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    Lundin Books $549mn Impairment

Summary

The Swedish firm will book a big impairment charge in 4Q results after taking Malaysian gas and Russian oil reserves off its balance sheet.

by: Mark Smedley

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Lundin Books $549mn Impairment

Sweden-based Lundin Petroleum announced January 19 a net 4Q2016 upstream impairment charge of $549mn ($632mn gross, offset by a $83mn tax credit) after having taken gas discoveries offshore Malaysia and oil found in the Russian Caspian off its balance sheet.

Lundin said it’s now unlikely any of the discoveries -- offshore Sabah in east Malaysia, plus the Tembakau gas find offshore peninsular Malaysia, as well as the Morskaya find in the Caspian -- can be commercialised in the near future. It did go into further detail on why they are unlikely to be developed. The affected Malaysia reserves are 60.6mn barrels of oil equivalent; those at Morskaya are 110.1mn boe.

It cautioned that 4Q2016 will therefore be negatively impacted by the impairment charges, as well as by a net $216mm foreign exchange loss, and $11mn of net exploration costs in the quarter, mainly on drilling the Neiden prospect in Norway's PL609 licence. The company is scheduled to report 2016 and 4Q earnings on February 1.

Lundin though said its 2016 production averaged 72,600 boe/d, of which a record 83,400 boe in 4Q, and the firm said it was “financially strong” with net debt of $4.1bn at end-December 2016 resulting in available liquidity of $0.9bn -- within its $5bn reserve-based lending facility backed by 28 banks.

 

Mark Smedley