Lundin Reports 3Q06 Results

Lundin Petroleum reports a net profit for the nine month period ended September 30, 2006 of MSEK 598.5 (MSEK 885.8) and MSEK 96.4 (MSEK 419.8) for the third quarter of 2006 representing earnings per share on a fully diluted basis of SEK 2.21 (SEK 3.45) for the first nine months of 2006 and SEK 0.33 (SEK 1.62) for the third quarter of 2006. The profit for the third quarter of 2006 has been adversely affected by the write offs of exploration expenditure for wells drilled in Ireland and France totaling MSEK 59.2.

Operating cash flow for the first nine months of 2006 amounted to MSEK 1,653.0 (MSEK 2,011.0) and MSEK 421.4 (MSEK 736.4) for the third quarter of 2006 representing operating cash flow per share on a fully diluted basis of SEK 6.10 (SEK 7.84) for the first nine months of 2006 and SEK 1.43 (SEK 2.85) for the third quarter of 2006.

Earnings before interest, tax and depletion and amortization (EBITDA) for the first nine months of 2006 amounted to MSEK 2,172.6 (MSEK 2,121.7) and MSEK 591.5 (MSEK 827.0) for the third quarter of 2006 representing EBITDA per share on a fully diluted basis of SEK 8.02 (SEK 8.27) for the first nine months of 2006 and SEK 2.01 (SEK 3.20) for the third quarter of 2006.

On July 31, 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 August 1, 2006. The acquired business contributed revenues of 99.9 MSEK and a net loss of 7.3 MSEK to Lundin Petroleum for the 61 day period.

On July 12, 2006, Lundin Petroleum signed an agreement with PDVSA to convert its directly owned 12.5% interest in the Colon Block Operating Service Agreement into a 5% shareholding in a joint venture company, Baripetrol SA, owning 100% of the Colon Block. The agreement confirmed the effective date for the transfer as April 1, 2006. Under the IFRS rules, under which Lundin Petroleum prepares its financial statements, this investment will be treated as an equity investment and Lundin Petroleum will only report income on a cash receipt basis. As such, Lundin Petroleum has ceased to report production and reserves, and revenue and cost of sales for the Colon Block from April 1, 2006.

During the third quarter of 2006 exploration wells were drilled on the Donegal license offshore Ireland and the Val des Marais well in France. Both wells were completed with unsatisfactory results and have been written off. The write offs for the Donegal and Val des Marais wells amounted to MSEK 40.0 and MSEK 19.2 respectively.

Net sales of oil and gas for the nine month period ended September 30, 2006 amounted to MSEK 3,128.0 (MSEK 3,027.0) and MSEK 935.1 (MSEK 1,123.0) for the third quarter of 2006. Production for the nine month period ended September 30, 2006 amounted to 7,657.6 (9,243.3) thousand barrels of oil equivalent (mboe) and 2,471.8 mboe (2,907.8 mboe) for the third quarter of 2006 representing 28.1 mboe per day (mboepd) (33.9 mboepd) for the nine month period ended September 30, 2006 and 26.9 mboepd (31.6 mboepd) for the third quarter of 2006. The average price achieved for a barrel of oil equivalent for the nine month period ended September 30, 2006 amounted to USD 62.34 (USD 52.20).

The average Dated Brent price for the nine month period ended September 30, 2006 amounted to USD 66.95 (USD 53.76) per barrel resulting in a post-tax negative hedge settlement of MSEK 99.0 (MSEK 177.3).

Other operating income for the nine month period ended September 30, 2006 amounted to MSEK 147.9 (MSEK 137.9) and MSEK 38.9 (MSEK 49.3) for the third quarter of 2006. This amount includes tariff income from the United Kingdom, France and the Netherlands and income for maintaining strategic inventory levels in France. The sale of CO2 emission rights in the United Kingdom during the second quarter of 2006 generated revenue of MSEK 22.3.

During the nine months to September 30, 2006 Lundin Petroleum generated a net profit after taxes of MSEK 599 (MUSD 80). Operating cash flow for the period was MSEK 1,653 (MUSD 221) and earnings before interest, tax and depreciation (EBITDA) was MSEK 2,173 (MUSD 291).

We have revised our financial forecasts for 2006 based upon a reduced Brent oil price of USD 60.00 per barrel for the remainder of 2006 as opposed to a previous forecast of USD 65.00 per barrel. We have also incorporated the actual third quarter financial results including exploration write off, the forecast financial results from Russia and delays to the start-up of Oudna production.

As a result we forecast a 2006 profit after taxes of MSEK 820 (MUSD 110) versus a previous forecast of MSEK 975 (MUSD 130).

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Brent Crude Oil : $56.86/BBL 0.76%
Light Crude Oil : $50.66/BBL 0.21%
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