Exploration costs to burden Lundin
Swedish oil company Lundin Petroleum will expense pre-tax exploration costs of approximately $71 million and recognise a net foreign exchange gain of approximately $159 million for the first quarter of 2016.
The company said on Friday that the profitability for the first quarter of 2016 would be impacted by certain expensed exploration costs as well as a net foreign currency exchange gain, mainly related to the revaluation of loan balances.
These items will have no impact on the reported operating cash flow or EBITDA for the period, Lundin stated.
According to the oil company, during the first quarter of 2016, Lundin will incur pre-tax exploration costs of approximately $71 million which will be charged to the income statement and offset by a tax credit of approximately $42 million.
The exploration costs mainly relate to the unsuccessful Lorry (PL700B) and Fosen (PL544) exploration wells in Norway and the Bambazon and Maligan exploration wells (Block SB307/308), offshore Sabah in Malaysia.
Lundin Petroleum further said it would recognise a net foreign exchange gain of approximately $159 million in its income statement for the first quarter of 2016. The Norwegian Krone and Euro strengthened against the US Dollar by approximately 5 percent during the first quarter of 2016 and the foreign exchange gain mainly relates to the revaluation of loan balances at the prevailing exchange rates at the end of the reporting period, the company explained.
Lundin said that the foreign exchange gain on the revaluation of loan balances was partly offset by settled foreign currency hedge losses in the first quarter of 2016 amounting to approximately $18 million.