working interest in the Lematang block from Serica Energy, increasing our interest to 25.88 percent.
Blora (Java)
The Tengis-1 exploration well (WI 43.3%) was completed in the third quarter of 2007. Two potential hydrocarbon zones were identified for testing operations. Gas flowed to surface with a high CO2 content. The well was plugged and abandoned and the Blora concession will now be relinquished.
Jemaja/Sokang (Natuna Sea)
Lundin Petroleum has been awarded by MIGAS two Direct Offer Joint Study areas located in the Natuna Sea, the Jemaja Block and Sokang Block. The two studies will be completed in 2007/2008.
The Netherlands
Gas production from the Netherlands for the first nine months of 2007 was 2,300 boepd in line with expectations.
Tunisia
The net oil production from the Oudna field (WI 40%) was 7,400 bopd for the first nine months of 2007. Production has been above forecast for the period since the field start-up in late 2006. The field continues to perform according to expectations with a natural decline of oil production as water production increases. The planned water treatment upgrade and repair work on the flow lines and umbilicals are close to completion.
In March 2007, the Entreprise Tunisienne d'Activités Pétrolières (ETAP), the Tunisian state oil company, exercised its option to acquire a 20 percent interest in the Oudna field and as a result, Lundin Petroleum's interest was reduced from 50 percent to 40 percent. Net production for the first nine months of 2007 is based upon a 50 percent interest for approximately 2.5 months and a 40 percent interest for the remainder. The consideration for the acquisition was a reimbursement of historical capital costs offset by net revenues since production start-up.
Russia
The net production from Russia during the first nine months of 2007 was 4,900 boepd which was slightly below expectations.
Development and appraisal drilling is ongoing at the Orenburg (WI 50%) and Komi (WI 50%) production operations. In addition subsurface studies are being completed at the onshore Kalmykia (WI 51%) operation with a view to commencing further development drilling.
The commencement of drilling of the Morskaya-1 exploration well in the Lagansky block (WI 70 %) located in the Northern Caspian will be in the first half of 2008. The construction of the barge mounted facilities necessary for the shallow water drilling have now been completed. We have received approval from the Russian licensing agency, Rosnedra, to the amendments of the licence commitments of the Lagansky block. In addition, good progress has been made in relation to the receipt of the necessary approvals required to receive the final permit to drill the well. At least one further exploration well will be drilled on the Lagansky block in 2008. Additional seismic acquisition is planned to commence in the fourth quarter of 2007.
An option agreement in relation to the Lagansky block was signed in July 2007 with JSC Gazprom ("Gazprom") whereby Gazprom will have an option to earn a 50 percent plus one share interest in the Lagansky block. In addition, Lundin Petroleum has signed an option agreement with its minority partner to purchase its 30 percent interest. The net effect if both options are exercised is that Gazprom will own a 50 percent plus one share and Lundin Petroleum will own a 50 percent less one share interest in the Lagansky block.
Sudan
A three well swamp drilling exploration programme in Block 5B (WI 24.5%) is expected to commence in the fourth quarter of 2007. The site setup works for the Umm Dandalo-1 well are complete and final commissioning of the drilling rig is expected to be completed shortly prior to mobilisation to Block 5B.
The 2D seismic acquisition is progressing with 700 km of new data having been acquired during the first nine months of 2007. As a result of the new seismic acquisition, further prospectivity on the western flank of Block 5B has been identified. An additional land rig will be mobilised into the block to commence a dry land drilling programme commencing in the first quarter of 2008 with the drilling of the of the Nyal-1 exploration well.
Rumours about conflicting awards for certain concessions in Southern Sudan have been brought to an end by the National Petroleum Commission, constituted of representatives of both North and South Sudan governments, which confirmed the sole validity of the existing contracts entered into by the Sudan government with the Block 5B consortium. The National Petroleum Commission has asked the Block 5B concession partners to accommodate the national oil company of the South Sudan Government, "NilePet", with a 10 percent working interesting Block 5B. Discussions are ongoing with the Sudan Government and the National Petroleum Commission which, if successfully completed, will result in a small dilution of Lundin Petroleum's working interest in Block 5B.
Congo (Brazzaville)
During 2007 all government approvals were received in respect of the acquisition of an 18.75 percent working interest in Block Marine XI offshore Congo (Brazzaville). Drilling operations are likely to commence in late 2008 following the successful acquisition of 1,200 km² of 3D seismic.
Vietnam
A production sharing agreement was signed earlier in 2007 for a 33.33 percent working interest in Block 06/94 in the Nam Con Son Basin, offshore Vietnam. The acquisition of 720 km² of 3D seismic was successfully completed in the third quarter of 2007 and seismic interpretation is ongoing. Exploration drilling will commence in late 2008 subject to rig availability.
Ethiopia
Two new production sharing contracts were signed in July 2007 covering Blocks 7 & 8 (WI 100%) located in the Ogaden basin and the Adigala Block (WI 100%) located in the "Afar" basin area. This is in addition to Blocks 2 and 6 (WI 100%) signed in 2006. It is expected that aeromagnetic studies will commence in 2008.
Kenya
In October 2007, a new production sharing contract for Block 10A (WI 100%) was signed. Block 10A is located in the Anza Basin in Northwest Kenya. It is expected that aerogravity studies will commence in 2008.
Cambodia
In October 2007, Lundin Petroleum acquired a 34 percent interest in Block E, offshore Cambodia. The completion of the deal is subject to government approvals. The 1,200 km 2D seismic acquisition that was recently completed on Block E will be used to define further exploration activities.
THE GROUP
Result
Lundin Petroleum reports a net profit for the nine month period ended 30 September 2007 of MSEK 732.9 (MSEK 598.5) and MSEK 223.2 (MSEK 96.4) for the third quarter of 2007 representing earnings per share on a fully diluted basis of SEK 2.32 (SEK 2.21) for the nine month period ended 30 September 2007 and SEK 0.71 (SEK 0.33) for the third quarter of 2007.
Operating cash flow for the nine month period ended 30 September 2007 amounted to MSEK 2,225.6 (MSEK 1,653.0) and MSEK 804.8 (MSEK 421.4) for the third quarter of 2007 representing operating cash flow per share on a fully diluted basis of SEK 7.06 (SEK 6.10) for the nine month period ended 30 September 2007 and SEK 2.55 (SEK 1.43) for the third quarter of 2007.
Earnings before interest, tax, depletion and amortisation (EBITDA) for the nine month period ended 30 September 2007 amounted to MSEK 2,411.6 (MSEK 2,172.6) and MSEK 769.7 (MSEK 591.5) for the third quarter of 2007 representing EBITDA per share on a fully diluted basis of SEK 7.65 (SEK 8.02) for the nine month period ended 30 September 2007 and SEK 2.44 (SEK 2.01) for the third quarter of 2007.
Changes in the Group
On 31 July 2006 Lundin Petroleum acquired 100% of the shares of Valkyries Petroleum Corp. ("Valkyries") in an all share transaction. The financial results of Valkyries have been fully consolidated within the Lundin Petroleum group from 1 August 2006.
Revenue
Net sales of oil and gas for the nine month period ended 30 September 2007 amounted to MSEK 3,962.7 (MSEK 3,128.0) and MSEK 1,288.7 (MSEK 935.1) for the third quarter of 2007 and are detailed in Note 1. Production for the nine month period ended 30 September 2007 amounted to 10,035.4 (7,657.6) thousand barrels of oil equivalent (mboe) representing 36.8 mboe per day (mboepd) (28.1 mboepd) for the nine month period ended 30 September 2007. The average price achieved for a barrel of oil equivalent for the nine month period ended 30 September 2007 amounted to USD 61.41 (USD 62.34). The average Dated Brent price for the nine month period ended 30 September 2007 amounted to USD 67.11 (USD 66.95) per barrel.
Other operating income for the nine month period ended 30 September 2007 amounted to MSEK 99.3 (MSEK 147.9) and MSEK 33.2 (MSEK 38.9) for the third quarter of 2007. This amount includes tariff income from the United Kingdom, France and the Netherlands and income for maintaining strategic inventory levels in France. Other operating income for the nine month period ended 30 September 2006 included an amount of MSEK 22.3 generated from the sale of CO2 emission rights in the United Kingdom.
Sales for the nine month period ended 30 September 2007 were comprised as follows:
| Sales Average price per boe* expressed in |
1 Jan 2007- 30 Sep 2007 |
1 Jul 2007- 30 Sep 2007 |
1 Jan 2006- 30 Sep 2006 |
1 Jul 2006- 30 Sep 2006 |
1 Jan 2006- 31 Dec 2006 |
|---|---|---|---|---|---|
| USD | 9 months | 3 months | 9 months | 3 months | 12 months |
| United Kingdom | |||||
| - Quantity in mboe | 3,959.9 | 1,263.6 | 4,548.8 | 1,246.2 | 5,769.0 |
| - Average price per boe | 67.14 | 74.97 | 65.04 | 68.63 | 63.76 |
| France | |||||
| - Quantity in mboe | 944.4 | 383.9 | 1,008.0 | 360.0 | 1,374.7 |
| - Average price per boe | 67.90 | 72.49 | 64.74 | 64.29 | 62.62 |
| Norway | |||||
| - Quantity in mboe | 193.8 | 59.8 | 224.6 | 73.9 | 319.5 |
| - Average price per boe | 62.24 | 71.04 | 63.17 | 68.01 | 60.42 |
| Netherlands | |||||
| - Quantity in mboe | 615.3 | 189.9 | 558.0 | 134.0 | 766.8 |
| - Average price per boe | 45.77 | 45.67 | 48.46 | 49.55 | 48.79 |
| Indonesia | |||||
| - Quantity in mboe | 445.2 | 93.5 | 316.2 | 109.2 | 634.1 |
| - Average price per boe | 62.69 | 69.38 | 60.55 | 65.27 | 58.65 |
| Russia | |||||
| - Quantity in mboe | 1,515.0 | 514.4 | 310.7 | 310.7 | 788.8 |
| - Average price per boe | 43.33 | 46.66 | 40.50 | 40.50 | 35.03 |
| Tunisia | |||||
| - Quantity in mboe | 1,719.0 | 339.6 | 122.5 | - | 397.3 |
| - Average price per boe | 65.74 | 74.75 | 63.86 | - | 61.79 |
| Total | |||||
| - Quantity in mboe | 9,392.6 | 2,844.7 | 7,088.8 | 2,234.0 | 10,050.2 |
| - Average price per boe | 61.41 | 67.27 | 62.34 | 62.69 | 59.70 |
* The average price per boe excludes the hedge settlements incurred in 2006.
The oil produced in Russia is sold on either the Russian domestic market or exported into the international market. 43% of Russian sales for the nine month period ended 30 September 2007 were on the export market at an average price of USD 63.05 per barrel with the remaining 57% of Russian sales being sold on the domestic market at an average price of USD 28.58 per barrel.
| 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- | |
|---|---|---|---|---|---|
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| Production | 9 months | 3 months | 9 months | 3 months | 12 months |
| United Kingdom | |||||
| - Quantity in mboe | 4,025.8 | 1,286.1 | 4,668.3 | 1,402.7 | 6,086.3 |
| - Quantity in mboepd | 14.7 | 14.0 | 17.1 | 15.2 | 16.7 |
| France | |||||
| - Quantity in mboe | 916.2 | 337.4 | 1,023.5 | 341.0 | 1,361.7 |
| - Quantity in mboepd | 3.4 | 3.7 | 3.7 | 3.7 | 3.7 |
| Norway | |||||
| - Quantity in mboe | 191.5 | 58.6 | 235.3 | 74.6 | 316.1 |
| - Quantity in mboepd | 0.7 | 0.6 | 0.9 | 0.8 | 0.9 |
| Netherlands | |||||
| - Quantity in mboe | 615.3 | 189.9 | 557.9 | 134.0 | 766.8 |
| - Quantity in mboepd | 2.3 | 2.1 | 2.0 | 1.5 | 2.1 |
| Indonesia | |||||
| - Quantity in mboe | 723.9 | 228.1 | 633.1 | 208.9 | 904.1 |
| - Quantity in mboepd | 2.7 | 2.5 | 2.3 | 2.3 | 2.5 |
| Russia | |||||
| - Quantity in mboe | 1,532.0 | 522.1 | 310.7 | 310.7 | 808.1 |
| - Quantity in mboepd | 5.6 | 5.7 | 1.1 | 3.4 | 2.2 |
| Tunisia | |||||
| - Quantity in mboe | 2,030.7 | 420.2 | 68.1 | - | 429.1 |
| - Quantity in mboepd | 7.4 | 4.6 | 0.2 | - | 1.2 |
| Venezuela | |||||
| - Quantity in mboe | - | - | 160.7 | - | 160.7 |
| - Quantity in mboepd | - | - | 0.6 | - | 0.4 |
| Total | |||||
| - Quantity in mboe | 10,035.4 | 3,042.4 | 7,657.6 | 2,471.9 | 10,832.9 |
| - Quantity in mboepd | 36.8 | 33.2 | 27.9 | 26.9 | 29.7 |
| Minority interest in Russia | |||||
| - Quantity in mboe | 185.7 | 66.0 | 38.1 | 38.1 | 100.4 |
| - Quantity in mboepd | 0.7 | 0.7 | 0.1 | 0.4 | 0.3 |
| Total excluding minority interest | |||||
| - Quantity in mboe | 9,849.7 | 2,976.4 | 7,619.5 | 2,433.8 | 10,732.5 |
| - Quantity in mboepd | 36.1 | 32.5 | 27.8 | 26.5 | 29.4 |
Lundin Petroleum has fully consolidated its subsidiaries in Russia of which they have control with the portion not owned by Lundin Petroleum shown as a minority interest. The average production for Russia adjusted for Lundin Petroleum's share of ownership is 4.9 mboepd.
The number of barrels produced differs from the number of barrels sold for a number of reasons. There are timing differences between sales and production in field areas such as Tunisia and Norway where production is into a Floating Production Storage Offloading vessel (FPSO). Sales are recorded when a lifting takes place and these can be at varying intervals and will not always be equal to the production at the end of a financial period. Sales in the United Kingdom are based upon production nominated in advance and may not represent the actual production for that month. A difference between nominated and actual production will result in a timing difference in an accounting period. The accounting effect of the timing differences between sales and production are reflected in the movements in the hydrocarbons inventory and the under/overlift position. Over time, the total sales will equal the production. There are permanent differences between production and sales in some of the field areas. The production reported for the United Kingdom is the platform production. This is the amount of crude oil that is produced from the field into the pipeline system that takes the crude to the onshore terminal. Once the field's crude oil enters the pipeline system it is commingled with the crude oil produced from other fields in the pipeline system that produce the blend of crude oil that is sold. The crude oil that is pumped into the pipeline system is tested against the blend of crude oil that arrives at the terminal and an adjustment is made to the number of barrels allocated to each field to reflect the relative quality of the crude oil input into the system. There is a quality adjustment of approximately minus five percent applied to the United Kingdom crude oil produced. In Tunisia, a portion of the production is allocated to the Tunisian state as a royalty payment. In Indonesia, production is allocated under a Production Sharing Contract (PSC) where, as part of the commercial terms of the agreement, a part of the working interest production is allocated to the host country as a type of royalty payment.
Production cost
Production costs for the nine month period ended 30 September 2007 expressed in US dollars were comprised as follows:
| Production cost and depletion | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
|---|---|---|---|---|---|
| in TUSD | 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 |
| 9 months | 3 months | 9 months | 3 months | 12 months | |
| Cost of operations | 166,141 | 55,768 | 125,598 | 46,794 | 184,320 |
| Tariff and transportation expenses | 20,041 | 6,558 | 14,082 | 5,064 | 20,310 |
| Royalty and direct taxes | 38,068 | 13,303 | 10,038 | 7,919 | 21,061 |
| Changes in inventory/overlift | -3,495 | 2,376 | -11,326 | -9,409 | -11,852 |
| Total production costs | 220,755 | 78,005 | 138,392 | 50,368 | 213,839 |
| Depletion | 119,333 | 34,941 | 75,651 | 22,242 | 105,406 |
| Total | 340,088 | 112,946 | 214,043 | 72,610 | 319,245 |
| Production cost and depletion | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
|---|---|---|---|---|---|
| in USD per boe | 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 |
| 9 months | 3 months | 9 months | 3 months | 12 months | |
| Cost of operations | 16.56 | 18.33 | 16.40 | 18.93 | 17.01 |
| Tariff and transportation expenses | 2.00 | 2.16 | 1.84 | 2.05 | 1.87 |
| Royalty and direct taxes | 3.79 | 4.37 | 1.31 | 3.20 | 1.94 |
| Changes in inventory/overlift | -0.35 | 0.78 | -1.48 | -3.81 | -1.09 |
| Total production costs | 22.00 | 25.64 | 18.07 | 20.37 | 19.73 |
| Depletion | 11.89 | 11.48 | 9.88 | 9.00 | 9.73 |
| Total cost per boe | 33.89 | 37.12 | 27.95 | 29.37 | 29.46 |
Production costs for the nine month period ended 30 September 2007 amounted to MSEK 1,516.7 (MSEK 1,033.8) and MSEK 526.3 (MSEK 366.0) for the third quarter of 2007 and detailed in Note 2. The reported cost of operations amounted to USD 16.56 per barrel (USD 16.40 per barrel) for the nine month period ended 30 September 2007 and USD 18.33 per barrel (USD 18.93 per barrel) for the third quarter of 2007.
The cost of operations for the third quarter of 2007 is consistent with the second quarter of 2007 but the lower production during the third quarter of 2007 has meant a higher cost of operations per barrel. Whilst the total cost of operations in the currency in which they are incurred is in line with forecast, the reported total cost of operations is above forecast due to the devaluation of the US dollar during the reporting period.
Royalty and direct taxes includes Russian Mineral Resource Extraction Tax ("MRET") and Russian Export Duties. The rate of MRET varies in relation to world oil prices and is levied on the volume of Russian production. MRET averaged USD 11.28 per barrel for the nine month period ended 30 September 2007. The rate of export duty on Russian oil is revised by the Russian Federation once every two months and is dependant on the price obtained for Russian oil on the export market. The export duty is levied on the volume of oil exported from Russia and averaged USD 25.32 per barrel for the nine month period ended 30 September 2007.
Depletion
Depletion of oil and gas properties for the nine month period ended 30 September 2007 amounted to MSEK 819.9 (MSEK 565.1) and MSEK 234.4 (MSEK 159.9) for the third quarter of 2007 and is detailed in Note 3.
The unit depletion cost for the third quarter of 2007 has reduced because of the lower contribution of Tunisia in the total production for the period.
Write off
Write off of oil and gas properties amounted to MSEK 209.9 (MSEK 104.7) for the nine month period ended 30 September 2007 and MSEK 128.0 (MSEK 70.3) for the third quarter of 2007. Exploration and appraisal project costs are capitalised as they are incurred and then reviewed on a regular basis to assess their future recoverability. When a decision is made not to proceed with a project the relevant costs are expensed. During the third quarter of 2007 the costs relating to the unsuccessful UK exploration well 41/10a-2z in Licence P1129 amounting to MSEK 57.2 were written off. Following the disappointing results of the Tengis-1 well on the Blora Block in Indonesia the decision has been made to relinquish the Block and costs of MSEK 57.8 have been written off.
Other income
Other income for the nine month period ended 30 September 2007 amounted to MSEK 2.1 (MSEK 6.3) and MSEK 1.1 (MSEK 3.4) for the third quarter of 2007 and represents fees and costs recovered by Lundin Petroleum from third parties.
General, administrative and depreciation expenses
General, administrative and depreciation expenses for the nine month period ended 30 September 2007 amounted to MSEK 135.9 (MSEK 75.8) and MSEK 27.1 (MSEK 20.0) for the third quarter of 2007. Depreciation charges amounted to MSEK 12.5 (MSEK 7.1) for the nine month period ended 30 September 2007. General and administrative expenses include an amount of MSEK 34.9 relating to the transaction costs for the cancelled initial public offering (IPO) of Viking Oil and Gas ASA during the first half of 2007.
Financial income
Financial income for the nine month period ended 30 September 2007 amounted to MSEK 174.9 (MSEK 44.7) and MSEK 116.3 (MSEK -44.9) for the third quarter of 2007 and is detailed in Note 4. Interest income for the nine month period ended 30 September 2007 amounted to MSEK 27.9 (MSEK 20.8) and included are interest received on bank accounts of MSEK 24.2 (MSEK 15.8) and interest received on a loan to an associated company for an amount of MSEK 3.7 (MSEK 3.0).
Dividend income received for the nine month period ended 30 September 2007 amounted to MSEK 20.4 (MSEK 9.1) of which 14.3 MSEK relates to a dividend from the 5% shareholding in Baripetrol SA paid in June 2007 and the remainder relates to distributions received from an unconsolidated investment in a company owning an interest in the Dutch gas processing and transportation infrastructure (NOGAT).
Net exchange gains for the nine month period ended 30 September 2007 amounted to MSEK 124.1 (MSEK 10.2) and MSEK 102.3 (MSEK -56.2) for the third quarter of 2007. Exchange rate variations result primarily from fluctuations in the value of the USD currency against a pool of currencies which includes, amongst others, NOK, EUR and the Russian Rouble (RUR). Lundin Petroleum has USD denominated debt recorded in subsidiaries using a functional currency other than USD. The devaluation of the USD against the NOK and the RUR led to exchange gains being recorded in these subsidiaries.
Financial expense
Financial expenses for the nine month period ended 30 September 2007 amounted to MSEK 97.7 (MSEK 76.6) and MSEK 33.1 (MSEK 29.2) for the third quarter of 2007 and are detailed in Note 5. Interest expense for the nine month period ended 30 September 2007 amounted to MSEK 62.8 (MSEK 31.4) and mainly relates to the bank loan facility.
The amortisation of financing fees amounted to MSEK 0.6 (MSEK 14.0) for the nine month period ended 30 September 2007 and MSEK 0.2 (MSEK 4.6) for the third quarter of 2007. The financing fees are in relation to the increase in the bank loan facility and are amortised over the anticipated usage of the bank loan facility.
Tax
The tax charge for the nine month period ended 30 September 2007 amounted to MSEK 726.0 (MSEK 872.4) and MSEK 267.3 (MSEK 190.8) for the third quarter of 2007 and is detailed in Note 6.
The current tax charge of MSEK 319.7 (MSEK 589.1) for the nine month period ended 30 September 2007 comprises current tax charges in, primarily the United Kingdom, France, the Netherlands, Tunisia and Indonesia. The current corporation tax charge for the third quarter of 2007 amounts to MSEK -9.1 (MSEK 186.7). During the first half year of 2007 the Group received a credit of UK corporation tax relating to the 2003-2005 corporation tax returns of MSEK 48.6. The negative current corporation tax charge for the third quarter of 2007 includes the tax refund due of MSEK 184.2 (MSEK 6.6) in Norway for 2007 exploration expenditure.
The deferred tax charge for the nine month period ended 30 September 2007 amounted to MSEK 406.3 (MSEK 283.3) and consists of corporation tax amounting to MSEK 370.5 (MSEK 259.7) and petroleum tax amounting to MSEK 35.8 (MSEK 23.6). Included in the deferred tax charge is a charge of MSEK 90.3 for tax losses carried forward utilised in Tunisia, and a charge of MSEK 522.6 due to timing differences in the rate of depletion of oil and gas assets between accounting and fiscal reporting, partly offset by tax losses carried forward in Norway and the Netherlands, amounting to MSEK 44.6 and MSEK 34.3 respectively. The deferred petroleum tax charge relates to Petroleum Revenue Tax (PRT) in the United Kingdom.
The Group operates in various countries and fiscal regimes where corporate income tax rates are different from the regulations in Sweden. Corporate income tax rates for the Group vary between 24% and 78%. Currently the majority of the Group's profit is derived from the United Kingdom where the effective tax rate amounts to 50%. The effective tax rate for the Group for the nine month period ended 30 September 2007 amounts to approximately 47%. When the tax refund received in the United Kingdom for prior periods is eliminated the effective tax rate for the Group for the period amounts to approximately 52%.
Minority interest
The net profit attributable to minority interest for the nine month period ended 30 September 2007 amounted to MSEK -1.8 (MSEK -0.6) and MSEK 11.9 (MSEK -1.5) for the third quarter of 2007 and relates primarily to the minority portion of the Russian subsidiaries which are fully consolidated.
BALANCE SHEET
Non-current assets
Oil and gas properties as at 30 September 2007 amounted to MSEK 15,855.8 (MSEK 14,407.8) and are detailed in Note 7. Development and exploration expenditure incurred for the nine month period ended 30 September 2007 is as follows:
| Development expenditure | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
|---|---|---|---|---|---|
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| in MSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| United Kingdom | 418.2 | 172.9 | 340.0 | 150.1 | 558.7 |
| France | 104.9 | 6.2 | 50.3 | 37.8 | 98.5 |
| Norway | 774.3 | 248.9 | 461.5 | 212.8 | 772.5 |
| Netherlands | 29.5 | 12.0 | 10.2 | 4.9 | 19.6 |
| Indonesia | 21.4 | 6.5 | 52.5 | 30.4 | 69.4 |
| Russia | 168.4 | 91.5 | 48.6 | 48.6 | 107.6 |
| Tunisia | 47.1 | 15.1 | 387.4 | 79.3 | 489.7 |
| Venezuela | - | - | 3.0 | -0.1 | -2.4 |
| Development expenditures | 1,563.8 | 553.1 | 1,353.5 | 563.8 | 2,113.6 |
| Exploration expenditure | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| in MSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| United Kingdom | 209.4 | 159.2 | 66.6 | 7.8 | 83.3 |
| France | 2.8 | 0.4 | 23.9 | 12.7 | 25.1 |
| Norway | 236.2 | 169.9 | 85.5 | 32.3 | 103.1 |
| Netherlands | 0.3 | - | 7.5 | 0.1 | 8.1 |
| Indonesia | 82.3 | 50.6 | 46.4 | 10.5 | 62.3 |
| Russia | 202.0 | 93.1 | 68.0 | 68.0 | 183.1 |
| Sudan | 70.6 | 9.0 | 37.4 | 3.5 | 50.6 |
| Ethiopia | 33.9 | 19.9 | - | - | 1.8 |
| Vietnam | 19.0 | 2.9 | - | - | 1.8 |
| Congo (Brazzaville) | 26.1 | 6.8 | 55.7 | 6.9 | 79.0 |
| Other | 32.1 | 10.2 | 68.3 | 41.9 | 70.4 |
| Exploration expenditures | 914.6 | 522.0 | 459.3 | 183.7 | 668.6 |
In addition to the above development and exploration expenditure, in the first quarter of 2007 an amount of MSEK 324.0 was paid on the completion of the Peik acquisition and an amount of MSEK 35.1 was paid for the additional 10% interest in the Lematang Block which contains the Singa gas field. During the first quarter of 2007 ETAP exercised their right to participate in the Oudna field, reducing Lundin Petroleum's interest from 50% to 40%. An amount of MSEK -39.7 has been recorded against oil and gas properties as the adjustment for the participation being the net amount of past capital costs less net revenues.
Other tangible assets as at 30 September 2007 amounted to MSEK 116.5 (MSEK 117.4).
The book amount for goodwill in relation to the acquisition of the Russian business at 31 July 2006 amounted to MSEK 773.7 (MSEK 817.2) as at 30 September 2007.
Financial assets as at 30 September 2007 amounted to MSEK 417.7 (MSEK 357.4) and are detailed in Note 8. Shares and participations amount to MSEK 246.7 (MSEK 260.3) as at 30 September 2007. Restricted cash as at 30 September 2007 amounted to MSEK 17.6 (MSEK 18.6) and represents the cash amount deposited to support a letter of credit issued in support of exploration work commitments in Sudan. Capitalised financing fees amount to MSEK 5.4 (MSEK -) and relate to the costs incurred in increasing the bank credit facility and are being amortised over the period of estimated usage of the facility. Other financial assets amount to MSEK 148.0 (MSEK 78.5) and mainly represent VAT paid on exploration and development costs in Russia that is expected to be recovered from VAT received on future project revenues.
The deferred tax asset as at 30 September 2007 amounted to MSEK 447.8 (MSEK 488.0) and relates primarily to tax losses carried forward in Norway and the Netherlands. The deferred tax asset at 31 December 2006 included tax loss carry forwards for Tunisia.
Current assets
Receivables and inventories amounted to MSEK 1,242.3 (MSEK 1,200.3) as at 30 September 2007 and are detailed in Note 9. Inventories include hydrocarbons and consumable well supplies. Corporation tax receivables as at 30 September 2007 amounted to MSEK 272.6 (MSEK 115.0) and related primarily to tax refunds due in Norway. Other assets amounted to MSEK 131.4 (MSEK 101.5) as at 30 September 2007.
Cash and cash equivalents as at 30 September 2007 amounted to MSEK 501.6 (MSEK 297.2).
Non-current liabilities
Provisions as at 30 September 2007 amounted to MSEK 4,770.3 (MSEK 4,481.5) and are detailed in Note 10. This amount includes a provision for site restoration of MSEK 649.2 (MSEK 624.7). The provision for deferred tax amounted to MSEK 4,091.2 (MSEK 3,832.6) and is mainly arising on the excess of book value over the tax value of oil and gas properties and the deferred tax gross up of the excess purchase price allocated to the in 2006 acquired Russian assets.
Long term interest bearing debt amounted to MSEK 2,067.9 (MSEK 1,391.1) as at 30 September 2007. The availability under the credit facility agreement entered into on the 16 August 2004 of MUSD 385.0 was increased to MUSD 500.0 on 28 February 2007. The cash drawings outstanding under the credit facility increased from MUSD 185.0 at 31 December 2006 to MUSD 305.0 as at 30 September 2007. The long term interest bearing debt also includes the long-term portion of a bank loan drawn by a subsidiary in Russia.
Current liabilities
Current liabilities as at 30 September 2007 amounted to MSEK 1,455.5 (MSEK 1,245.0) and are detailed in Note 11. Joint venture creditors amounted to MSEK 774.1 (MSEK 650.8) and mainly relate to the amounts payable for the development activities in progress in Norway and United Kingdom and ongoing operational costs. Short-term interest bearing debt amounted to MSEK 47.9 (MSEK 47.4) and relates to the current portion of a bank loan drawn by a subsidiary in Russia. Tax payable amounted to MSEK 307.5 (MSEK 174.0). The increase in current tax payable is primarily attributable to tax payable in Tunisia on the profits of the Oudna field.
SUBSEQUENT EVENTS
On 26 October 2007 Lundin Petroleum secured USD 1 billion in new financing facilities. The facilities were fully underwritten by BNP Paribas and sub-underwriters Bank of Scotland and Royal Bank of Scotland. The financing facilities consist of a USD 850 million revolving borrowing base and letter of credit facility and a USD 150 million unsecured corporate facility. An increased debt facility was arranged to enable the funding of potential new projects and acquisition opportunities.
On 15 October 2007 Lundin Petroleum signed an agreement to acquire the shares in Carr Production France SARL ("Carr"). Carr directly holds a 20 percent interest in four concessions located at Soudron, Granville, Courdemanges and Vert la Gravelle and a research permit (Val des Marais). Lundin Petroleum is operator and holds the remaining 80 percent interest. The transaction was completed on 31 October 2007 after receipt of government approval. The results of Carr will be consolidated from this date.
Lundin Petroleum completed the drilling of the exploration well 7/7-4 on Licence PL 335 in the North Sea in October 2007 and the well has now been permanently plugged and abandoned. The costs associated with this well will be written off in the fourth quarter of 2007.
Parent company
The business of the Parent Company is investment in and management of oil and gas assets. The net profit for the parent company amounted to a profit of MSEK 37.6 (MSEK 13.4) for the nine month period ended 30 September 2007 and MSEK 0.8 (MSEK 5.7) for the third quarter of 2007.
The profit included general and administrative expenses of MSEK 28.4 (MSEK 43.6). Interest income derived from loans to subsidiary companies amounted to MSEK 18.8 (MSEK 28.0). Currency exchange gains amounted to MSEK 31.0 (MSEK -1.8). The foreign exchange gains relates primarily to the revaluation of the loan to a subsidiary in relation to the anticipated dividend accrued for at 31 December 2006. On 16 May 2007 the loan was converted to shares in the subsidiary.
The Parent Company acquired 68,000 of its own shares in June 2007 at an average price of 64.43 SEK per share to fully hedge its potential obligations under its employee Long Term Incentive Plan. This transaction was recorded as a reduction in equity.
No deferred tax asset has been recorded against the historic losses incurred by the Parent Company because of uncertainty as to the timing of their utilisation.
CHANGES IN THE BOARD
At the AGM on 16 May 2007, Viveca Ax:son Johnson and Kai Hietarinta did not stand for re-election as members of the Board of Directors of Lundin Petroleum.
SHARE DATA
Lundin Petroleum AB's registered share capital at 30 September 2007 amounts to SEK 3,154,406 represented by 315,440,580 shares with a quota value of SEK 0.01 each.
At the AGM held on 16 May 2007, the shareholders of Lundin Petroleum approved the implementation of a Long-Term Incentive Plan (LTI) consisting of a Share Option Plan and a Performance Share Plan. Employees had the choice to select either the Share Option Plan or the Performance Share Plan or a 50/50 allocation of both.
The Share Plan Option includes the conditional granting of options with a vesting period of 18 months and subject to the achievement of a performance condition measuring Total Shareholder Return (TSR) relative to a peer group of companies. The options were issued at a 10% premium to the average closing price of Lundin Petroleum shares for the ten days after the AGM. Employees will earn between 0 and 100 percent of the options depending upon the companies performance measured using a relative TSR.
The Performance Share Plan includes a conditional award of Lundin Petroleum shares with a vesting period of three years and subject to the achievement of a performance condition relative to TSR. The number of shares awarded under the Performance Share Plan is based on the value of the options granted under the Share Option Plan. The employees will earn between 50 and 100 percent of the award of shares depending upon the companies performance measured using a relative TSR. Under the performance Share Plan, Lundin Petroleum made a conditional award of 67,751 shares subject to the achievement of performance criteria. In June 2007, Lundin Petroleum acquired 68,000 of its own shares to fully hedge its potential obligation under the Performance Share Plan.
The following incentive warrants have been issued under the Group's incentive programme for employees. The incentive warrants outstanding at the end of the period and their expiry date and exercise prices are shown below:
| Issued 2005 | Issued 2006 | Issued 2007 | |
|---|---|---|---|
| Exercise price (SEK) | 60.20 | 97.40 | 78.05 |
| Number authorised | 3,000,000 | 3,250,000 | 3,950,000 |
| Number outstanding | 2,470,000 | 3,106,000 | 3,525,000 |
| Exercise period | 15 June 2006 -31 May 2008 |
15 June 2007 -31 May 2009 |
1 Dec 2008 - 31 May 2010 |
In addition to these incentive warrants, 642,500 incentive warrants were acquired and converted to Lundin Petroleum incentive warrants and another 371,500 incentive warrants in Lundin Petroleum were issued in connection with the acquisition of Valkyries. The number of incentive warrants associated with the Valkyries acquisition outstanding at 30 September 2007 amounted to 384,000 with an exercise price in the range 75.62 – 97.40 SEK with various exercise periods up to 31 May 2009.
ACCOUNTING PRINCIPLES
The financial statements of the Group have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Reporting, and the Swedish financial accounting standards RR31. The accounting policies adopted are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2006.
The financial statements of the Parent Company are prepared in accordance with accounting principles generally accepted in Sweden, applying RR 32 issued by the Swedish Financial Accounting Standards Council and the Annual Accounts Act. RR 32 requires the Parent Company to use similar accounting principles as for the Group, i.e. IFRS to the extent allowed by RR 32. The Parent Company's accounting principles do not in any material respect deviate from the Group principles.
RISKS AND UNCERTAINTIES
The major risk the Group faces is the nature of oil and gas exploration and production itself. Oil and gas exploration, development and production involve high operational and financial risks, which even a combination of experience, knowledge and careful evaluation may not be able to fully eliminate or which are beyond the Company's control. Lundin Petroleum's long-term commercial success depends on its ability to find, acquire, develop and commercially produce oil and natural gas reserves. A future increase in Lundin Petroleum's reserves will depend not only on its ability to explore and develop any properties Lundin Petroleum may have from time to time, but also on its ability to select and acquire suitable producing properties or prospects. In addition, there is no assurance that commercial quantities of oil and gas will be discovered or acquired by Lundin Petroleum. Other risks can be categorized into either Operational Risks or Financial Risks.
Operational Risk
The Group faces a number of risks and uncertainties in the areas of operation which may have an adverse impact on its ability to successfully pursue its exploration, appraisal and development plans as well as on its production of oil and gas. A more detailed analysis of the operational risks faced by Lundin Petroleum is given in the Company's annual report for 2006.
Lundin Petroleum is, and will be, actively engaged in oil and gas operations in various countries. Risks may arise in changes in laws affecting foreign ownership, government participation, taxation, royalties, duties, rates of exchange and exchange control. Further, certain aspects of Lundin Petroleum's exploration and production programs require the consent or favourable decisions of governmental bodies. In addition, Lundin Petroleum's exploration, development and production activities may be subject to political and economic uncertainties, expropriation of property and cancellation or modification of contract rights, taxation, royalties, duties, foreign exchange restrictions and other risks arising out of foreign governmental sovereignty over the areas in which Lundin Petroleum's operations are conducted, as well as risks of loss in some countries due to civil strife, acts of war, guerrilla activities and insurrection.
Financial Risk
As an international oil and gas exploration and production company operating globally, Lundin Petroleum is exposed to financial risks such as fluctuations in oil price, currency rates, interest rates as well as credit financing. The Company shall seek to control these risks through sound management practice and the use of internationally accepted financial instruments, such as oil price hedges and interest rate hedges. Lundin Petroleum uses financial instruments solely for the purpose of minimising risks in the Company's business. A more detailed analysis of the financial risks faced by Lundin Petroleum and how it addresses these risks is given in the Company's annual report for 2006.
EXCHANGE RATES
For the preparation of the interim financial statements, the following currency exchange rates have been used.
| Average | Period end | |
|---|---|---|
| 1 EUR equals SEK | 9.2368 | 9.2147 |
| 1 USD equals SEK | 6.8706 | 6.4988 |
CONSOLIDATED INCOME STATEMENT<<
| 30 Sep 2007 30 Sep 2007 30 Sep 2006 30 Sep 2006 Expressed in TSEK 3 months 9 months 3 months Note 9 months Operating income Net sales of oil and gas 1 3,962,742 1,288,745 3,127,976 935,133 Other operating income 99,305 33,243 147,876 38,872 |
31 Dec 2006 12 months 4,233,348 181,158 |
|---|---|
| 4,062,047 974,005 1,321,988 3,275,852 |
4,414,506 |
| Cost of sales | |
| Production costs 2 -1,516,719 -526,316 -1,033,786 -365,954 |
-1,575,781 |
| Depletion of oil and gas properties 3 -819,890 -159,904 -234,375 -565,105 |
-776,735 |
| Write off of oil and gas properties -209,889 -127,991 -104,744 -70,337 |
-123,469 |
| Gross profit 1,515,549 433,306 1,572,217 377,810 |
1,938,521 |
| Other income 2,130 1,100 6,276 3,434 |
9,618 |
| General, administration and | |
| depreciation expenses -135,858 -27,088 -75,763 -19,983 |
-116,818 |
| Operating profit 1,381,821 407,318 1,502,730 361,261 |
1,831,321 |
| Result from financial investments | |
| Financial income 4 174,875 116,335 44,723 -44,862 |
96,395 |
| Financial expenses 5 -97,733 -33,105 -76,566 -29,217 |
-96,364 |
| 77,142 -74,079 83,230 -31,843 |
31 |
| Profit before tax 1,458,963 490,548 1,470,887 287,182 |
1,831,352 |
| Tax 6 -726,015 -267,344 -872,370 -190,803 |
-1,036,917 |
| Net result 732,948 96,379 223,204 598,517 |
794,435 |
| Net result attributable to: | |
| Shareholders of the parent company 734,773 211,279 599,149 97,907 |
803,005 |
| Minority interest -1,825 11,925 -632 -1,528 |
-8,570 |
| Net result 732,948 223,204 598,517 96,379 |
794,435 |
| Earnings per share – SEK 1) 2.33 0.67 2.22 0.33 |
2.86 |
| Diluted earnings per share – SEK 1) 2.33 0.33 0.67 2.21 |
2.85 |
1) Based on net result attributable to shareholders of the parent company.
>> CONSOLIDATED BALANCE SHEET
| 30 September | 31 December | ||
|---|---|---|---|
| Expressed in TSEK | Note | 2007 | 2006 |
| ASSETS | |||
| Non-current assets | |||
| Oil and gas properties | 7 | 15,855,798 | 14,407,846 |
| Other tangible assets | 116,450 | 117,424 | |
| Goodwill | 773,665 | 817,185 | |
| Financial assets | 8 | 417,720 | 357,442 |
| Deferred tax | 447,757 | 488,024 | |
| Total non-current assets | 17,611,390 | 16,187,921 | |
| Current assets | |||
| Receivables and inventory | 9 | 1,242,264 | 1,200,269 |
| Cash and cash equivalents | 501,645 | 297,221 | |
| Total current assets | 1,743,909 | 1,497,490 | |
| TOTAL ASSETS | 19,355,299 | 17,685,411 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Shareholders´ equity | 9,541,413 | 8,952,680 | |
| Minority interest | 1,520,146 | 1,615,131 | |
| Total equity | 11,061,559 | 10,567,811 | |
| Non-current liabilities | |||
| Provisions | 10 | 4,770,311 | 4,481,496 |
| Bank loans | 2,067,931 | 1,391,063 | |
| Total non-current liabilities | 6,838,242 | 5,872,559 | |
| Current liabilities | 11 | 1,455,498 | 1,245,041 |
| TOTAL EQUITY AND LIABILITIES | 19,355,299 | 17,685,411 | |
| Pledged assets | 3,183,140 | 1,986,537 | |
| Contingent liabilities | 152,722 | 161,313 |
CONSOLIDATED STATEMENT OF CASH FLOW<<
| 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- | |
|---|---|---|---|---|---|
| Expressed in TSEK | 30 Sep 2007 9 months |
30 Sep 2007 3 months |
30 Sep 2006 9 months |
30 Sep 2006 3 months |
31 Dec 2006 12 months |
| Cash flow from operations | |||||
| Net result | 732,948 | 223,204 | 598,517 | 96,379 | 794,435 |
| Adjustments from non-cash related items | 1,378,947 | 511,316 | 1,019,319 | 253,102 | 1,526,866 |
| Changes in working capital | 112,527 | 72,251 | 21,073 | -242,386 | -245,905 |
| Total cash flow from operations | 2,224,422 | 806,771 | 1,638,909 | 107,095 | 2,075,396 |
| Cash flow used for investments | |||||
| Investment in subsidiary assets | - | - | 40,971 | - | 40,971 |
| Investment in real estate | - | - | -14,147 | -2,454 | -18,586 |
| Change in other financial fixed assets | 136 | 60 | -3,200 | 38,434 | -1,793 |
| Other payments | 14 | 2 | -28,917 | -8,947 | -28,324 |
| Investment in oil and gas properties | -2,818,770 | -1,069,176 | -1,812,785 | -747,504 | -2,782,309 |
| Investment in office equipment and other assets | -17,575 | -2,656 | -14,686 | -6,930 | -19,399 |
| Total cash flow used for investments | -2,836,195 | -1,071,770 | -1,832,764 | -686,430 | -2,809,440 |
| Cash flow from/used for financing | |||||
| Changes in long-term receivable | 6,499 | 6,499 | - | - | - |
| Changes in long-term bank loan | 793,924 | 166,369 | 77,495 | 494,772 | 651,574 |
| Paid financing fees | -5,986 | - | - | - | - |
| Purchase of own shares | -4,395 | - | - | - | - |
| Proceeds from share issues | 54,586 | 1,551 | 34,992 | 10,460 | 40,648 |
| Dividend paid to minority | - | - | - | - | -2,125 |
| Total cash flow from/used for financing | 844,628 | 174,419 | 112,487 | 505,232 | 690,097 |
| Change in cash and cash equivalents | 232,855 | -90,580 | -81,368 | -74,103 | -43,947 |
| Cash and cash equivalents at the beginning of the | |||||
| period | 297,221 | 616,131 | 389,415 | 349,960 | 389,415 |
| Currency exchange difference in cash and cash equivalents |
-28,431 | -23,906 | -26,584 | 5,606 | -48,247 |
| Cash and cash equivalents at the end of the | |||||
| period | 501,645 | 501,645 | 281,463 | 281,463 | 297,221 |
>>CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Additional | ||||||
|---|---|---|---|---|---|---|
| Share | paid-in-capital/ | Retained | Minority | |||
| Expressed in TSEK | capital | Other reserves | earnings | Net result | interest | Total equity |
| Balance at 1 January 2006 | 2,571 | 1,333,405 | 1,350,133 | 993,507 | 3,050 | 3,682,666 |
| Transfer of prior year net result | - | - | 993,507 | -993,507 | - | - |
| Currency translation difference | - | -167,571 | - | - | 18,461 | -149,110 |
| Change in fair value | - | 34,481 | - | - | - | 34,481 |
| Income and expenses recognised directly in equity Net result |
- - |
-133,090 - |
- - |
- 599,149 |
18,461 -632 |
-114,629 598,517 |
| Total recognised income and | ||||||
| expense | - | -133,090 | - | 599,149 | 17,829 | 483,888 |
| Acquired minority | - | - | - | - | 1,534,867 | 1,534,867 |
| Issuance of shares | 570 | 5,088,698 | - | - | - | 5,089,268 |
| Transfer of share based payments | - | 4,687 | -4,687 | - | - | - |
| Share based payments | - | - | 19,077 | - | - | 19,077 |
| Balance at 30 September 2006 | 3,141 | 6,293,700 | 2,358,030 | 599,149 | 1,555,746 | 10,809,766 |
| Currency translation difference | - | -527,687 | - | - | -107,458 | -635,145 |
| Change in fair value | - | -53,671 | - | - | - | -53,671 |
| Income and expenses | ||||||
| recognised directly in equity | - | -581,358 | - | - | -107,458 | -688,816 |
| Net result | - | - | - | 203,856 | -7,938 | 195,918 |
| Total recognised income and | ||||||
| expense | - | -581,358 | - | 203,856 | -115,396 | -492,898 |
| Transfer to income statement | - | 62,216 | - | - | - | 62,216 |
| Dividend | - | - | - | - | -2,125 | -2,125 |
| Acquired minority | - | - | - | - | 179,169 | 179,169 |
| Issuance of shares | 1 | 5,656 | - | - | - | 5,657 |
| Transfer of share based payments | - | 497 | -497 | - | - | - |
| Share based payments | - | - | 8,289 | - | - | 8,289 |
| Investments | - | - | - | - | -2,263 | -2,263 |
| Balance at 31 December 2006 | 3,142 | 5,780,711 | 2,365,822 | 803,005 | 1,615,131 | 10,567,811 |
| Transfer of prior year net result | - | - | 803,005 | -803,005 | - | - |
| Currency translation difference | - | -209,899 | - | - | -92,398 | -302,297 |
| Change in fair value | - | -9,988 | - | - | - | -9,988 |
| Income and expenses | ||||||
| recognised directly in equity | - | -219,887 | - | - | -92,398 | -312,285 |
| Net result | - | - | - | 734,773 | -1,825 | 732,948 |
| Total recognised income and expense |
||||||
| - | -219,887 | - | 734,773 | -94,223 | 420,663 | |
| Transfer to income statement | - | -288 | - | - | - | -288 |
| Issuance of shares | 12 | 54,574 | - | - | - | 54,586 |
| Purchase of own shares | - | -4,395 | - | - | - | -4,395 |
| Transfer of share based payments | - | 7,440 | -7,440 | - | - | - |
| Share based payments | - | - | 23,945 | - | - | 23,945 |
| Minority share in dividend paid | - | - | - | - | -763 | -763 |
| Balance at 30 September 2007 | 3,154 | 5,618,155 | 3,185,332 | 734,773 | 1,520,145 | 11,061,559 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS>>
| 30 Sep 2007 30 Sep 2007 30 Sep 2006 30 Sep 2006 31 Dec 2006 9 months 3 months 9 months 3 months 12 months TSEK |
|
|---|---|
| Operating income | |
| Net sales of: | |
| Crude oil | |
| - United Kingdom 1,810,073 631,797 2,179,432 605,976 2,670,527 |
|
| - France 440,533 188,753 487,478 172,209 634,301 |
|
| - Norway 82,537 36,824 141,812 28,568 105,719 |
|
| - Indonesia 189,783 42,982 141,506 51,025 272,333 |
|
| - Russia 451,051 162,116 94,003 94,003 203,604 |
|
| - Tunisia 776,431 168,523 58,452 -199 180,912 |
|
| 3,750,408 1,222,739 3,066,590 959,838 4,103,489 |
|
| Condensate | |
| - United Kingdom 16,485 7,473 30,689 8,383 40,160 |
|
| - Netherlands 5,448 1,890 4,764 1,803 |
6,328 |
| - Indonesia 1,402 35 839 671 |
901 |
| 23,335 9,398 36,292 10,857 47,389 |
|
| Gas | |
| - Norway 327 96 293 74 |
442 |
| - Netherlands 188,073 56,394 197,184 47,238 269,337 |
|
| - Indonesia 599 141 118 675 |
820 |
| 188,999 56,608 198,152 47,453 270,599 |
|
| Service fee | |
| - Venezuela - - 25,018 -391 23,478 |
|
| Oil price hedging settlement - - -198,076 -82,624 -211,607 |
|
| 3,962,742 1,288,745 3,127,976 935,133 4,233,348 |
|
| Operating profit contribution | |
| - United Kingdom 617,864 189,973 1,077,269 263,381 1,268,597 |
|
| - France 273,849 118,965 305,136 91,407 385,285 |
|
| - Norway 24,343 10,942 61,561 27,174 72,682 |
|
| - Netherlands 88,643 24,896 100,419 25,526 140,348 |
|
| - Russia 75,415 45,733 15,035 15,035 -21,875 |
|
| - Indonesia -2,540 -21,863 75,674 18,297 106,094 |
|
| - Tunisia 461,881 87,573 -9,291 -4,921 89,115 |
|
| - Albania -32,425 -452 - - |
- |
| - Other -125,209 -48,449 -123,073 -74,638 -208,925 |
|
| Total operating profit contribution 1,381,821 407,318 1,502,730 361,261 1,831,321 |
| Note 2. Production costs, | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
|---|---|---|---|---|---|
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| TSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| Cost of operations | 1,141,490 | 375,723 | 938,217 | 340,336 | 1,358,254 |
| Tariff and transportation expenses | 137,695 | 44,148 | 105,191 | 36,775 | 149,665 |
| Direct production taxes | 261,550 | 89,728 | 74,984 | 58,904 | 155,197 |
| Change in inventory/ overlift position | -24,016 | 16,717 | -84,606 | -70,061 | -87,335 |
| 1,516,719 | 526,316 | 1,033,786 | 365,954 | 1,575,781 | |
| Note 3. Depletion of oil and gas | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
| properties, | 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 |
| TSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| United Kingdom | 357,078 | 111,707 | 333,788 | 96,065 | 427,516 |
| France | 44,315 | 16,044 | 50,616 | 16,580 | 66,420 |
| Norway | 17,033 | 5,172 | 19,617 | 6,006 | 25,993 |
| Netherlands | 53,535 | 16,429 | 44,556 | 9,398 | 60,402 |
| Indonesia | 25,559 | 7,844 | 16,980 | 4,300 | 24,944 |
| Russia | 53,922 | 18,097 | 9,365 | 9,365 | 37,555 |
| Tunisia | 268,448 | 59,082 | 40,599 | - | 66,568 |
| Venezuela | - | - | 49,584 | 18,190 | 67,337 |
| 819,890 | 234,375 | 565,105 | 159,904 | 776,735 | |
| Note 4. Financial income, | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| TSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| Interest income | 27,934 | 11,780 | 20,762 | 6,317 | 31,572 |
| Dividends received | 20,394 | 2,300 | 9,123 | 2,628 | 12,028 |
| Foreign exchange gain, net | 124,099 | 102,255 | 10,234 | -56,215 | 46,216 |
| Fair value adjustment on pension | - | - | - | - | 1,679 |
| Repayment received on loan | 2,448 | - | 4,604 | 2,408 | 4,900 |
| 174,875 | 116,335 | 44,723 | -44,862 | 96,395 | |
| Note 5. Financial expenses, | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| TSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| Loan interest expenses | 62,753 | 20,819 | 31,449 | 13,111 | 41,803 |
| Unwind site restoration discount | 27,551 | 11,019 | 18,932 | 5,195 | 24,126 |
| Change in market value interest rate | |||||
| hedge | -11 | - | 3,264 | 3,032 | 691 |
| Amortisation of deferred financing | |||||
| fees | 596 | 250 | 14,036 | 4,640 | 18,633 |
| Other financial expenses | 6,844 | 1,017 | 8,885 | 11,111 | |
| 3,239 |
| Note 6. Tax, | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
|---|---|---|---|---|---|
| TSEK | 30 Sep 2007 9 months |
30 Sep 2007 3 months |
30 Sep 2006 9 months |
30 Sep 2006 3 months |
31 Dec 2006 12 months |
| Current tax | 319,722 | -9,139 | 589,110 | 186,680 | 567,709 |
| Deferred tax | 406,293 | 276,483 | 283,260 | 4,123 | 469,208 |
| 726,015 | 267,344 | 872,370 | 190,803 | 1,036,917 |
| Note 7. Oil and gas properties, TSEK |
Book amount 30 Sep 2007 |
Book amount 31 Dec 2006 |
|---|---|---|
| United Kingdom | 2,835,002 | 2,589,545 |
| France | 974,922 | 865,059 |
| Norway | 3,315,749 | 1,980,342 |
| Netherlands | 526,103 | 434,797 |
| Indonesia | 268,472 | 274,364 |
| Russia | 7,450,097 | 7,524,638 |
| Tunisia | 159,448 | 543,155 |
| Sudan | 147,128 | 75,347 |
| Albania | - | 30,283 |
| Congo (Brazzaville) | 94,978 | 74,232 |
| Vietnam | 19,712 | 1,798 |
| Ethiopia | 33,611 | 11,292 |
| Others | 30,576 | 2,994 |
| 15,855,798 | 14,407,846 |
| Note 8. Financial assets, TSEK |
Book amount 30 Sep 2007 |
Book amount 31 Dec 2006 |
|---|---|---|
| Shares and participations | 246,676 | 260,265 |
| Restricted cash | 17,649 | 18,641 |
| Capitalised financing fees | 5,385 | - |
| Other financial assets | 148,010 | 78,536 |
| 417,720 | 357,442 |
| Note 9. Receivables and inventories, TSEK |
Book amount 30 Sep 2007 |
Book amount 31 Dec 2006 |
|---|---|---|
| Inventories | 160,365 | 123,679 |
| Trade receivables | 476,294 | 621,273 |
| Underlift | 58,961 | 46,936 |
| Corporation tax | 272,591 | 114,963 |
| Joint venture debtors | 142,701 | 187,671 |
| Derivative instruments | - | 4,199 |
| Other assets | 131,352 | 101,548 |
| 1,242,264 | 1,200,269 |
| Note 10. Provisions, TSEK |
Book amount 30 Sep 2007 |
Book amount 31 Dec 2006 |
|---|---|---|
| Site restoration | 649,232 | 624,675 |
| Pension | 9,410 | 10,127 |
| Deferred taxes | 4,091,235 | 3,832,648 |
| Other | 20,434 | 14,046 |
| 4,770,311 | 4,481,496 |
| Note 11. Current liabilities, | Book amount | Book amount |
|---|---|---|
| TSEK | 30 Sep 2007 | 31 Dec 2006 |
| Trade payables | 155,666 | 220,734 |
| Overlift | 24,587 | 17,986 |
| Tax payables | 307,477 | 173,998 |
| Accrued expenses | 78,393 | 56,645 |
| Acquisition liabilities | 38,056 | 37,183 |
| Joint venture creditors | 774,131 | 650,845 |
| Short-term bank loans | 47,929 | 47,364 |
| Other liabilities | 29,259 | 40,286 |
| 1,455,498 | 1,245,041 |
PARENT COMPANY INCOME STATEMENT IN SUMMARY
| 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- | |
|---|---|---|---|---|---|
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| Expressed in TSEK | 9 months | 3 months | 9 months | 3 months | 12 months |
| Operating income | |||||
| Other operating income | 15,979 | 7,242 | 30,666 | 10,575 | 39,218 |
| Gross profit | 15,979 | 7,242 | 30,666 | 10,575 | 39,218 |
| General, administration and depreciation | |||||
| expenses | -28,368 | -7,443 | -43,578 | -14,595 | -34,192 |
| Operating profit | -12,389 | -201 | -12,912 | -4,020 | 5,026 |
| Result from financial investments | |||||
| Financial income | 49,987 | 989 | 28,104 | 9,602 | 1,806,299 |
| Financial expenses | - | - | -1,767 | 166 | -56,492 |
| 49,987 | 989 | 26,337 | 9,768 | 1,749,807 | |
| Profit before tax | 37,598 | 788 | 13,425 | 5,748 | 1,754,833 |
| Tax | - | - | - | - | - |
| Net result | 37,598 | 788 | 13,425 | 5,748 | 1,754,833 |
PARENT COMPANY BALANCE SHEET IN SUMMARY
| Expressed in TSEK | 30 September 2007 |
31 December 2006 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Financial assets | 7,862,505 | 5,974,079 |
| Total non-current assets | 7,862,505 | 5,974,079 |
| Current assets | ||
| Receivables | 13,374 | 1,791,160 |
| Cash and cash equivalents | 4,075 | 8,962 |
| Total current assets | 17,449 | 1,800,122 |
| TOTAL ASSETS | 7,879,954 | 7,774,201 |
| SHAREHOLDERS´EQUITY AND LIABILITIES | ||
| Shareholders´ equity including net result for the | ||
| period | 7,875,028 | 7,764,091 |
| Current liabilities | 4,926 | 10,110 |
| TOTAL EQUITY AND LIABILITIES | 7,879,954 | 7,774,201 |
| Pledged assets | 3,183,140 | 1,986,537 |
| Contingent liabilities | 152,722 | 161,313 |
PARENT COMPANY CASH FLOW STATEMENT IN SUMMARY
| Expressed in TSEK | 1 Jan 2007- 30 Sep 2007 9 months |
1 Jul 2007- 30 Sep 2007 3 months |
1 Jan 2006- 30 Sep 2006 9 months |
1 Jul 2006- 30 Sep 2006 3 months |
1 Jan 2006- 31 Dec 2006 12 months |
|---|---|---|---|---|---|
| Cash flow from/used for operations | |||||
| Net result | 37,598 | 788 | 13,425 | 5,748 | 1,754,833 |
| Adjustments for non- cash related items | -31,011 | 1,183 | 18,255 | 8,873 | -8,484 |
| Changes in working capital | -6,897 | -194 | -7,703 | -2,339 | -1,787,486 |
| Total cash flow from/used for operations | -310 | 1,777 | 23,977 | 12,282 | -41,137 |
| Cash flow used for investments | |||||
| Change in other financial fixed assets | -54,427 | -6,166 | -54,802 | -26,057 | -3,242 |
| Investment in subsidiaries | - | - | -149 | - | - |
| Total cash flow used for investments | -54,427 | -6,166 | -54,951 | -26,057 | -3,242 |
| Cash flow from financing | |||||
| Purchase of own shares | -4,395 | - | - | - | - |
| Proceeds from share issues | 54,586 | 1,551 | 34,992 | 10,460 | 40,648 |
| Total cash flow from financing | 50,191 | 1,551 | 34,992 | 10,460 | 40,648 |
| Change in cash and cash equivalents | -4,546 | -2,838 | 4,018 | -3,315 | -3,731 |
| Cash and bank at the beginning of the period Currency exchange difference in cash and cash |
8,962 | 7,223 | 10,856 | 19,282 | 10,856 |
| equivalents | -341 | -310 | 932 | -161 | 1,837 |
| Cash and cash equivalents at the end of the period |
4,075 | 4,075 | 15,806 | 15,806 | 8,962 |
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
| Restricted Equity | Unrestricted equity | |||||
|---|---|---|---|---|---|---|
| Share | Statutory | Other | Retained | Net | Total | |
| Capital | reserve | Reserves | Earnings | result | equity | |
| Balance at 1 January 2006 | 2,571 | 861,306 | - | 23,118 | 6,265 | 893,260 |
| Transfer of prior year net result | - | - | - | 6,265 | -6,265 | - |
| New share issuance | 570 | - | 5,088,698 | - | - | 5,089,268 |
| Transfer of share based payments | - | - | 4,687 | -4,687 | - | - |
| Share based payments | - | - | - | 19,077 | - | 19,077 |
| Currency translation difference | - | - | -17,531 | - | - | -17,531 |
| Net result | - | - | - | - | 13,425 | 13,425 |
| Balance at 30 September 2006 | 3,141 | 861,306 | 5,075,854 | 43,773 | 13,425 | 5,997,499 |
| New share issuance | 1 | - | 5,656 | - | - | 5,657 |
| Transfer of share based payments | - | - | 497 | -497 | - | - |
| Share based payments | - | - | - | 8,289 | - | 8,289 |
| Currency translation difference | - | - | 11,238 | - | - | 11,238 |
| Net result | - | - | - | - | 1,741,408 | 1,741,408 |
| Balance at 31 December 2006 | 3,142 | 861,306 | 5,093,245 | 51,565 | 1,754,833 | 7,764,091 |
| Transfer of prior year net result | - | - | - | 1,754,833 | -1,754,833 | - |
| New share issuance | 12 | - | 54,574 | - | - | 54,586 |
| Purchase of own shares | - | - | -4,395 | - | - | -4,395 |
| Transfer of share based payments | - | - | 7,440 | -7,440 | - | - |
| Share based payments | - | - | - | 23,945 | - | 23,945 |
| Currency translation difference | - | - | -797 | - | - | -797 |
| Net result | - | - | - | - | 37,598 | 37,598 |
| Balance at 30 September 2007 | 3,154 | 861,306 | 5,150,067 | 1,822,903 | 37,598 | 7,875,028 |
KEY FINANCIAL DATA
| Data per share | 1 Jan 2007- 30 Sep 2007 9 months |
1 Jul 2007- 30 Sep 2007 3 months |
1 Jan 2006- 30 Sep 2006 9 months |
1 Jul 2006- 30 Sep 2006 3 months |
1 Jan 2006- 31 Dec 2006 12 months |
|---|---|---|---|---|---|
| Shareholders' equity SEK per share1 | 35.07 | 35.07 | 34.42 | 34.42 | 33.63 |
| Operating cash flow SEK per share 2 | 7.06 | 2.55 | 6.10 | 1.43 | 8.05 |
| Cash flow from operations SEK per share3 | 7.06 | 2.55 | 6.00 | 0.32 | 7.35 |
| Earnings SEK per share4 | 2.33 | 0.71 | 2.22 | 0.33 | 2.83 |
| Earnings SEK per share fully diluted5 | 2.32 | 0.71 | 2.21 | 0.33 | 2.81 |
| Dividend per share | - | - | - | - | - |
| Quoted price at the end of the financial | |||||
| period (regards the parent company), SEK | 74.25 | 74.25 | 77.25 | 77.25 | 79.50 |
| Number of shares at period end | 315,440,580 | 315,440,580 | 314,095,080 | 314,095,080 | 314,215,080 |
| Weighted average number of shares for the | |||||
| period6 | 314,858,088 | 315,417,178 | 269,648,605 | 293,030,056 | 280,867,805 |
| Weighted average number of shares for the | |||||
| period (fully diluted)6 | 315,267,758 | 315,770,319 | 270,866,666 | 294,248,117 | 282,251,337 |
| Key data group | 1 Jan 2007- | 1 Jul 2007- | 1 Jan 2006- | 1 Jul 2006- | 1 Jan 2006- |
| 30 Sep 2007 | 30 Sep 2007 | 30 Sep 2006 | 30 Sep 2006 | 31 Dec 2006 | |
| 9 months | 3 months | 9 months | 3 months | 12 months | |
| Return on equity, %7 | |||||
| 7 | 2 | 8 | 1 | 11 | |
| Return on capital employed, %8 | 11 | 3 | 18 | 4 | 22 |
| Debt/equity ratio, %9 | 17 | 17 | 7 | 7 | 12 |
| Equity ratio, %10 | 57 | 57 | 55 | 55 | 51 |
| Share of risk capital, %11 | 76 | 76 | 85 | 85 | 81 |
| Interest coverage ratio, %12 | 2,425 | 1,220 | 3,895 | 1,998 | 4,010 |
| Operating cash flow/interest ratio13 | 3,547 | 1,922 | 4,264 | 2,785 | 4,848 |
| Yield14 | - | - | - | - | - |
1 the Group's shareholders' equity divided by the number of shares at period end.
2 the Group's operating income less production costs and less current taxes divided by the weighted average number of shares for the period.
3 cash flow from operations in accordance with the consolidated statement of cash flow divided by the weighted average number of shares for the period.
4 the Group's net result divided by the weighted average number of shares for the period.
5 the Group's net result divided by the weighted average number of shares for the period after considering the dilution effect of outstanding warrants.
6 the number of shares at the beginning of the period with new issue of shares weighted for the proportion of the period they are in issue.
7 the Group's net result divided by the Group's average total equity.
8 the Group's income before tax plus interest expenses plus/less exchange differences on financial loans divided by the average capital employed (the average balance sheet total less non-interest bearing liabilities).
9 the Group's interest bearing liabilities in relation to shareholders' equity.
10 the Group's total equity in relation to balance sheet total.
11 the sum of the total equity and the deferred tax provision divided by the balance sheet total.
12 the Group's result after financial items plus interest expenses plus/less exchange differences on financial loans divided by interest expenses.
13 the Group's operating income less production costs and less current taxes divided by the interest charge for the period.
14 dividend in relation to quoted share price at the end of the financial period.
Financial information
The Company will publish the following reports:
- The year end report (January December 2007) will be published on 21 February 2008.
- The three month report (January March 2008) will be published on 20 May 2008.
- The six month report (January June 2008) will be published on 13 August 2008.
- The nine month report (January September 2008) will be published on 12 November 2008.
Stockholm, 14 November 2007
C. Ashley Heppenstall President & CEO
The financial information relating to the nine month period ended 30 September 2007 has not been subject to review by the auditors of the company.