Lundin Counts Barents Drilling Costs

Lundin Petroleum said January 17 it will book losses of $115mn in its 4Q 2017 earnings, comprising pre-tax exploration costs of $31mn, a net foreign exchange loss of $69mn and an after-tax loss on the sale of assets of $15mn.

The exploration costs are mainly due to the Swedish independent's non-commercial gas discovery on the Hufsa prospect and a dry well on the Hurri prospect, both on PL533 in the southern Barents Sea; but it said they would be offset by a tax credit of some $24mn. The forex loss is due to a 3% weakening of the Norwegian krone and 2% strengthening of the euro, both relative to the US dollar, and consequent revaluation of loan balances.

The $15mn loss is on divestment of a 39% working interest in the Brynhild oil field to CapeOmega, completed November 30 2017;  Lundin had anticipated a loss of some kind. Brynhild is in the southern North Sea, not far from the UK median, and was Lundin's first field development as operator and started up December 2014. Lundin retains 51% and operatorship.

Lundin said the items are largely non-cash and will have no impact on operating cash flow or operating profits (Ebitda).

Update: Japan's Inpex said January 17 it was among 34 firms to have been awarded licence stakes in Norway's APA 2017 round, announced the previous day.  It secured one licence interest in PL950 in the western Barents Sea, above the Arctic Circle some 70km offshore. Licensees include Lundin (50%), Norway's state Petoro (20%) and Inpex (30%). It is one of six new licences which Lundin is to operate; in addition Lundin has been offered several non-operated licence interests.