Lundin Announces Year End Report 2020

Source: 1/28/2021, Location: Europe

- Strong financial performance with free cash flow generation of MUSD 448, operating cost below guidance at USD 2.69 per boe and reduced net debt to USD 3.9 billion
- Balance sheet re-financed with USD 5 billion corporate facility with significantly improved terms
- Board of Directors propose to increase 2020 dividend by 80 percent to USD 1.80 per share corresponding to MUSD 512
- Record quarterly production in the fourth quarter of 185 Mboepd and 2021 production guidance set between 170 to 190 Mboepd
- Johan Sverdrup Phase 1 plateau production raised to 500 Mbopd gross, with expectation to increase up to 535 Mbopd by mid-2021
- Edvard Grieg reserves increased by 50 MMboe to 350 MMboe gross 2P ultimate recovery, extending plateau a further year to late 2023
- Delivering growth with resource additions of 210 percent of production in 2020 and pipeline of new projects with net resources of approximately 200 MMboe being matured for development within the temporary tax incentives
- Acceleration of Decarbonisation Strategy achieving carbon neutrality from 2025 from operational emissions

Comment from Nick Walker, President and CEO of Lundin Energy:
“I’m pleased to report that in 2020 Lundin Energy delivered another strong set of results. Our operations and key projects remain on track, despite the impact of COVID-19 and unprecedented oil price volatility, demonstrating the resilience of our industry leading, low-cost business.

“This was a challenging year for all, with the impact from COVID-19 on people’s health, society and of course the global oil market. At Lundin Energy we continue to handle the impact with agility and flexibility, safeguarding our people’s well-being whilst keeping our main business priorities on course. We exited 2020 with record production in the fourth quarter of 185 Mboepd, resulting in annual production of 165 Mboepd at the top end of the original guidance range, despite the production cuts imposed by the Norwegian government. Operating costs were just USD 2.69 per boe, below the guidance for the year.

“Our world class assets continue to outperform and production is now set to exceed 200 Mboepd by 2023. Edvard Grieg gross 2P ultimate recovery was raised to 350 MMboe, almost double the original project sanction level. Alongside area tie-back developments this extends the production plateau to end 2023, which I anticipate will go further with upsides and area exploration opportunities. At Johan Sverdrup we reached Phase 1 plateau production ahead of schedule and the facilities capacity has been lifted significantly with an expectation of reaching up to 535 Mbopd gross from mid-2021. This is an increase of 95 Mbopd on design levels, and the full field plateau should increase to 720 Mbopd, when Phase 2 starts up in the fourth quarter of 2022.

“Our growth strategy continues to deliver results with total resource additions in 2020 of 210 percent of produced volumes. With a pipeline of nine potential new projects, prioritised for development within the new tax environment, and our active exploration and appraisal programme in 2021, targeting over 300 MMboe of net unrisked resources, I am confident that we can continue to grow resources.

“Financially we had a strong year, despite record low oil prices, delivering free cash flow of MUSD 448, covering our 2020 dividend more than 1.4 times, enabling us to deleverage the business at an average realised oil price of USD 40.0 per barrel. Liquidity was further strengthened with the successful refinancing of the business through a USD 5 billion committed corporate facility, with significantly improved terms. I am pleased to note that the Board of Directors is recommending a 80 percent increased dividend of USD 1.80 per share (in total MUSD 512), clearly demonstrating our commitment to sustain and increase shareholder returns. The Company’s policy remains to pay a sustainable dividend even below USD 50 per barrel.

“We have also delivered on our Decarbonisation Strategy in 2020. Work continues on the electrification of our key producing assets alongside our investments in renewable energy to offset and replace the electricity we consume. When combined with our natural carbon capture projects, we can now achieve carbon neutrality from 2025; a first for the upstream industry, and showing we can deliver both profitable growth and environmental benefits.

“It is an honour to be taking up the reins of this industry-leading Company and I would like to express my deep gratitude to Alex Schneiter for providing exceptional leadership over the past five years. His foresight and ambition means that Lundin Energy is, and will continue to be, at the forefront of the industry. I would like to thank all our stakeholders for their support during this very challenging year. I look forward to reporting on our active 2021 programme and I am encouraged by the outlook for the business, which is well positioned to deliver resilient, sustainable growth into the future.”

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