Lundin to increase spending in 2020 by 30 pct

Swedish oil and gas company Lundin Petroleum has increased its 2020 budget by 30 percent compared to the last year and boosted its production guidance for the year with expectations for long-term growth. 

Lundin said on Friday that its 2020 development, appraisal, exploration and abandonment budget would total $1.27 billion, representing a 30 percent increase on 2019 capital expenditure.

The production guidance for 2020 is between 145 to 165 thousand barrels of oil equivalent per day (Mboepd) and the long-term production guidance is increased to 160 – 170 Mboepd from 2021 with a target of over 200 Mboepd.

Lundin also on Friday released its full year 2019 and 4Q 2019 financial report. According to the report, Lundin’s revenues were $749.7 million in 4Q 2019 compared to revenues of $652.2 million in the same period of 2018.

The company’s net result in 4Q 2019 was $155.3 million, compared to a loss of $98.2 million in 4Q 2018. Lundin’s adjusted net result in the last quarter of 2019 was $78.9 million, compared to $75.2 million in 4Q 2018.

For the full year 2019, Lundin posted a profit of $824.9 million, an increase compared to $225.7 million profit in 2018. Revenues in 2019 were $2.9 billion, an increase from $2.6 billion revenues in 2018.

Production guidance

Lundin’s average production in 2019 was 93.3 Mboepd, which was above the mid-point of the upgraded 2019 production guidance of between 90 and 95 Mboepd, and 10 percent above the mid-point of the original guidance of 75 to 95 Mboepd.

Lundin Petroleum’s production guidance for 2020 is between 145 to 165 Mboepd, reflecting the ramp-up of Johan Sverdrup Phase 1 to plateau levels by the summer of 2020 and a planned two-week maintenance shutdown at Edvard Grieg in the second quarter of 2020. The production contribution is split approximately 50 percent from the Johan Sverdrup field, 40 percent from the Edvard Grieg field, and the remainder from the other assets.

The long-term production guidance for the company has been increased to between 160 and 170 Mboepd from 2021 onwards, with a target of over 200 Mboepd from upsides from existing fields. The updated long-term guidance reflects the sale of a 2.6 percent interest in Johan Sverdrup during 2019, which is offset by an extension of the Edvard Grieg plateau period.

Development budget

The 2020 development expenditure is budgeted at $895 million, which is an increase of one-third over 2019 levels. The Edvard Grieg tie-back projects, Solveig and Rolvsnes EWT will see increased activity compared to last year, and drilling will start on the Edvard Grieg infill campaign.

Approximately 40 percent of the 2020 budgeted development expenditure relates to the non-operated Johan Sverdrup field (WI 20%). The remaining spend for the Phase 1 project relates mainly to the drilling of additional development wells, while the Phase 2 project will see another active year of construction ahead of scheduled start-up in 4Q 2022.

Approximately 35 percent of the budgeted development expenditure relates to the operated Solveig project (WI 65%) and the Rolvsnes Extended Well Test (WI 80%). Both projects will be subsea tie-backs to Edvard Grieg and are being implemented together.

In 2020, offshore construction activities will take place, which include the installation of the subsea equipment and pipelines. On Solveig, drilling will start on the first development wells during the year and the project remains on track for first oil in 1Q 2021.

The Edvard Grieg field (WI 65%) 2020 program, includes drilling of the first of the three infill wells sanctioned in 2019, as well as contribution to the Utsira High Area power from shore system.

Budgeted expenditure at the non-operated Alvheim area involves the drilling of two infill wells.

Exploration & appraisal 

Lundin’s exploration and appraisal budget for 2020 is $225 million and involves the drilling of 10 wells, of which five are operated, and is targeting over 650 MMboe of net unrisked resources.

Four exploration wells are planned in the Southern Barents Sea. Two wells will be drilled on the Loppa high area close to the Alta/Gohta discoveries, targeting the Polmak prospect in PL609 (WI 40%) and the Bask prospect in PL533B (WI 40%). The other wells to be drilled are Schenzhou in PL722 (WI 20%) close to the Wisting oil discovery, and Spissa in PL960 (WI 20%).

In the Norwegian Sea, two wells are planned, an appraisal well on the Balderbrå gas discovery made in 2018 in PL894 (WI 10%) estimated to contain between 50 and 140 MMboe of gross resources and an exploration well on the Melstein prospect in PL886 (WI 60%).

Four exploration wells are planned to be drilled in the Norwegian North Sea, Iving in PL820S (WI 40%) and Hasselbaink in PL917 (WI 20%) both located east of the Alvheim area, Merckx in PL981 (WI 60%) in the greater Utsira High area within tie-back distance to Edvard Grieg, and the Dovregubben prospect in PL976 (WI 50%) on the Sele High southeast of the Utsira High.

The 2020 abandonment expenditure budget is $50 million for abandonment of the Brynhild development wells, representing the bulk of the field abandonment costs, and with the subsea facilities scheduled to be decommissioned in 2021.

Lundin Petroleum has recently revealed its strategy to reach carbon neutrality by 2030 and proposed to change its name to Lundin Energy to better reflect its “clear actions and targets towards a lower carbon future.”

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