ORRÖN ENERGY AB YEAR END REPORT
2015Lundin Petroleum AB (publ)
company registration number 556610-8055
› 1 ‹
Production of 32.3 Mboepd (23.8 Mboepd)1
Revenue of MUSD 569.3 (MUSD 785.2)
EBITDA of MUSD 384.7 (MUSD 671.3)
Operating cash flow of MUSD 699.6 (MUSD 1,138.5)
Net result of MUSD -866.3 (MUSD -431.9) including a net foreign exchange loss of MUSD -507.3 and an after tax impairment charge of MUSD -296.3
Net debt of MUSD 3,786 (31 December 2014: MUSD 2,609)
Edvard Grieg facilities successfully installed offshore Norway and first oil was achieved in November 2015.
The Bøyla field, Norway and the Bertam field, Malaysia commenced production in January and April 2015 respectively.
The Norwegian Ministry of Petroleum and Energy approved the Plan for Development and Operations (PDO) for Johan Sverdrup Phase 1 in August 2015.
Alta appraisal and sidetrack wells in the southern Barents Sea, Norway completed successfully.
Eight exploration licences awarded in the Norwegian 2014 APA licensing round, six as operator.
Production licence obtained for the Morskaya field in the Caspian Sea, Russia.
NOK 4.5 billion financing facility for Norwegian exploration was signed in April 2015.
Fourth quarter ended 31 December 2015 (31 December 2014)Production of 38.3 Mboepd (22.0 Mboepd)1
Revenue of MUSD 136.0 (MUSD 135.2)
EBITDA of MUSD 93.6 (MUSD 164.4)
Operating cash flow of MUSD 175.4 (MUSD 334.5)
Net result of MUSD -493.7 (MUSD -437.0) including a net foreign exchange loss of MUSD -129.2 and an after tax impairment charge of MUSD -296.3
1 Jan 2015- 31 Dec 2015 12 months | 1 Oct 2015- 31 Dec 2015 3 months | 1 Jan 2014- 31 Dec 2014 12 months | 1 Oct 2014- 31 Dec 2014 3 months | |
Production in Mboepd1 | 32.3 | 38.3 | 23.8 | 22.0 |
Revenue in MUSD | 569.3 | 136.0 | 785.2 | 135.2 |
Net result in MUSD | -866.3 | -493.7 | -431.9 | -437.0 |
Net result attributable to shareholders of the Parent Company in MUSD | -861.7 | -492.5 | -427.2 | -436.0 |
Earnings/share in USD2 | -2.79 | -1.59 | -1.38 | -1.41 |
Earnings/share fully diluted in USD2 | -2.78 | -1.59 | -1.38 | -1.41 |
EBITDA in MUSD | 384.7 | 93.6 | 671.3 | 164.4 |
Operating cash flow in MUSD | 699.6 | 175.4 | 1,138.5 | 334.5 |
1 Excluding production from Russian onshore assets following the sale of the assets in July 2014.
2 Based on net result attributable to shareholders of the Parent Company
An extensive list of definitions can be found on www.lundin-petroleum.com under the heading "Definitions".
AbbreviationsWe continue to witness extreme volatility in oil prices with falls to levels not seen in over a decade and it is clear to me that the battle for market share is approaching its final conclusion. At current price levels I believe a rebalancing of supply and demand is inevitable and likely to take place during the second half of 2016 as higher cost producers are forced to curtail production levels. We know from our own experience that unique and highly prized assets such as Johan Sverdrup are not discovered every day and it is only fields with these characteristics that can be developed at current price levels. All fields face natural decline and therefore the significant investment cuts and project deferrals that we have seen will ultimately lead to a recovery in oil prices.
That being said we must face the realities of low oil prices and the best strategy in such market conditions is to execute on and deliver a low cost asset base. That is exactly what we are doing.
It makes me very proud to report that our Company passed a significant milestone by achieving first oil from Edvard Grieg at the end of November. We delivered this project ahead of our latest guidance, and more importantly it was delivered safely and within budget. Initial performance is very encouraging and ahead of our expectations in terms of facilities uptime and well productivity. This has been a remarkable achievement by our Norwegian project team, our contractors and subcontractors and would not have been possible without the excellent support received from our partners and the government in Norway. Edvard Grieg marks the beginning of a transformational increase in Lundin Petroleum's production levels and cash flow generation going forward. I am also pleased to report that we met our revised production forecast of 32,000 boepd for the full year.
Our Company is in strong health with reserves of close to 700 MMboe and a production base that will grow significantly. Our cost of operations will fall below USD 10 per barrel and with strong access to liquidity to withstand the current low oil price environment we will emerge from this downturn as a company that is stronger than ever.
Recently, Statoil announced the acquisition of a minority shareholding in Lundin Petroleum, corresponding to 11.93 percent of the shares outstanding. Statoil has stated that there is no further plan to increase their shareholding in the Company and that they are supportive of Lundin Petroleum's management, its Board of Directors and its strategy. We welcome Statoil as a long-term shareholder of Lundin Petroleum and we view such an investment as a testimony of the unique and very valuable portfolio which the Company has built during this last decade. We are looking forward to continue to successfully work together with Statoil as a partner with the ultimate objective to further enhance the value of our key assets such as Edvard Grieg and Johan Sverdrup.
Edvard Grieg commenced production on 28 November 2015 and since then has achieved a remarkable average uptime of
95 percent. Initial productivity per well has also exceeded expectations. This excellent performance has allowed us to achieve spot production rates in excess of 90,000 boepd when our third Edvard Grieg production well was brought on stream. In addition, following successful field appraisal, we have been able to book an additional 20 MMboe of gross 2P reserves on the Edvard Grieg field bringing the total gross field reserves to 206 MMboe.
Our fourth quarter production averaged 38,300 boepd and was slightly ahead of our guidance. The positive impact of the Edvard Grieg field coming onstream earlier than forecast was partially offset by facilities related issues on the Alvheim FPSO which have now been resolved. The Alvheim FPSO continues to provide excellent uptime and reliability with production efficiency of 94 percent for 2015.
The Brynhild field delivered production in line with our guidance for the second half of 2015, however achieving consistent levels of uptime performance remains challenging. The Brynhild subsurface data acquired so far from the producing wells suggests the connected volume is significantly lower than was predicted in our Plan of Development. This downward revision to Brynhild reserves has however been offset by positive revisions to our Alvheim area and Edvard Grieg reserves.
For 2016 our production guidance is between 60,000 and 70,000 boepd. This equates to a doubling of 2015 levels. The Edvard Grieg field is today the largest contributor of Lundin Petroleum's production growth until the Johan Sverdrup field comes onstream towards the end of 2019. Edvard Grieg will reach its plateau production as planned during the second half of 2016.
Our cost of operations for the full year remains low and was below forecast at approximately USD 10.25 per barrel. Our costs of operations for 2016 are forecast at USD 8.25 per barrel for the full year.
The execution of the Johan Sverdrup Phase 1 development is going according to plan. More importantly, we continue to see the benefit of the current market conditions and the impact of the low oil price environment on costs. Statoil, the operator of the Johan Sverdrup field, have reported further cost reductions for Phase 1 which is now estimated at NOK 108.5 billion
compared to the original plan of development estimate of NOK 123 billion; a downwards revision of 12 percent. Furthermore, debottlenecking measures have been approved with the aim to increase Phase 1 production capacity.
Significant progress has also been achieved towards the concept definition of Phase 2. This has resulted in further savings with the total full field capital expenditure now estimated at between NOK 160 to 190 billion (real) compared to the original plan of development full field estimate of NOK 170 to 220 billion. Phase 2 concept selection is anticipated to be made towards the end of 2016.
Johan Sverdrup is ideally positioned to take the full benefit of this challenging environment and corresponding low oil price. There is no better time to go in the market and award contracts. I anticipate we will see further cost savings in Johan Sverdrup which will further improve the economics of this world class project.
We continue to be active on the exploration front with particular focus on the southern Barents Sea, the Utsira High and the Sabah area in Malaysia. During the fourth quarter we announced a new discovery, Rolvsnes, located just south of the Edvard Grieg field and on trend with the Luno South discovery. Studies are ongoing to establish the commerciality of these discoveries as potential tie-back to the Edvard Grieg facilities.
Although it is fair to say that overall our fourth quarter exploration track record has been disappointing I remain confident in our ability to continue to find new resources with the quality and potential to create value within our own core exploration areas. Overall, we have demonstrated that with a focused approach, innovative and creative thinking and a long term strategy of organic growth, we will continue to generate significant shareholder value with our average finding costs in Norway remaining well below USD 1 per barrel.
In 2016 our strategy remains unchanged and our main focus will be the southern Barents Sea where we will be active on both fronts; exploration and appraisal with a particular focus on the existing Alta discovery area. I firmly believe that the southern Barents Sea potential is significant and this is a region where the Company will dedicate significant resources for the years to come. Further exploration drilling will also be taking place on the Utsira High and in the Sabah area in Malaysia.
Our 2016 objectives are very clear. First of all, we will maximise our existing operational efficiency to establish a solid foundation of strong cash flow for the next growth phase of the Company. Capital and operational efficiency is in the forefront of our minds. We are also embracing the low oil price environment as a time of opportunity when it comes to our operations. Secondly, we will continue to work very hard to maintain a robust balance sheet and strong access to liquidity. Capital discipline will be a major focus in these challenging times. This will also allow us to maintain an opportunistic attitude and take full advantage of the current deflationary environment. Thirdly, we will continue to play a proactive role towards the execution of the Johan Sverdrup field and provide all the support required at the partnership level to maximise the ultimate profitability of this world class asset. Finally, our organic growth strategy remains intact and we will continue to explore for new resources. In this environment, though, we will maintain a very disciplined and focused approach, which, in actual fact, has been very successful in the past, leading to great discoveries and value creation.
It goes without saying that these objectives will be realised without compromising on the health and safety of our people and our responsibility to our stakeholders. As we enter a new phase of significant growth I am confident in our ability to take full advantage of this challenging environment. Ultimately, this is about positioning the Company to deliver sustainable value driven transformation. This transformation is possible with the enthusiasm and hardworking culture embedded in the
Company. I am very grateful for the continued support from you fellow shareholders, the Board and the whole team at Lundin Petroleum.
Yours Sincerely,
President and CEO Stockholm, 3 February 2016
Lundin Petroleum AB issued this content on 03 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 03 February 2016 06:13:26 UTC
Original Document: https://www.lundin-petroleum.com/Press/pr_corp_03-02-16_e.pdf
