Lundin Says 1Q Profitability Affected by Exploration Costs, FX Losses

Sweden's Lundin Petroleum reported Wednesday that its profitability for the first quarter of 2015 will be adversely affected by exploration costs and a foreign currency exchange loss. However, the firm pointed out that these items are non-cash charges that will have no impact on the reported operating cash flow or EBITDA for the period.

Lundin said it will incur pre-tax exploration costs of approximately $45 million. These are mainly related to two exploration wells drilled in Norway during the first quarter: Gemini on production license 338C (a dry well) and Zulu on PL674BS (a gas discovery).

Lundin's $204 million non-cash foreign exchange loss relates to the revaluation of loan balances at the prevailing exchange rates at the end of the reporting period.

Lundin CFO Mike Nicholson commented in a company statement:

"Whilst Lundin Petroleum has generated a largely non-cash foreign exchange loss driven primarily by the impact of a stronger US dollar on our intra group loan balances, we must recognize that a strong US dollar is positive for the company. The majority of our revenues are earned in US dollars, and the value of the assets of the company is predominantly US dollar driven. In addition, a strong US dollar is beneficial in terms of lowering the cost of funding our non-US dollar denominated expenditures."

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