Lundin braces for 4Q loss

Swedish independent Lundin Petroleum will expense pre-tax exploration costs of $31 million and recognize a net foreign exchange loss of $69 million as well as an after tax loss on sale of assets of $15 million for the fourth quarter of 2017.

The profitability for the fourth quarter of 2017 will be impacted by certain expensed exploration costs, a loss on sale of assets, as well as a net foreign currency exchange loss mainly related to the revaluation of loan balances, the oil company said on Wednesday.

These items are largely non-cash and will have no impact on operating cash flow or EBITDA, Lundin added.

Exploration Costs

During the fourth quarter of 2017, Lundin Petroleum will incur pre-tax exploration costs of approximately $31 million which will be charged to the income statement and offset by a tax credit of approximately $24 million. The exploration costs are mainly related to the non-commercial gas discovery on the Hufsa prospect and the dry well on the Hurri prospect, both located in PL533 in the Barents Sea.

Loss assets sale

The previously announced transaction in relation to the divestment of a 39 percent working interest in the Brynhild field in the North Sea to CapeOmega was completed on November 30, 2017. Lundin Petroleum has previously announced that on completion of the transaction a net loss on sale of assets would be recorded as a result of the accounting for income taxes in accordance with IFRS. Consequently, an after tax loss of $15 million will be charged to the income statement for the fourth quarter 2017.

Net debt & foreign exchange loss

The net debt position of Lundin Petroleum at December 31, 2017 amounted to $3.9 billion resulting in available liquidity of $1.1 billion within its $5 billion reserve-based lending facility.

Lundin Petroleum will recognize a net foreign exchange loss of approximately $69 million for the fourth quarter of 2017. The Norwegian Krone weakened against the US Dollar by approximately 3 percent and the Euro strengthened against the US Dollar by approximately 2 percent during the fourth quarter of 2017. The foreign exchange loss mainly relates to the revaluation of loan balances at the prevailing exchange rates at the balance sheet date.