Lundin Energy AB (Lundin Energy) will publish its financial report for the fourth quarter 2021 and host a webcast presentation for the 2021 year end results and a 2022 business update on Tuesday, 1 February 2022.
For the fourth quarter 2021, Lundin Energy will expense pre-tax exploration costs of approximately MUSD 20, and recognise a net foreign exchange loss of approximately MUSD 84.
AkerBP transaction
On 21 December 2021, Lundin Energy announced that it had entered into an agreement (the transaction) with AkerBP whereby AkerBP will absorb Lundin Energy's E&P business through a cross-border merger in accordance with Norwegian and Swedish law. Before completion of the cross-border merger, the shares in the company holding Lundin Energy's E&P business will be distributed to Lundin Energy shareholders. Consequently Lundin Energy will present its E&P business as discontinued operations in the consolidated Income Statement and will present the asset and liabilities associated with the E&P business as assets and liabilities held for distribution.
All the items included in this update on the fourth quarter 2021 financial results relate to Lundin Energy's E&P business unless stated otherwise.
Continuing operations
Once the transaction with AkerBP is completed, the renewable business, which is reported as continuing operations, will be debt free and have a cash balance of MUSD 130, to cover capital expenditure and other working capital items. The renewable business is expected to be free cash flow positive from late 2023, when the renewable portfolio has been fully built out and all projects are operational.
Exploration costs
It is the Company's policy to capitalize costs associated with its exploration activities and when it is determined that a commercial discovery has not been achieved, the associated exploration costs are charged to the income statement. For the fourth quarter of 2021, Lundin Energy will incur pre-tax exploration costs of approximately MUSD 20, which will be charged to the income statement and offset by a tax credit of approximately MUSD 16. The exploration costs are mainly related to the Dovregubben well in PL976, the Lyderhorn well in PL1041 and relinquished licenses.
Net debt and foreign exchange loss
The net debt position of Lundin Energy at 31 December 2021, amounted to USD 2.7 billion, resulting in available liquidity of USD 2.0 billion within its existing credit facility and cash balances held.
Lundin Energy will recognise a net foreign exchange loss of approximately MUSD 84 for the fourth quarter of 2021. The Norwegian Krone was stable against the US Dollar and the Euro weakened by approximately two percent against the US Dollar during the fourth quarter of 2021. The foreign exchange loss is largely non-cash and mainly relates to the revaluation of loan balances at the prevailing exchange rates at the balance sheet date.
Hedging effectiveness
As a result of the AkerBP transaction, part of the outstanding foreign currency contracts and interest rate swap contracts are no longer considered as effective hedges under hedge effectiveness testing. The mark-to-market fair value of these ineffective contracts will be recognized as a non-cash item in the income statement for discontinued operations during the fourth quarter of 2021.
Change in inventory and under/overlift balances
Lundin Energy recognises income based on its sold volume (sales method). Consequently, changes in inventory and under/overlift balances are reported as an adjustment to cost valued at production cost, including depletion. During the fourth quarter of 2021, Lundin Energy was overlifted by 4.5 Mboepd.
Revenue from the crude oil sales from third parties
Lundin Energy markets its own crude oil production and at times markets crude oil from third parties. For the fourth quarter 2021, revenue from the sale of crude oil from third parties amounted to MUSD 72.8 offset by the purchase of crude oil from third parties of MUSD 72.5, resulting in a gross profit of MUSD 0.3 on third party activities for the fourth quarter 2021. The third party crude oil sales and purchase will be reported under discontinued operations.
Contact:
Tel: +1 6319131422
ORRÖN ENERGY AB 
