Quarter Financial Highlights - Lundin Petroleum 3Q Highlights 2006

Source: www.gulfoilandgas.com 11/15/2006, Location: Europe

Lundin Petroleum reports a net profit for the nine month period ended 30 September 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 totalling 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 amortisation (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.

Investments
On 31 July 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 1 August 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 12 July 2006, Lundin Petroleum signed an agreement with PDVSA to convert its directly owned 12.5% interest in the Col?n Block Operating Service Agreement into a 5% shareholding in a joint venture company, Baripetrol SA, owning 100% of the Col?n Block. The agreement confirmed the effective date for the transfer as 1 April 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 1 April 2006.

Items impacting the quarterly result
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.

Revenue
Net sales of oil and gas for the nine month period ended 30 September 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 30 September 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 30 September 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 30 September 2006 amounted to USD 62.34 (USD 52.20).

The average Dated Brent price for the nine month period ended 30 September 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 30 September 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.

OPERATIONS
United Kingdom
The net production to Lundin Petroleum in the first nine months of 2006 was 17,100 boepd representing over 60% of the total production for the Group.

Net production from the Broom field (Lundin Petroleum working interest (WI) 55%) averaged 10,700 boepd during the period. Production was in-line with expectations during the third quarter of 2006 with the restoration of water injection capacity following production shortfalls during the second quarter of 2006.

A 3-D seismic acquisition was successfully completed during the first half of 2006 over Broom, Heather and South West Heather fields. The results of the Broom seismic will be incorporated into a revised reservoir simulation model during the first half of 2007 using actual field production data. Further infill drilling will be completed on the Broom field during the second half of 2007 for which rig capacity has been secured.

Production from the Heather field (WI 100%) averaged 2,200 boepd during the period. Limited water injection capacity continued to have a negative impact on production. The project to reinstall the Heather platform drilling rig has been successfully completed. A three well drilling programme of infill wells and workovers has commenced. The drilling programme will continue through 2007 and is expected to have a positive impact on Heather production. The drilling programme will also test the potential of the nonproducing Heather Triassic reservoir.

Net production from the Thistle field (WI 99%) averaged 4,200 boepd during the period. Production was ahead of expectations during the third quarter following the delays earlier in the year of restoring water injection following the 2005 shutdown. Lundin Petroleum has commenced a long-term investment programme to redevelop the Thistle field. The redevelopment involves the reinstallation of the Thistle drilling rig in 2007, a 3-D seismic programme on Thistle and significant facilities investment to ensure an extended life for the Thistle platform.

In the third quarter Lundin Petroleum acquired various working interests in seven exploration licenses in the North Sea from Palace Exploration Company (E & P) Limited of which it is proposed that Lundin Petroleum will assume operatorship in four of the licenses. The acquisition is subject to government approval. The proposed work programme on the acquired licenses includes the drilling of five exploration wells in 2006/2007 for which rig capacity has been secured for four wells. In addition, a further exploration well will be drilled in 2007 on block PL 1176 (WI 25%).

Norway
Net production from the Jotun field (WI 7%) offshore Norway averaged approximately 900 boepd during the period. The infill drilling programme on Jotun is ongoing. The first well came on production in November 2006 with a consequent positive impact on production.

The development of the Alvheim field (WI 15%) offshore Norway continues to progress satisfactorily. Development drilling is ongoing, with the completion of five production and water disposal wells, and will continue over the next two years. In tandem the Alvheim FPSO is in Norway undergoing topsides installation and subsea installation is progressing in the field. First production from Alvheim is expected in the first half 2007 at a forecast net production rate of 12,750 boepd. During the third quarter of 2006 the East Kameleon exploration well was successfully drilled as an oil and gas discovery proving up the north eastern extension of the Alvheim field complex. The successful well coupled with ongoing technical work are expected to lead to reserve increases in the Alvheim field. The Alvheim drilling programme includes further exploration drilling to test increased reserve potential in the area.

A plan of development for the Volund field (formerly Hamsun (WI 35%)) was submitted to the Norwegian Government in the third quarter of 2006. Volund will be developed as a subsea tie back to the Alvheim FPSO. Forecast first production is in 2009 at an initial rate of 8,000 boepd net to Lundin Petroleum.

As detailed above the East Kameleon exploration well (WI 15%) was confirmed as a discovery. Exploration drilling on the Luno prospect in PL338 (WI 50%) operated by Lundin Petroleum has been delayed until the first half of 2007 due to rig delivery delays. This well will be part of a three well 2007 exploration programme in Norway also including PL335 (WI 18%) and PL292 (WI 40%). Rig capacity is secured for all wells.

France
In the Paris Basin production averaged 2,700 boepd for the period. An ongoing programme of workovers and well intervention has yielded a positive impact on production. A four well infill drilling programme on the Villeperdue field (WI 100%) commenced during the third quarter and will be completed in 2007. The exploration well Chevigny-1 in the Val des Marais concession (WI 50%) drilled in July 2006 was plugged and abandoned as a dry hole.

Indonesia
Salawati Island and Basin (Papua)
The net production from Salawati (Salawati Island WI 14.5% and Salawati Basin WI 25.9%) was 2,300 boepd during the period. First production from the TBA field offshore Salawati Island was achieved during the third quarter following the successful installation of a FPSO facility. The TBA field is currently producing at approximately 700 boepd net to Lundin Petroleum.

Banyumas (Java)
The Jati-1 exploration well (WI 25%) was plugged and abandoned as uncommercial in the first half of 2006.

Blora (Java)
The Tengis-1 exploration well (WI 43.3%) has been delayed due to issues associated with field regulatory approvals.

Lematang (South Sumatra)
A plan of development for the Singa gas field (WI 15.88%) is currently awaiting approval from Indonesian regulatory authorities.

A gas sales agreement is currently being negotiated with the state gas distribution company PT Persusahaan Negara (PGN) to supply gas to PGN customers in West Java for 10 years following the earlier signing of a heads of agreement. First gas from the Singa development is forecast for 2008.

Lundin Petroleum signed an agreement in June 2006 to acquire an additional 10 per cent working interest in the Lematang block from Serica Energy plc for USD 5 million. Following completion of the transaction which is subject to government approval, Lundin Petroleum will own a 25.88% working interest in the Lematang block containing the Singa field.

The Netherlands
Gas production from the Netherlands for the period averaged 2,000 boepd. Third quarter 2006 production was below expectations due to low demand from the market during the summer months.

Tunisia
The Oudna field (WI 50%) development was successfully completed in November 2006 with commencement of first oil production. During the third quarter of 2006 the re-classification and upgrading work on the Ikdam FPSO was completed in the Malta drydocks. Production start-up was delayed due to flowline damage, which happened during offshore installation and which has now been successfully repaired. The Oudna field is currently producing as planned on natural flow at a net rate at approximately 4,000 bopd. Full production forecast at 10,000 boepd net to Lundin Petroleum is expected imminently following commencement of jet pump operations.

Production from the Isis field (WI 40%) was suspended in April 2006 as planned. The average production from the field during the period from 1 January 2006 to suspension was 600 boepd.

Venezuela
In July 2006 an agreement was completed between Lundin Petroleum and its partners and the Venezuelan national oil company Petroleos de Venezuela S.A. (PDVSA) in connection with the conversion of the Colon Unit Operating Services Agreement (WI 12.5%) into a new joint venture company with direct participation by PDVSA. Lundin Petroleum holds a 5% equity interest in the new joint venture company, Baripetrol SA. The new arrangement was effective from 1 April 2006 and as such Lundin Petroleum will from this date account for its investment in Venezuela as an equity holding and will not report to its share of production. PDVSA has agreed to extend the period for exploration and production on the Colon block from 2014 to 2025.

The net production from the Colon block in the first quarter 2006 was 1,800 boepd. In the Aquitaine Basin (WI 50%) the net production was 1,000 boepd during the period.

Russia
Following the successful acquisition of Valkyries Petroleum Corporation on 1 August 2006 the net production to Lundin Petroleum from this date has averaged 4,500 boepd.

Development drilling is ongoing at the Orenburg (WI 50%) and Komi (WI 50%) production field operations and will continue throughout 2007. In addition, development drilling at the Kalmykia (WI 51%) field operations is likely to resume in 2007 following ongoing development studies.

The Morskaya-1 exploration well in the Lagansky block located in the North Caspian Sea was delayed until 2007. Construction of the barge mounted facilities necessary for shallow water drilling has been substantially completed in Astrakhan. However, construction delays were experienced such that it was not possible to complete the exploration drilling activities in sufficient time prior to the onset of winter conditions in the North Caspian Sea when drilling is not possible. Seismic acquisition has continued in the Lagansky block with the acquisition of 775 km of data in 2006. It is planned to drill two exploration wells in the Lagansky block in 2007.

Ireland
An offshore exploration well was drilled during the third quarter of 2006 on Petroleum Exploration License ?? 1/05 in the Donegal Basin (WI 30%). The well was plugged and abandoned as a dry hole.

Nigeria
Lundin Petroleum holds a 22.5% net revenue interest in OML 113 offshore Nigeria containing the Aje oil and gas discovery. Technical and commercial studies have been completed and as a result Lundin Petroleum has decided not to proceed with further appraisal drilling on the Aje field. Lundin Petroleum is in the process of relinquishing its interest in the license.

Sudan
A comprehensive peace agreement was signed in Sudan in early 2005 between the Government and the Sudan People’s Liberation Army (SPLA). A new Government has been formed containing representatives of the major political factions. In addition a National Petroleum Commission has been formed comprising of the President of Sudan, representatives of the national Government of Southern Sudan and representatives of the local area where oil activity is taking place. The National Petroleum Commission will oversee petroleum activities in Sudan.

The 2-D seismic acquisition is ongoing on Block 5B (WI 24.5%) where it is planned to acquire 1,100 km of new data. It is forecast that 500 km will be acquired prior to year end 2006. The three well exploration programme in Block 5B is now planned to commence in 2007. Construction of swamp drilling equipment is ongoing. The commencement of drilling operations in 2007 is still subject to the operating environment in Block 5B remaining stable and secure.

Albania
Technical studies are continuing on the Durresi block (WI 50%) with a view to determining future exploration drilling activity the timing of which remains subject to drilling rig availability.

South East Asia / Vietnam
Lundin Petroleum opened a new office in Singapore during the third quarter of 2006 to develop new venture exploration and production opportunities in the South East Asia region. In August 2006 Lundin Petroleum was conditionally awarded a 33.33% working interest in Block 06/94 in the Nam Con Son Basin, offshore Vietnam. The agreement is subject to the execution of a Production Sharing Contract with PetroVietnam.

Ethiopia
A new production sharing contract was signed in November 2006 for Block 2 and 6 (WI 100%), covering 24,000 square kilometers in the Ogaden Basin.

Congo (Brazzaville)
In the third quarter of 2006 Lundin Petroleum acquired an 18.75% working interest in Marine XI Block, offshore Congo (Brazzaville) from Soco International plc. This acquisition is subject to receipt of all necessary approvals. During the fourth quarter of 2006 a 1,200 square kilometer 3-D seismic acquisition programme has commenced on the block.


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