Orrön Energy AB (publ) Annual Report 2018

FY2018 Annual Report · Orrön Energy AB (publ)
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Delivering 
on our vision

Annual Report 2018

1

Lundin Petroleum is one of the leading 
independent oil and gas companies in 
Europe with a strategic focus on Norway. 
We create sustainable, long-term value 
across the full spectrum of the oil and 
gas value chain.

Report Highlights

Annual Report 2018

pages 
10 -15

Production growth
The Johan Sverdrup development project in 
combination with a pipeline of potential new 
projects means that Lundin Petroleum has a 
strong production growth trajectory for the 
coming years.

pages 
3 &17

Low carbon operations
Lundin Petroleum operates with one of the 
lowest carbon emissions intensities in the 
industry.

pages 
4  & 40

Strong cash flow generation
Record free cash ﬂ ow generation, resulting in a 
proposed dividend for 2018 of USD 1.48 per share, 
corresponding to MUSD 500

Strategic Report

Our business model  
2018 performance 
Management review  
Operations 
Responsibility  
Risk management 

Corporate Governance Report

Guiding principles 
Board of Directors  
Group management  
Internal control over ﬁ nancial reporting  
Auditor’s report 

2
4
6
8
16
18

22
27
33
38
39

Financial Report

40
Financial summary 
42
Directors’ report 
53
Financial statements of the Group 
Accounting policies 
58
Financial statements of the Parent Company   89
95
Board assurance 
96
Auditor’s report 

Additional Information

Key ﬁ nancial data  
Relevant reconcilliations of alternative  
performance measured 
Key ratio deﬁ nitions  
Five year ﬁ nancial data  
Reserve quantity information 
Deﬁ nitions and abbreviations  
Share data  
Shareholder information 

101

102
103
104
105
106
107
108

Sustainabilty reporting 2018

Read more about Lundin Petroleum’s performance 
and management approach on environmental, 
governance and social issues in the Sustainability 
Report available on www.lundin-petroleum.com.

This report constitutes the Annual Report for Lundin 
Petroleum AB (publ), company registration number 
556610-8055.

Lundin Petroleum AB (“Lundin Petroleum” or “the 
Company”) is a Swedish public limited liability company 
listed on Nasdaq Stockholm with ticker “LUPE”.

Lundin Petroleum Annual Report 2018

1

  
 
STRATEGIC REPORT | Our Business Model

Delivering on our vision

Our vision is to grow a profitable upstream exploration 
and production company focused on organic growth, in 
a safe and environmentally responsible manner for the 
long-term benefit of our shareholders and society.

Innovative and responsible operator in Norway
Lundin Petroleum has grown to become one of the largest operated acreage 
holders in Norway, with a proven track record of discovering, developing and 
producing oil and gas resources efficiently and responsibly. 

with a focus on organic growth
By actively pursuing new exploration acreage in core areas we secure access to 
new reservoirs and plays. Our subsurface expertise, in combination with cutting-
edge technology, ensure an organic growth strategy that is sustainable and 
successful. 

delivering long-term sustainable value 
Our active organic growth strategy has delivered a strong long-term production 
profile and a pipeline of future growth opportunities. This gives us the capacity to 
deliver increased free cash flows and a sustainable and progressive dividend.

2

Lundin Petroleum Annual Report 2018

and low carbon operations
The oil and gas industry must be part of the 
solution for making global energy systems 
sustainable for future generations. Thanks to 
carbon mitigation technology and improved 
emissions management, Lundin Petroleum 
operates with one of the lowest carbon intensity 
levels in the industry – about a quarter of the 
industry world average.

Our low carbon performance is set to improve 
further in the coming years, with power from 
shore for Johan Sverdrup and Edvard Grieg. 

In 2018, power supply from shore started for 
Johan Sverdrup. This will help reduce emissions 
by an estimated 460,000 tonnes per year, 
equivalent to the emissions of 230,000 cars, and 
will make Johan Sverdrup among the most 
carbon efficient fields in the world.

Lundin Petroleum Annual Report 2018

3

STRATEGIC REPORT | Performance 2018

2018 Performance

Outstanding operational performance 
at industry leading low operating cost 

generated record high operating cash 

flow and free cash flow for 2018. 

4

Lundin Petroleum Annual Report 2018

I

L
A
N
O
T
A
R
E
P
O

Production

Operating cost

Reserves

81

Mboepd

3.66

USD/boe

745

net MMboe

I

L
A
C
N
A
N
F

I

Operating
 cash flow

1848

MUSD

EBITDA

1916

MUSD

Free 
cash flow

663

MUSD

Contingent 
resources 

225

net MMboe

Proposed 
dividend

500

MUSD

E
L
B
A
N
A
T
S
U
S

I

Safe operations

Process safety

Environment

Zero

serious injuries

Zero

incidents

Zero

material incidents

Carbon intensity
Edvard Grieg

4.9

CO2e kg/boe

Lundin Petroleum Annual Report 2018

5

STRATEGIC REPORT | Management Review

“

Our industry leading cost 
efficient growth and strong 
financial outlook enables us 
to distribute material and 
sustainable dividends, while 
continuing to deliver on our 
successful organic growth 
strategy.

Alex Schneiter
President and CEO

2018 was a standout year across all
areas of our business, with excellent
performance from our producing
assets, strong financial results
and success with the drill bit. This
success has been achieved while
maintaining an industry leading
low carbon intensity per produced
barrel, at about one quarter of the
industry world average.

Buoyed by stronger commodity prices, operating cost
below guidance and very strong production efﬁ ciency, we
delivered a record high free cash ﬂ ow in 2018. For the ﬁ fth
consecutive year, we more than replaced our produced
barrels with reserves. In light of these results and our strong
ﬁ nancial outlook for the next decade, I am pleased that the
Board of Directors has proposed an annual cash dividend of
USD 500 million, which we aim to increase as the business
continues to grow.

Maximising value from our production assets
Our production for 2018 was at the upper end of the 
guidance for the year, supported by excellent performance 
from Edvard Grieg and the Alvheim area. Plateau 
production for Edvard Grieg has been further extended to 
mid-2020 and the inﬁ ll and tie-back opportunities identiﬁ ed 
in the area will allow us to keep the facilities full for many 
years to come.

drilling and riser platforms have been successfully installed 
offshore and the remaining topsides will be installed during 
spring 2019. With the current progress, it is safe to say that we 
are ﬁ rmly on track for expected ﬁ rst oil in November 2019. 

When Phase 1 reaches plateau production in 2020, our 
production is expected to reach over 150 Mboepd. At full 
ﬁ eld plateau production in 2023 our production will be over 
170 Mboepd, with potential to reach over 200 Mboepd as our 
successful organic growth strategy continues to deliver. 

Production growth beyond Johan Sverdrup 
We had signiﬁ cant success in 2018 with new discoveries made 
near our core areas on the Utsira High and the Alvheim area 
and we matured our appraisal opportunities further towards 
development. As a result, we now have seven potential new 
projects in the pipeline. Complementing our organic growth 
strategy, we also made strategic acquisitions to increase our 
working interest in key assets such as Luno II, in order to bring 
commercial and operational alignment with the Edvard Grieg 
partnership, and in the licences containing the Rolvsnes oil 
discovery and the Goddo prospect, an area that has potential 
of over 250 MMboe gross resources. 

2019 will be one of the most signiﬁ cant years in Lundin 
Petroleum’s history. It started with a record award in the 2018 
APA licensing round, growing our acreage position in Norway 
by about 70 percent since year-end 2017. Johan Sverdrup is on 
schedule for production start and we will deliver our busiest 
exploration programme to date, targeting over 750 MMboe of 
additional net resources. 

I would like to thank all of my colleagues for an outstanding 
2018 and our shareholders and the Board for your continued 
support. I look forward to another successful period of delivery 
and growth for our Company.

Johan Sverdrup closer to start-up
The giant Johan Sverdrup ﬁ eld is now less than a year 
away from start-up and 2018 was a critical year of project 
delivery. All four steel jackets and the topsides for the 

Alex Schneiter
President and CEO

6

Lundin Petroleum Annual Report 2018

As a leading operator in Norway, 
Lundin Petroleum is among the 
best in class in terms of providing 
responsible, cost efficient and 
sustainable growth.

2018 was an outstanding year for our Company both from an 
operational and ﬁ nancial perspective. Based on this success 
and the future growth prospects of the business, the Board of 
Directors is proposing an annual cash dividend of USD 500 
million, sustainable down to an oil price of below USD 50 per 
barrel.

Energy efficiency will be key for a low carbon future
With our success, we take our responsibility toward society 
and the environment seriously. Whilst we transition to a 
lower carbon energy system, it is a fact that hydrocarbons 
will remain a signiﬁ cant component of the energy mix for 
generations to come. There will be a continued demand 
for oil and gas as an affordable energy source necessary to 
maintain economic growth, reduce poverty and improve living 
standards across the globe. We will however need affordable 
energy which has a much lower impact on the environment. 
Therefore, we have to become much smarter in how we 
produce, store, transport and consume energy. The emergence 
of renewables will certainly be a key factor in reducing carbon 
emissions but energy efﬁ ciency may play an even more 
important role.

Operating with industry leading low carbon intensity
At Lundin Petroleum, we are committed to produce oil and 
gas in the most efﬁ cient way possible with minimum impact 
on the environment. We are very proud to be best in class in 

this area with a carbon intensity per produced barrel of oil 
that is among the lowest in our industry. When the Johan 
Sverdrup ﬁ eld comes onstream, the carbon emissions will drop 
even further, as power required to run the platforms will be 
supplied from hydropower generated onshore. This solution 
will make Johan Sverdrup one of the most carbon efﬁ cient 
ﬁ elds in the world.

Ensuring continued growth
The Utsira High in the North Sea is the backbone of the 
Company and will ensure sustainable growth for decades to 
come. However, we will not stop there and I am excited about 
our exploration and appraisal campaign for 2019 which is our 
most ambitious programme so far. We are active in all areas 
on the Norwegian Continental shelf, from the south to the 
very north, and are pushing the frontiers of technology always 
further in cooperation with our service providers. 

The Board of Directors continuously monitors the challenges 
for our industry and I am pleased that in 2018 we formed a 
special committee to ensure that we continue to stay on top of 
all health, safety and environmental issues. Responsibility in 
all we do is key to our current and future success. 

On behalf of the Board, I would like to extend my deepest 
gratitude and thanks to the people who make it possible for 
our Company to continue delivering success for the beneﬁ t of 
all our shareholders and stakeholders.

Ian H. Lundin
Chairman of the Board

Lundin Petroleum Annual Report 2018

7

STRATEGIC REPORT | Operations

Outstanding operational 
performance

Edvard Grieg 
production efficiency
98% 

2P reserves replacement ratio
163%

Johan Sverdrup Phase 1 
~85% complete

Organic growth
4 appraisal successes
2 new discoveries

8

Lundin Petroleum Annual Report 2018

“

2018 was another year of strong operational 
delivery meeting all of our key targets. With 
Johan Sverdrup on track for production start-
up in November 2019 and a pipeline of seven 
potential new projects, we have a significant 
production growth trajectory ahead of us.

Nick Walker
Chief Operating Officer

Lundin Petroleum Annual Report 2018

9

STRATEGIC REPORT | Operations

Strong production 
driven by excellent 
reservoir and facilities 
performance

2018 production exceeded guidance
Lundin Petroleum’s average production rate for 2018 was 
81.1 Mboepd. This strong performance was at the upper end of 
the guidance range for the year, driven by the continued excellent 
reservoir and facilities performance from both the Edvard Grieg ﬁ eld 
and the Alvheim area. 

Focus on production growth beyond Johan Sverdrup
Lundin Petroleum’s production growth trajectory for the coming 
years is among the strongest in the industry. Once the Johan 
Sverdrup full ﬁ eld development is completed, Lundin Petroleum is 
set to more than double 2018 production levels. 

The outlook for continued growth beyond Johan Sverdrup looks 
promising, following the exploration and appraisal success in 2018. 
Seven potential new projects, in combination with a quality asset 
base and an active exploration drilling programme, will ensure that 
Lundin Petroleum continues to deliver strong production growth for 
many more years to come.

Further
organic
growth

Target 
>200 Mboepd
upsides and
new projects

>170

Mboepd

>150

Mboepd

75–95

Mboepd

Long-term
production 

Johan Sverdrup
Phase 1 plateau 

Johan Sverdrup
full field plateau

2019

2020

2023

Significantly extending plateau 
production at Edvard Grieg 

Lundin Petroleum’s key operated asset, the Edvard Grieg ﬁ eld, 
continues to exceed expectations on both reservoir and facility 
performance. Edvard Grieg achieved a strong production 
efﬁ ciency of 98 percent for 2018. 

opportunities to keep the Edvard Grieg facilities full for even 
longer have been identiﬁ ed in the area. An inﬁ ll drilling 
programme is planned to commence in 2020 and the nearby 
Luno II and Rolvsnes discoveries are planned as subsea tie-
backs to the Edvard Grieg facilities, projects that are set to be 
sanctioned in 2019 and implemented in parallell.

The PDO development drilling programme was completed 
during the year, with all development well results in line with or 
better than prognosis. Water production build-up is signiﬁ cantly 
slower than expected, which has resulted in further extending 
the ﬁ eld’s plateau production to mid-2020. A pipeline of future 

The 4D seismic survey that was acquired over the Edvard Grieg 
ﬁ eld in 2018 indicates that the water injection ﬂ ood front is 
further away from the main production wells than predicted 
by the current reservoir models. This information is still under 
review and has not been incorporated into the reservoir models 
used to support the year end 2018 reserves estimate.

10

Lundin Petroleum Annual Report 2018

 
>1 billion boe resource 
base through the drill bit

Reserves Summary

End 2017

2018 production

Revisions 

Reserves end 2018

Reserves replacement ratio

Proved plus 
Probable
(2P reserves)

Proved plus 
Probable
plus Possible
(3P reserves)

726.3

-30.1

+49.2

745.4

163%

895.5

-30.1

+35.4

900.9

118%

Track record of reserves replacement exceeding 
production 
Reserves were increased in 2018 with a 2P reserves replacement 
ratio of 163 percent and it was the ﬁ fth consecutive year that 
Lundin Petroleum has more than replaced produced barrels with 
reserves. Oil and natural gas liquids (NGL) represent 96 percent 
of the 2P reserves and all reserve estimates are independently 
audited by ERC Equipoise Ltd. (ERCE).

The main reason for the increase in 2018 relates to the 
Johan Sverdrup ﬁ eld, driven by positive well results from the 
development drilling in combination with the Phase 2 PDO 
sanction of full ﬁ eld water alternating gas injection (WAG) for 
enhanced recovery, which has resulted in associated contingent 
resources being promoted to reserves. 

During 2019, sanctioning of the Edvard Grieg inﬁ ll well 
programme, the Luno II project and the Rolvsnes extended 
well test are expected to continue the trend of 2P reserves 
replacement exceeding production.

Contingent resource increase from successful 
exploration and appraisal drilling
Lundin Petroleum’s contingent resources at year end 2018 
amounted to 225 MMboe, which represents an increase of 
40 MMboe from year end 2017, before projects matured to 
reserves.

New discoveries on Frosk in the Alvheim area and Lille Prinsen 
in the Utsira High area and positive results from the appraisal 
wells on Luno II, Rolvsnes and Gekko, together with the 
acquisition of an additional 15 percent interest in Luno II were 
the main drivers for the increase. 

2P reserves end 2018 

745 MMboe

Edvard Grieg
116

Alvheim Area
23
Ivar Aasen
2

Johan Sverdrup 
605

Contingent resources 
end 2018 

225 MMboe

Other
26

Johan Sverdrup
30

Edvard Grieg
10

Alvheim Area 
9

Luno II
42

Rolvsnes 
22

Alta/Gohta
87

i

Lundin Petroleum reports all of its reserves in working 
interest barrels of oil equivalent.

Definitions of reserves and resources can be found on 
page 106.

Lundin Petroleum Annual Report 2018

11

STRATEGIC REPORT | Operations

Johan Sverdrup is one of the most important 
industrial projects in Norway over the next 
50 years

It has been an important year of installation 
on the Johan Sverdrup project
2018 has been a key installation year for the Johan Sverdrup project. With the installation 
of three jackets, two topsides, one bridge, over 400 km of pipelines and 200 km of cables for 
power from shore, it has likely been the busiest installation campaign ever for a project on the 
Norwegian continental shelf. The remaining two topsides for the process and living quarter 
platforms will be installed in spring 2019 and with the good progress that is being made on the 
project, Phase 1 remains ﬁ rmly on track for expected ﬁ rst oil in November 2019.

Phase 2 will involve the installation of an additional processing platform at the ﬁ eld centre and 
will see gross production capacity increase to 660 Mbopd. First oil for Phase 2 is planned during 
the fourth quarter of 2022.

12

Lundin Petroleum Annual Report 2018

“

Johan Sverdrup is quite simply a fantastic 
story for us. The discovery we made back 
in 2010 is set to start production later in 
2019 and will create value for society for 
generations to come.

Kristin Færøvik
Managing Director, Lundin Norway

Gross resources 
2.2–3.2
 billion boe

Costs reduced 
~50% 
since PDO
including foreign exchange gains

Phase 1 start-up
November 2019

Phase 2 start-up
Q4 2022 

Production capacity
440 Mbopd

Production capacity
660 Mbopd 

Lundin Petroleum Annual Report 2018

13

 
STRATEGIC REPORT | Operations

A pipeline of future 
organic growth opportunities

Our organic growth strategy continues to deliver more 
development opportunities across our seven core areas.

Seven potential new projects
2018 was all about progressing contingent resources towards commercialisation. Through 
an active exploration and appraisal campaign, new discoveries were made and appraisal 
opportunities were matured further towards development. Together with the inﬁ ll 
drilling programme at Edvard Grig, set to be sanctioned in 2019, Lundin Petroleum 
has seven potential new projects in the pipeline.

Southeastern Trend

Loppa High

Alta/Gohta

Through appraisal drilling and test production, the commercial potential of 
the unique Alta and Rolvsnes discoveries was signiﬁ cantly de-risked in 2018. 
The long-term production behavior from the Rolvsnes reservoir needs to be 
understood better and the next step is to conduct an extended well test 
via a subsea tie-back of the suspended appraisal well to the Edvard Grieg 
platform. The extended well test will be sanctioned in the ﬁ rst quarter 
of 2019 with implementation in parallel with the Luno II development 
project and is expected to come online in mid-2021. 

A plan for development will be submitted in the ﬁ rst quarter of 
2019 for the Luno II discovery, scheduled to come on-stream in 
2021 as a subsea tie-back to the nearby Edvard Grieg platform. 
The Gekko appraisal well was successfully completed in 
October 2018 and options for the economic development of 
the ﬁ eld are being assessed.

The Frosk and Lille Prinsen discoveries will be further 
appraised in 2019, including a long-term production 
test on Frosk through the Bøyla subsea facilities 
into Alvheim. It is expected that Lille Prinsen will 
be economic to develop and an appraisal well is 
planned for 2019.

Frøya High/
Froan Basin

Harstad

Northern North 
Sea Area

Norway

Frosk

Gekko

Alvheim Area

Utsira High Area

Oslo

Edvard Grieg Infills
Luno II

Lille Prinsen
Rolvsnes

Mandal High

14

Lundin Petroleum Annual Report 2018

i

More information on Lundin Petroleum’s 
operations can be found in the Directors’ Report 
on pages 43–46.

Delivering on our organic growth strategy

Through licensing rounds and strategic transactions, Lundin Petroleum actively renewed and diversiﬁ ed 
its exploration portfolio in 2018, including adding the Northern North Sea as a new core area. Following 
the record award in the APA 2018 licensing round, Lundin Petroleum holds 82 licences in Norway, 
which is an increase in acreage position by about 70 percent since year-end 2017. 

In 2019, Lundin Petroleum plans to drill a total of 17 exploration and appraisal wells out of which 
15 are exploration wells targeting over 750 MMboe of net unrisked resources. The 2019 exploration 
programme will target prospects in all seven core exploration areas and is the largest and most diverse 
exploration programme for Lundin Petroleum to date.

The Alta/Gohta discovery- 
pioneering production 
from karstified carbonate 
reservoirs 
Active appraisal programme 
The appraisal well and the extended production 
test on the Alta discovery in the southern Barents 
Sea were successfully completed in September 
2018. The results exceeded expectations, 
demonstrating sustainable ﬂ ow rates and excellent 
reservoir productivity and connectivity to a large 
volume of oil. Through these positive results, the 
understanding of this complex carbonate reservoir 
has been signiﬁ cantly advanced, the development 
of which would be a ﬁ rst on the Norwegian 
Continental shelf.

Studies for commercialising Alta and Gohta 
are being progressed to determine additional 
appraisal drilling requirements and development 
options. The current development concept for 
Alta is a subsea ﬁ eld development connected to a 
standalone ﬂ oating production and storage vessel. 
The adjacent Gohta discovery is also considered a 
possible joint development opportunity.

The large amount of new information from the 
positive results from the Alta extended well test 
and latest generation 3D seismic survey (Topseis) 
over the entire Alta and Gohta area is under 
evaluation. The contingent resources for the Alta 
and Gohta discoveries are therefore unchanged 
from year-end 2017 and will be updated during 
2019 when the future appraisal plans for the area 
is deﬁ ned and all the additional data has been 
processed.

Lundin Petroleum Annual Report 2018

15

STRATEGIC REPORT | Responsibility

Responsible operations 

Lundin Petroleum’s sustainability 
approach is to develop and produce 
oil and gas resources efficiently and 
responsibly.

Responsible conduct and business success go hand in hand. 
Our business model rests on our commitment to carry out our 
activities in an efﬁ cient and responsible manner for the long-
term beneﬁ t of shareholders and society.

In line with this commitment, a thorough review of our 
Code of Conduct was completed in 2018 to ensure that the 
core principles governing our responsible business conduct 
fully reﬂ ect our operational context. The Code of Conduct 
provides guidance to all employees, contractors and partners 
on how to conduct activities in an economically, socially and 
environmentally responsible way. To highlight and emphasise 
the importance of these guiding principles and everyone’s 
commitment to abide by them, a ceremony attended by the 
Board’s CR/HSE Committee, management and employees was 
held to sign the updated Code of Conduct. New policies were 
also adopted in the areas of diversity, security (relating to the 
General Data Protection Regulation, GDPR) and transparent 
tax reporting to better reﬂ ect current practice in relation to 
these important areas. The e-learning tool was further revised 
to ensure that all employees are familiar with these governing 
documents and the new formal requirements.

Improving energy efﬁ ciency and reducing carbon emissions 
remain a core focus for Lundin Petroleum and we can again 
report one of the lowest carbon emission intensity levels in 
the industry. We also intensiﬁ ed our engagement to address 
climate change with key stakeholders, through support to 

research and development, sharing of best practice within the 
industry and by participating in the global dialogue. 

In line with our commitment to actively support the 
Sustainable Development Goals (the SDGs), we joined a 
campaign initiated by the UN, in collaboration with Reuters 
and The Business Debate. The initiative aims to promote 
how global businesses and organisations work to achieve 
economic development in an environmentally sustainable 
manner. Climate change requires unprecedented action and 
collaboration between various societal actors and through 
this initiative, we had the opportunity to illustrate how our 
Company can contribute to achieving the SDG goals. We do this 
by providing society with affordable energy while addressing 
the climate change challenge through our industry leading 
work in developing and producing oil and gas resources 
efﬁ ciently and responsibly with a low carbon footprint. 

Sustainability Reporting
Read more about Lundin Petroleum’s management and performance approach 
on environmental, social and governance issues in our 2018 Sustainability 
Report, available on www.lundin-petroleum.com.

The Sustainability Report provides comprehensive information on how Lundin 
Petroleum integrates sustainability issues into its business model to create long-
term sustainable value for all stakeholders. The Sustainability Report conforms to 
the new Global Reporting Initiative (GRI) standards and constitutes our disclosure 
on non-ﬁ nancial reporting required under Swedish law implementing the EU 
Directive 2014/95/EU. It also constitutes our Communication on Progress (COP) to 
the UN Global Compact. 

The Sustainability Report is a tool for stakeholders to assess our sustainability 
approach and performance and we welcome this engagement as a means to 
improve how we address key sustainability issues within the industry.

16

Lundin Petroleum Annual Report 2018

“

Our commitment to safe and responsible 
practices and low carbon operations is 
fundamental to delivering on our business 
model to create long-term sustainable value.

Christine Batruch
Vice President Corporate Responsibility

Health, safety and environment
Our people are our key asset and reducing health and 
safety risks throughout our operations is our highest 
priority. We continue to foster an open culture to learn 
from incidents and improve how we address health 
and safety concerns. Our highly skilled workforce 
actively assess potential risks and contributes to develop 
and implement mitigation strategies. Our emergency 
preparedness is tested on a regular basis to ensure full 
readiness in the event of an incident. Together these 
measures help to ensure that we provide a safe working 
environment and protect the environment wherever we 
operate.

Our robust health and safety culture is reﬂ ected in our 
2018 performance as there were no serious personal 
injuries or process safety incidents during the year. The 
Lost Time Incident Rate (LTIR) was 0.5 per million hours 
worked and the Total Recordable Incident Rate (TRIR) was 
1.0 per million hours worked. There were no material 
incidents with impact on the environment.

Low carbon performance
Lundin Petroleum operates with one of the lowest carbon 
emissions intensity levels in the industry. Work to further reduce 
carbon emissions from our operations continued in 2018 and 
reduction targets were achieved. The carbon emission level from 
the operated Edvard Grieg platform was 4.9 kg CO2 equivalent per 
barrel in 2018.

Lundin Petroleum supports the commitments set out in the 
Paris Agreement to address global climate change and actively 
participates in industry initiatives that aim to reduce carbon 
emissions, such as the Norwegian oil and gas roadmap for 2030 
and 2050.

Carbon emissions intensity
kgCO2e/boe

~20

~10

~5

~0.7

Power from
shore 2022

World

Norway Edvard
Grieg

Johan
Sverdrup

Lundin Petroleum Annual Report 2018

17

STRATEGIC REPORT | Risk Management

Key risk areas

Lundin Petroleum’s risks fall into three key areas: 
operational, financial and strategic, including external 
risks that could impact the Company’s business 
operations or reputation. 

Operational
Risk

Financial
Risk

Strategic
Risk

18

Lundin Petroleum Annual Report 2018

Managing risk

A standardised risk management methodology is used to perform quantitative 
and qualitative risk assessments to prioritise control activities and enable the 
Company to deal effectively with both potential opportunities and threats. 

Operational Risk

Concentration of operations

Reserves and resources

Risk 
The majority of production comes from the Edvard Grieg ﬁ eld 
and the Alvheim area. This concentration of operations increases 
the vulnerability for long-term production shutdowns.

Risk 
Uncertainty in estimates of economically recoverable reserves 
and inability to bring estimates into resources and reserves. 

Response 
Highly skilled and experienced operational teams are employed 
throughout the organisation and critical spares are held in 
inventory. Insurance covering the ﬁ nancial liquidity impact 
from a loss of production is subscribed for the Edvard Grieg 
ﬁ eld, reducing the ﬁ nancial impact of any unexpected long-term 
shutdowns.

Response 
Reserves and resource evaluations are performed according to 
international industry standards and undergo a comprehensive 
internal peer review in addition to an annual reserves audit 
process by an external independent reserves auditor. 

 Delay of development projects

Security / Cyber Security 

Risk 
Delay in delivery of development projects due to safety incidents, 
installation schedules or missed targets. The risk of cost overruns 
and a delay in production that could affect liquidity. 

Risk
Security risks are of serious concern in the oil and gas industry 
and range from personnel security to attacks on physical assets, 
including information data loss and system intrusions.

Response
Lundin Petroleum has a proven track record of safe work systems 
and successfully delivering development projects. The large 
Johan Sverdrup project is progressing ahead of schedule and has 
achieved signiﬁ cant cost savings compared to original estimates.

Response
Security risks are regularly monitored and audited. The risk 
level in Norway is assessed as low but high levels of awareness 
are nonetheless maintained. Business continuity plans are 
in place, networks are monitored to prevent and remedy any 
external attacks and training on cyber risk awareness is being 
implemented.

Health, Safety and Environment (HSE) 

Risk
Operational incidents such as a signiﬁ cant ﬁ re, process 
safety, major accidents involving impact on people and the 
environment, collision or well control issues are a signiﬁ cant risk 
within the oil and gas industry.

Response 
Lundin Petroleum has a strong HSEQ (Health, Safety, 
Environmental and Quality) management system to reduce the 
risk of such incidents, which is subject to incident investigations 
and audits. The Company maintains a robust HSE culture 
throughout the organisation to ensure safety and security for 
people and the environment. 

i

This summary gives an overview of Lundin 
Petroleum’s risk universe, however other risks 
may also exist or arise.

More information on how Lundin Petroleum 
works to address risks related to maintaining a 
sustainable and ethical business can be found 
in the Sustainability Report.

Lundin Petroleum Annual Report 2018

19

 
STRATEGIC REPORT | Risk Management

Financial Risk

Asset retirement

Risk 
Incorrect ﬁ nancial estimates of future decommissioning costs for 
ﬁ elds at the end of the economic life cycle could lead to ﬁ nancial 
and tax impact, liability and other implications of abandonment 
and reclamation.

Response
Decommissioning cost estimates are reviewed on an annual basis 
throughout an asset’s life cycle, including in the development 
phase, according to the Company’s policy on asset retirement 
liability.

Liquidity and funding

Risk
Investments and costs overrunning budgets or production 
underperformance leading to the Company being unable to fund 
its ﬁ nancial commitments from cash ﬂ ow, debt or equity. 

Response
Lundin Petroleum strives to maintain a good asset management 
strategy to ensure continued asset integrity to maximise cash 
ﬂ ow and borrowing capacity. Access to debt capital markets is 
achieved through a proactive banking relationship strategy to 
ensure optimal debt availability. Access to the equity capital 
markets is achieved through an active investor relations strategy.

Financial reporting

Market conditions

Risk 
Delayed or inaccurate ﬁ nancial reporting impacting external 
reporting requirements. Risk of regulatory action, shareholder 
law suits and loss of investor conﬁ dence.

Risk 
Volatility in the oil price could affect ﬁ nancial earnings, cash 
ﬂ ow generation and the overall investment and liquidity 
position.

Response 
Lundin Petroleum maintains robust internal controls and 
reporting processes to mitigate this risk. Financial reporting is 
subject to internal controls, a monthly management reporting 
process and is veriﬁ ed by internal and external audits.

Response 
Lundin Petroleum updates the asset business plan regularly 
throughout the year, a process that includes stress testing the 
business for a prolonged period of lower oil prices. If such a 
scenario demonstrates a liquidity shortfall, the Company will 
consider a number of options including reducing investment 
levels, raising additional debt or entering into oil price hedging. 

Interest and currency

Risk
As a result of the Company carrying debt, a rise in interest rates 
carries a risk of impacting the Company’s earnings and free 
cash ﬂ ow potential. A foreign exchange risk exists in relation 
to market ﬂ uctuations of foreign currencies, given that the 
underlying value of the Company’s assets is predominantly USD 
denominated whilst certain costs are denominated in other 
currencies.

Response
The exposure to interest rate and currency risk is continuously 
assessed and monitored. Hedging instruments are used to manage 
this risk, which is also subject to robust internal controls.

20

Lundin Petroleum Annual Report 2018

Strategic Risk

Climate change

Risk 
Negative perception of the oil and gas industry, leading to the 
risk of reduced access to licences. Failure to adapt to climate 
legislation.

Response
Lundin Petroleum operates with one of the lowest carbon 
emissions intensities in the industry and in a country with world-
leading environmental governance. Carbon footprint and energy 
efﬁ ciency of operations are reviewed on an ongoing basis and 
greenhouse gas emissions are disclosed regularly.

Legal process in Sweden

Risk 
Reputational risk and potential loss of stakeholder and investor 
conﬁ dence through potential criminal trial and ﬁ nancial 
penalties in relation to the preliminary investigation in Sweden 
into the Company’s past operations in Sudan during 1997–2003.

Response 
Lundin Petroleum is actively defending its interests through the 
Swedish legal process and maintains a transparent and effective 
engagement with its various stakeholders to ensure an open 
and informed dialogue. More information on the preliminary 
investigation led by the Swedish Prosecution Authority can be 
found on page 34.

Ethical business conduct

Shareholder value creation

Risk 
Risk of non-compliance with ethical business practices, fraud, 
bribery and corruption. Non-compliance could lead to investigations 
and litigation and loss of legal or social licence to operate. 

Risk
Inability to meet stakeholder expectations and create 
shareholder value either through current business strategy or 
due to market conditions. Failure to sustain the organic growth 
strategy.

Response 
Lundin Petroleum creates sustainable shareholder value by 
investing in an active organic growth strategy in Norway, 
supported by excellent resource potential, highly skilled 
employees as well as attractive ﬁ scal terms for a full cycle 
strategy. 

Response 
Lundin Petroleum operates according to the highest level of 
ethical standards, ensured through the consistent application 
of its Code of Conduct and policies and procedures. Internal 
awareness training is conducted to communicate expectations 
of ethical business conduct to staff and reference to the Code of 
Conduct is integrated into business supplier contracts.

Laws and regulations

Risk
Breach of applicable laws and regulations or complexity and 
changes to regulation that could negatively affect the Company. 
May lead to investigations, litigation, negative ﬁ nancial impact, 
reputational damage and cancellation or modiﬁ cation of 
contractual rights.

Response
Lundin Petroleum adheres to applicable laws and regulations 
and has a robust corporate governance framework in place to 
ensure it acts in accordance with good oilﬁ eld practice and high 
standards of corporate citizenship. Lundin Petroleum operates
in Norway, a country with a world-leading regulatory framework 
for oil and gas activities.

Lundin Petroleum Annual Report 2018

21

GOVERNANCE | Corporate Governance Report 2018

Corporate Governance Report 2018

Guiding principles  
Shareholders’ meetings 
External auditors of the Company 
Nomination Committee 
Board of Directors  
Board committees 
Group management  
Policy on Remuneration 
Internal control over ﬁ nancial reporting 
Auditor’s report  

22
25
25
26
27
30
33
35
38
39

This Corporate Governance Report has been 
prepared in accordance with the Swedish 
Companies Act (SFS 2005:551), the Annual 
Accounts Act (SFS 1995:1554) and the Swedish 
Corporate Governance Code and has been subject 
to a review by the Company’s statutory auditor. 

Lundin Petroleum reports one deviation from the 
Corporate Governance Code in 2018 in respect of 
the composition of the Nomination Committee 
as further described on page 26. There were no 
infringements of applicable stock exchange rules 
during the year, nor any breaches of good practice 
on the securities market. 

Lundin Petroleum AB (publ), company registration 
number 556610-8055, has its corporate head ofﬁ ce 
at Hovslagargatan 5, 111 48 Stockholm, Sweden 
and the registered seat of the Board of Directors 
is Stockholm, Sweden. The Company’s website is 
www.lundin-petroleum.com.

2019 Annual General Meeting 

The 2019 Annual General Meeting (AGM) 
will be held on 29 March 2019 at 1 p.m. 
in Vinterträdgården at Grand Hôtel, Södra 
Blasieholmshamnen 8, in Stockholm. Shareholders 
who wish to attend the meeting must be recorded 
in the share register maintained by Euroclear 
Sweden on Saturday 23 March 2019 (please 
note that since the record date is on a Saturday, 
shareholders must be registered in the share 
register on Friday 22 March 2019, at the latest) 
and must notify the Company of their intention to 
attend the AGM no later than 25 March 2019.

Further information about registration to the AGM, 
as well as voting by proxy, can be found in the 
notice of the AGM, available on the Company’s 
website.

22

Lundin Petroleum Annual Report 2018

Corporate Governance

Lundin Petroleum’s corporate governance 
framework seeks to ensure that its business 
is conducted efficiently and responsibly, 
that responsibilities are allocated in a 
clear manner and that the interests of 
shareholders, management and the Board of 
Directors remain fully aligned.

Guiding principles of corporate governance 
Since its creation in 2001, Lundin Petroleum has been guided 
by general principles of corporate governance, which form an 
integral part of Lundin Petroleum’s business model. Lundin 
Petroleum’s business is to explore for, develop and produce oil 
and gas. The Company aims to create value for its shareholders 
through exploration and organic growth, while operating in an 
economically, socially and environmentally responsible way for 
the beneﬁ t of all stakeholders. By tying the corporate governance 
framework to its sustainability proﬁ le, Lundin Petroleum has 
managed to achieve the high goals set out in the sustainability 
strategy. To achieve such sustainable value creation, Lundin 
Petroleum applies a governance structure that favours 
straightforward decision making processes, with easy access 
to relevant decision makers, while nonetheless providing the 
necessary checks and balances for the control of the activities, 
both operationally and ﬁ nancially. Lundin Petroleum’s principles 
of corporate governance seek to:

·  Protect shareholder rights
·  Provide a safe and rewarding working environment to 

all employees

·  Ensure compliance with applicable laws and best industry 

practice

·  Ensure activities are carried out competently and sustainably
·  Sustain the well-being of local communities in areas 

of operation

As a Swedish public limited company listed on Nasdaq 
Stockholm, Lundin Petroleum is subject to the Rule Book for 
Issuers of Nasdaq Stockholm, which can be found on 
www.nasdaqomxnordic.com. In addition, the Company abides 
by principles of corporate governance found in a number 
of internal and external documents. Abiding to corporate 
governance principles builds trust in Lundin Petroleum, which 
results in increased shareholder value. By ensuring the business 
is conducted in a responsible manner, the corporate governance 
structure ultimately paves the way to increased efﬁ ciency.

“

Our corporate governance structure 
ensures safe, responsible and efficient 
operations and is fundamental to our past 
and future operational success.

Ian H. Lundin
Chairman of the Board

Lundin Petroleum – Governance Structure

External 
Audit 

Shareholders’ Meeting

Nomination
Committee

Board of Directors

Audit 
Committee

Compensation
Committee

CR/HSE
Committee

Internal
Audit 

CEO and Group Management

Independant 
Qualified 
Reserves Auditor

Main external rules and regulations for 
corporate governance at Lundin Petroleum 

Main internal rules and regulations for corporate 
governance at Lundin Petroleum 

· Swedish Companies Act
· Swedish Annual Accounts Act
· NASDAQ Stockholm Rule Book for Issuers
· Swedish Code of Corporate Governance 

· The Articles of Association
· The Code of Conduct
· Policies, Procedures and Guidelines
· The HSEQ Leadership Charter
· The Rules of Procedure of the Board,  
  instructions to the CEO and for the ﬁnancial  
  reporting to the Board and the terms of    
  reference of the Board Committees and the  
  Investment Committee
· Code of Internal Audit Activity
· Nomination Committee process

Highlights 2018

Torstein Sanness 
appointed as a new 
Board member at the 
AGM held on 3 May 
2018.

A new CR/HSE Committee 
was established building 
on the work of the 
previous CR/HSE Board 
representative. 

The AGM resolved to 
declare an inaugural cash 
dividend of SEK 4.00 per 
share.

Adoption of an updated 
Code of Conduct to 
better reﬂ ect the 
operating context of the 
Company. 

Lundin Petroleum Annual Report 2018

23

 
   
    
GOVERNANCE | Corporate Governance Report 2018

Corporate Governance Rules and Regulations
Swedish Corporate Governance Code
The Corporate Governance Code is based on the tradition of 
self- regulation and the principle of “comply or explain”. It acts 
as a complement to the corporate governance rules contained in 
the Swedish Companies Act, the Annual Accounts Act, EU rules 
and other regulations such as the Rule Book for Issuers and good 
practice on the securities market. The Corporate Governance 
Code can be found on www.bolagsstyrning.se.

Lundin Petroleum’s Articles of Association
The Articles of Association contain customary provisions 
regarding the Company’s governance and do not contain any 
limitations as to how many votes each shareholder may cast at 
Shareholders’ Meetings, nor any special provisions regarding the 
appointment and dismissal of Board members or amendments 
to the Articles of Association. The Articles of Association are 
available on the Company’s website.

Lundin Petroleum’s Code of Conduct
Lundin Petroleum’s Code of Conduct is a set of principles 
formulated by the Board to give overall guidance to employees, 
contractors and partners on how the Company is to conduct 
its activities in an economically, socially and environmentally 
responsible way, for the beneﬁ t of all stakeholders, including 
shareholders, employees, business partners, host and home 
governments and local communities. The Company applies 
the same standards to all of its activities to satisfy both 
its commercial and ethical requirements and strives to 
continuously improve its performance and to act in accordance 
with good oilﬁ eld practice and high standards of corporate 
citizenship. The Code of Conduct is an integral part of the 
Company’s contracting procedures and any violations of 
the Code of Conduct will be the subject of an inquiry and 
appropriate remedial measures. In addition, performance 
under the Code of Conduct and Corporate Responsibility (CR) is 
regularly reported to the Board. An updated Code of Conduct 
was issued in 2018 to better reﬂ ect the operating context of the 
Company. The Code of Conduct is available on the Company’s 
website.

Lundin Petroleum’s policies, procedures, guidelines and 
HSEQ Leadership Charter
Corporate policies, procedures and guidelines have been 
developed to outline speciﬁ c rules and controls, to increase 
efﬁ ciency and improve performance by facilitating compliance. 
They cover areas such as Operations, Accounting and Finance, 
Health and Safety, Environment, Anti-Corruption, Human 
Rights, Stakeholder Relations, Legal, Information Systems, 
Insurance & Risk Management, Human Resources, Inside 
Information and Corporate Communications. During 2018, 
new corporate policies adopted include a Diversity Policy, 
Security Policy, Market Risk Policy and Tax Policy. All policies, 
procedures and guidelines are continuously reviewed and 
updated as and when required and have been integrated into 
local management systems. 

In 2018 Lundin Petroleum adopted a Corporate HSEQ (Health, 
Safety, Environmental and Quality) Leadership Charter, which 
sets out the governance framework as well as operational 
governance for managing the business in accordance with the 

highest standards. The Charter sets out four core foundation 
themes: leadership, risk and opportunity management, 
continuous improvement and implementation and is applicable 
across the organisation. It further details how these themes are 
to be operationalised.

CR and HSE related policies are available on the Company’s 
website.

Lundin Petroleum’s Rules of Procedure of the Board
The Rules of Procedure of the Board contain the fundamental 
rules regarding the division of duties between the Board, the 
Committees, the Chairman of the Board and the Chief Executive 
Ofﬁ cer (CEO). The Rules of Procedure also include instructions 
to the CEO, instructions for the ﬁ nancial reporting to the Board 
and the terms of reference of the Board Committees and the 
Investment Committee. The Rules of Procedure are reviewed and 
approved annually by the Board. 

Share capital and shareholders
The shares of Lundin Petroleum are listed on Nasdaq Stockholm. 
The total number of shares is 340,386,445 shares with a quota 
value of SEK 0.01 each (rounded-off), representing a registered 
share capital of SEK 3,478,713. All shares of the Company carry 
the same voting rights and the same rights to a share of the 
Company’s assets and earnings. The Board has been authorised 
by previous Annual General Meetings (AGMs) to decide upon 
repurchases and sales of the Company’s own shares as an 
instrument to optimise the Company’s capital structure and 
to secure the Company’s obligations under its incentive plans. 
During 2018, the Company purchased 640,000 own shares at 
an average purchase price of SEK 186.77 and held as per 31 
December 2018 1,873,310 own shares in total. 

Lundin Petroleum had at the end of 2018 a total of 28,801 
shareholders listed with Euroclear Sweden, which represents 
a decrease of 690 compared to the end of 2017, i.e. a decrease 
of approximately two percent. Shares in free ﬂ oat amounted 
to 51.8 percent and exclude shares held by an entity associated 
with the Lundin family and by Equinor.

The 10 largest shareholders 
as at 31 December 2018

Number 
of shares

Percent 
(rounded) 

Nemesia1

Equinor

Vanguard 

JP Morgan Asset Management 

BlackRock

USS Investment Management 

Norges Bank 

State Street Global Advisors 

Credit Suisse

Nordea Fonder

Other shareholders

Total 

95,478,606

68,417,676

6,959,519

5,741,518

5,733,873

4,950,000

4,102,761

4,058,739

4,047,202

3,500,205

137,396,346

340,386,445

28.1

20.1

2.0

1.7

1.7

1.5

1.2

1.2

1.2

1.0

40.4

100

1  An investment company wholly owned by a Lundin family trust.

Source: Q4 Inc. 

24

Lundin Petroleum Annual Report 2018

 
members, except for the Chief Executive Ofﬁ cer, and SEK 
165,000 to each Committee Chair and SEK 110,000 to other 
Committee members and SEK 165,000 to the CR/HSE Board 
representative with the total fees for Committee work, 
including fees for the Committee Chairs and CR/HSE Board 
representative fees, not to exceed SEK 1,155,000.

·  Approval of the remuneration of the statutory auditor.
·  Approval of the Company’s 2018 Policy on Remuneration for 

Group management.

·  Approval of LTIP 2018 for members of Group management and 

a number of key employees.

·  Authorisation for the Board to issue new shares and/or 

convertible debentures corresponding to in total not more 
than 34 million new shares, with or without the application of 
the shareholders pre-emption rights.

·  Authorisation for the Board to decide on repurchases and sales 
of the Company’s own shares on Nasdaq Stockholm, where the 
number of shares held in treasury from time to time shall not 
exceed ten percent of all outstanding shares of the Company.

An electronic system with voting devices was used for the two 
last items requiring a qualiﬁ ed majority. The minutes of the 
2018 AGM and all AGM materials, in Swedish and English, are 
available on the Company’s website, together with the CEO’s 
address to the AGM.

External auditors of the Company 
Statutory auditor 
Lundin Petroleum’s statutory auditor audits annually the 
Company’s ﬁ nancial statements, the consolidated ﬁ nancial 
statements, the Board’s and the CEO’s administration of the 
Company’s affairs and reports on the Corporate Governance 
Report. The auditor also reviews the Sustainability Report to 
conﬁ rm that it contains the required information. In addition, 
the auditor performs a review of the Company’s half year report 
and issues a statement regarding the Company’s compliance 
with the Policy on Remuneration approved by the AGM. The 
Board meets at least once a year with the auditor without any 
member of Group management present at the meeting. In 
addition, the auditor participates regularly in Audit Committee 
meetings, in particular in connection with the Company’s half 
year and year end reports. Group entities outside of Sweden are 
audited in accordance with local rules and regulations.

Dividend Policy

Lundin Petroleum’s objective is to create attractive 
shareholder returns by investing through the business 
cycle with capital investments allocated to exploration, 
development and production assets. The Company’s 
expectation is to create shareholder returns both 
through share price appreciation and by distributing 
a sustainable yearly dividend - paid in quarterly 
instalments and denominated in USD - with the plan of 
maintaining or increasing the dividend over time in line 
with the Company’s ﬁ nancial performance and being 
sustainable below an oil price of USD 50 per barrel. The 
dividend shall be sustainable in the context of allowing 
the Company to continue to pursue its organic growth 
strategy and to develop its contingent resources whilst 
maintaining a conservative gearing ratio and retaining 
an appropriate liquidity position within its available 
credit lines. 

Lundin Petroleum Annual Report 2018

25

Shareholders’ Meetings
The Shareholders’ Meeting is the highest decision-making body 
of Lundin Petroleum where the shareholders exercise their 
voting rights and inﬂ uence the business of the Company. The 
AGM is held each year before the end of June at the seat of the 
Board in Stockholm. The notice of the AGM is announced in 
the Swedish Gazette (Post- och Inrikes Tidningar) and on the 
Company’s website no more than six and no less than four 
weeks prior to the meeting. The documentation for the AGM is 
provided on the Company’s website in Swedish and in English 
at the latest three weeks before the AGM and all proceedings are 
simultaneously translated from Swedish to English and from 
English to Swedish. 

2018 AGM
The 2018 AGM was held on 3 May 2018 at Grand Hôtel in 
Stockholm. The AGM was attended by 801 shareholders, 
personally or by proxy, representing 68.91 percent of the 
share capital. The Chairman of the Board, all Board members 
including the CEO were present, as well as the Company’s 
auditor and the majority of the members of the Nomination 
Committee for the 2018 AGM. The members of the Nomination 
Committee for the 2018 AGM were Hans Ek (SEB Investment 
Management AB), Filippa Gerstädt (Nordea Funds), Åsa Nisell 
(Swedbank Robur Fonder) and Ian H. Lundin (Nemesia S.à.r.l., 
and Landor Participations Inc., as well as non-executive 
Chairman of the Board of Lundin Petroleum). 

The resolutions passed by the 2018 AGM include:
·  Election of advokat Klaes Edhall as Chairman of the AGM.
·  Re-election of Peggy Bruzelius, C. Ashley Heppenstall, Ian 

H. Lundin, Lukas H. Lundin, Grace Reksten Skaugen, Cecilia 
Vieweg, Alex Schneiter and Jakob Thomasen as Board 
members and election of Torstein Sanness as a new Board 
member. 

·  Re-election of Ian H. Lundin as Chairman of the Board.
·  Discharge of the Board and the CEO from liability for the 

administration of the Company’s business for 2017.

·  Adoption of the Company’s income statement and balance 
sheet and the consolidated income statement and balance 
sheet for 2017 and resolving to declare a dividend of SEK 4.00 
per share with a record date of 7 May 2018. 
·  Re-election of the registered accounting ﬁ rm 

PricewaterhouseCoopers AB as the Company’s statutory 
auditor until the 2019 AGM, authorised public accountant 
Johan Rippe being the designated auditor in charge.
·  Approval of the remuneration of SEK 1,100,000 to the 
Chairman of the Board and SEK 525,000 to other Board 

GOVERNANCE | Corporate Governance Report 2018

Nomination Committee for the 2019 AGM

Member

Appointed by 

Hans Ek 

SEB Investment 
Management AB

Filippa Gerstädt Nordea Funds

Åsa Nisell

Ian H. Lundin

Swedbank Robur 
Fonder 

Nemesia S.à.r.l 
and non-executive 
Chairman of the Board 
of Lundin Petroleum

Meeting
attendance 

Shares 
represented 
as at 1 Aug 2018

Shares 
represented as 
at 31 Dec 2018

Independent of the 
Company and Group 
management

Independent of the 
Company’s major 
shareholders

3/3

3/3

2/21

3/3

0.6 percent

0.5 percent

1.0 percent

1.0 percent

1.3 percent

0.5 percent

27.7 percent

28.1 percent

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No2 

Total 30.6 percent  Total 30.0 

percent 
(rounded)

1 Åsa Nisell was a member of the Nomination Committee until 9 January 2019 but stepped down as a result of Swedbank Robur Fonder no 
longer being a larger shareholder of the Company.
2 For details, see schedule on pages 28–29.

The Company’s external auditor is the registered accounting 
ﬁ rm PricewaterhouseCoopers AB, which was ﬁ rst elected as 
the Company’s statutory auditor in 2001. The auditor’s fees 
are described in the notes to the ﬁ nancial statements, see Note 
30 on page 88 and Note 7 on page 93. The auditor’s fees also 
detail payments made for assignments outside the regular audit 
mandate. Such assignments are kept to a minimum to ensure 
the auditor’s independence towards the Company and require 
prior approval of the Company’s Audit Committee.

Independent qualiﬁ ed reserves auditor
Lundin Petroleum’s independent qualiﬁ ed reserves auditor 
certiﬁ es annually the Company’s oil and gas reserves and 
certain contingent resources, i.e. the Company’s core assets, 
although such assets are not included in the Company’s balance 
sheet. The current auditor is ERC Equipoise Ltd. For further 
information regarding the Company’s reserves and resources, 
see the Operations Review on pages 8–15.

Nomination Committee
The Nomination Committee is formed in accordance with 
the Company’s Nomination Committee Process approved at 
the 2014 AGM. According to the Process, the Company shall 
invite four of the larger shareholders of the Company based on 
shareholdings as per 1 August each year to form the Nomination 
Committee, however, the members are, regardless of how 
they are appointed, required to promote the interests of all 
shareholders of the Company.

The tasks of the Nomination Committee include making 
recommendations to the AGM regarding the election of the 
Chairman of the AGM, election of Board members and the 
Chairman of the Board, remuneration of the Chairman and 
other Board members, including remuneration for Board 
Committee work, election of the statutory auditor and 
remuneration of the statutory auditor. Shareholders may submit 
proposals to the Nomination Committee by e-mail to 
nomcom@lundin-petroleum.com. 

Nomination Committee for the 2019 AGM
The members of the Nomination Committee for the 2019 AGM 
were announced and posted on the Company’s website on 3 
September 2018. Equinor ASA was invited to join but declined 
the invitation. 

Ian H. Lundin was unanimously elected as Chairman of the 
Nomination Committee. The fact that he is the Chairman 
of the Nomination Committee and Chairman of Lundin 
Petroleum constitutes a deviation from rule 2.4 in the Corporate 
Governance Code, however this deviation was considered 
justiﬁ ed as Ian H. Lundin represents the major shareholder of 
the Company.

The Nomination Committee has held three meetings during 
its mandate so far. To prepare the Nomination Committee for 
its tasks and duties and to familiarise the members with the 
Company, the Chairman of the Board, Ian H. Lundin, who is 
also the Chairman of the Nomination Committee, commented 
at the meetings on the Company’s business operations and 
future outlook, as well as on the oil and gas industry in general. 

Summary of the Nomination Committee’s work during their 
mandate:
·  Considering the recommendation received through the 
Company’s Audit Committee regarding the election of 
statutory auditor at the 2019 AGM.

·  Considering Board and statutory auditor remuneration issues 

and proposals to the 2019 AGM.

·  Considering a proposal to appoint an external independent 

Chairman for the 2019 AGM.

·  Considering amendments to the Nomination Committee 

Process and that no changes should be proposed.

·  Considering the size and composition of the Board in light of 
the diversity recommendations in the Corporate Governance 
Code, including gender balance, age, educational and 
professional backgrounds and the proposed Board members’ 
individual and collective qualiﬁ cations, experiences and 
capabilities in respect of the Company’s current position and 
expected development.

·  Considering the results of the annual assessment of the Board 

and the functioning of its work. 

·  Members of the Nomination Committee, who are independent 
of the Company’s major shareholders, met and had discussions 
with current Board members Peggy Bruzelius, Jakob Thomasen 
and Torstein Sanness to discuss the work and functioning of 
the Board.

The full Nomination Committee report, including the ﬁ nal 
proposals to the 2019 AGM, is available on the Company’s website.

26

Lundin Petroleum Annual Report 2018

 
Board of Directors
The Board of Directors of Lundin Petroleum is responsible for the 
organisation of the Company and management of the
Company’s operations. The Board is to manage the Company’s 
affairs in the interests of the Company and all shareholders with 
the aim of creating long-term shareholder value. To achieve this, 
the Board should at all times have an appropriate and diverse 
composition considering the current and expected development 
of the operations, with Board members from a wide range of 
backgrounds that possess both individually and collectively the 
necessary experience and expertise. 

Composition of the Board
The Board of Lundin Petroleum shall, according to the Articles of 
Association, consist of a minimum of three and a maximum of ten 
directors with a maximum of three deputies, and the AGM decides 
the ﬁ nal number each year. The Board members are elected for a 
period of one year. There are no deputy members and no members 
appointed by employee organisations. In addition, the Board is 
supported by a corporate secretary, the Company’s Vice President 
Legal Henrika Frykman, who is not a Board member.

The Nomination Committee for the 2018 AGM considered that 
a Board size of nine members would be appropriate taking into 
account the nature, size, complexity and geographical scope of the 
Company’s business. The Nomination Committee considered that 
the Board as proposed and elected by the 2018 AGM is a broad and 
versatile group of knowledgeable and skilled individuals who are 
motivated and prepared to undertake the tasks required of the 
Board in today’s challenging international business environment. 
The Board members possess substantial expertise and experience 
relating to the oil and gas industry internationally and speciﬁ cally 
Norway, being Lundin Petroleum’s core area of operation, public 
company ﬁ nancial matters, Swedish practice and compliance 
matters and CR/HSE matters. The Nomination Committee 
considered that the proposed Board fulﬁ lled the requirements 
regarding independence in relation to the Company, Group 
management and the Company’s major shareholders. 

Gender balance was speciﬁ cally discussed and the Nomination 
Committee noted that 33 percent of the proposed Board members 

were women. The Company aims to promote diversity at all levels 
of the Company, and the Nomination Committee applies the 
diversity requirements of the Corporate Governance Code. The 
recommendation of the Swedish Corporate Governance Board 
is that larger listed Swedish companies should strive to achieve 
35 percent female Board representation by 2018, which had 
been achieved by the Company during 2015–2018. Whilst the 
percentage of women on the proposed Board was slightly lower 
than in the past, the Nomination Committee considered that the 
experience of the Board members, and in particular the signiﬁ cant 
Norwegian experience of the new proposed Board member 
Torstein Sanness, outweighed the slight decline. The Nomination 
Committee supports the ambition of the Swedish Corporate 
Governance Board regarding levels and timing of achieving gender 
balance and believes that it is important to continue to strive for 
gender balance when future changes in the composition of the 
Board are considered. 

Board meetings and work in 2018 
The Chairman of the Board, Ian H. Lundin, is responsible for 
ensuring that the Board’s work is well organised and conducted 
in an efﬁ cient manner. He upholds the reporting instructions for 
management, as drawn up by the CEO and as approved by the 
Board, however, he does not take part in the day-to-day decision-
making concerning the operations of the Company. The Chairman 
maintains close contacts with the CEO to ensure the Board is at 
all times sufﬁ ciently informed of the Company’s operations and 
ﬁ nancial status. 

To continue developing the Board’s knowledge of the Company 
and its operations, at least one Board meeting per year is held 
in an operational location and is combined with visits to the 
operations, industry partners and other business interests. In 
October 2018, the Board visited the Lundin Petroleum operated 
Edvard Grieg platform in the Norwegian Sea and the Kvaerner 
Yard at Stord where Johan Sverdrup accomodation platform 
topsides were being built, and an executive session with Group 
management was held in connection with the Board meeting. 
Group management also attended Board meetings during the 
year to present and report on speciﬁ c questions, and a monthly 
operational report was circulated to the Board, as well as a 
quarterly CR/HSE report.

Principal tasks of the Board of Directors

·  Establishing the overall goals and strategy of the Company.
·  Making decisions regarding the supply of capital.
·  Appointing, evaluating and, if necessary, dismissing the CEO.
·  Ensuring that there is an effective system for follow-up and control of the 
Company’s operations and the risks to the Company that are associated 
with its operations.

·  Ensuring that there is a satisfactory process for monitoring the 

Company’s compliance with laws and other regulations relevant to the 
Company’s operations, as well as the application of internal guidelines.

·  Deﬁ ning necessary guidelines to govern the Company’s conduct in 

society, with the aim of ensuring its long- term value creation capability.
·  Ensuring that the Company’s external communications are characterised 

by openness, and that they are accurate, reliable and relevant.

·  Ensuring that the Company’s organisation in respect of accounting, 

management of funds and the Company’s ﬁ nancial position in general 
include satisfactory systems of internal control.

·  Continuously evaluating the Company’s and the Group’s economic 

situation, including its ﬁ scal position.

Lundin Petroleum Annual Report 2018

27

GOVERNANCE | Corporate Governance Report 2018

Board of Directors:

Ian H. Lundin

Alex Schneiter

Peggy Bruzelius

C. Ashley Heppenstall

Chairman (since 
2002), member of the 
Compensation Committee

President & Chief Executive 
Ofﬁ cer, Director

Director, Chair of the Audit 
Committee

Director, member of the 
Audit Committee

2001

1960

2016

1962

B.Sc. Petroleum 
Engineering from the 
University of Tulsa.

M.Sc. Geophysics and 
degree in Geology from the 
University of Geneva.

2013

1949

M.Sc. Economics and 
Business from the 
Stockholm School of 
Economics.

2001

1962

B.Sc. Mathematics from the 
University of Durham.

Function

Elected

Born

Education

Experience

CEO of International 
Petroleum Corp. 1989–
1998.
CEO of Lundin Oil AB 
1998–2001. 
CEO of Lundin Petroleum 
2001–2002.

Various positions within 
Lundin related companies 
since 1993. 
COO of Lundin Petroleum 
2001–2015. 
CEO of Lundin Petroleum 
since 2015.

Managing Director of ABB 
Financial Services AB 1991-
1997. 
Head of the asset 
management division of 
Skandinaviska Enskilda 
Banken AB 1997-1998.

Other board duties

Member of the board of 
Etrion Corporation and 
Bukowski Auktioner AB. 

–

Chair of the board of
Lancelot Asset Management
AB, member of the board of
Akzo Nobel NV and 
Skandia Liv.

Shares as at 
31 December 2018

Attendance

Board

Audit Committee

Compensation Committee

CR/HSE Committee

Remuneration1

Nil2

9/9

–

5/5

–

Board and Committee work 

SEK 1,210,000

Special assignments 
outside the directorship 

Independent of the 
Company and Group 
management 

Independent of major 
shareholders 

SEK 1,000,000

Yes

No2

208,000

8,000

9/9

6/6

–

–

9/9

–

–

–

Nil

Nil

No3

Yes

SEK 690,000

SEK 635,000

Nil

Yes

Yes

SEK 5,328,000

No4

No4

1  See also note 28 on pages 84–85.
2  Ian H. Lundin is in the Nomination Committee’s and the Company’s opinion not deemed independent of the Company’s major shareholder as Ian H. Lundin is a 

member of the Lundin family that holds, through a family trust, Nemesia S.à.r.l., which holds 95,478,606 shares in the Company.

3  Alex Schneiter is in the Nomination Committee’s and the Company’s opinion not deemed independent of the Company and Group management since he is the 

President and CEO of Lundin Petroleum.

28

Lundin Petroleum Annual Report 2018

Various positions within 
Lundin related companies 
since 1993. 
CFO of Lundin Oil AB 
1998–2001. 
CFO of Lundin Petroleum 
2001–2002. 
CEO of Lundin Petroleum 
2002–2015.

Chairman of the board 
of Africa Energy Corp. 
and member of the board 
of Lundin Gold Inc., 
Filo Mining Corp. and 
International Petroleum 
Corp.

Nil4

9/9

6/6

–

–

Lukas H. Lundin

Grace Reksten Skaugen

Torstein Sanness

Jakob Thomasen

Cecilia Vieweg

Director

2001

1958

Director, Chair of the CR/
HSE Committee, member 
of the Compensation 
Committee

Director, member of the 
CR/HSE Committee

Director, member of the 
Audit Committee and the 
CR/HSE Committee

Director, Chair of the 
Compensation Committee

2015

1953

2018

1947

2017

1962

2013

1955

Graduate from the New 
Mexico Institute of 
Mining, Technology and 
Engineering.

Various key positions within 
companies where the 
Lundin family has a major 
shareholding.

M.Ba. from the BI Norwegian 
School of Management, 
B.Sc. Honours Physics and 
Doctoreate laser physics 
from Imperial College of 
Science and Technology at 
the University of London.

Former Director of 
Corporate Finance with SEB 
Enskilda Securities in Oslo. 
Board member/deputy chair 
of Statoil ASA 2002 –2015.
Member of HSBC European 
Senior Advisory Council.

Chairman of the board 
of Lundin Mining Corp., 
Lucara Diamond Corp., 
NGEx Resources Inc., 
Lundin Gold Inc., Filo 
Mining Corp., International 
Petroleum Corp. and Lundin 
Foundation, member of 
the board of Bukowski 
Auktioner AB.

Deputy Chair of the 
board of Orkla ASA and 
member of the board of 
Investor AB and Euronav 
NV, founder and board 
member of the Norwegian 
Institute of Directors and 
council member of the 
International Institute for 
Strategic Studies in London.

M.Sc. Engineering in 
geology, geophysics and 
mining engineering from 
the Norwegian Institute of 
Technology in Trondheim.

Managing Director of 
Lundin Norway AS 
2004–2015. 
Managing Director of Det 
Norske Oljeselskap AS 
2000–2004. 
Various positions in Saga 
Petroleum 1972–2000.

Chairman of the board of 
Magnora ASA and member 
of the board of 
International Petroleum 
Corp., Panoro Energy ASA 
and TGS Nopec ASA.

Graduate of the University 
of Copenhagen, Denmark, 
M.Sc. in Geoscience and 
completed the Advanced 
Strategic Management 
programme at IMD, 
Switzerland.

Former CEO of Maersk 
Oil and a member of the 
Executive Board of the 
Maersk Group 2009 - 2016.

L.L.M. from the University 
of Lund.

General Counsel and 
member of the Executive 
Management of AB 
Electrolux 1999–2016. 
Senior positions in AB Volvo 
Group 1990-1998. 
Lawyer in private practice.

Chairman of the DHI Group, 
ESVAGT and Falck Safety 
Services and member of 
the board of University of 
Copenhagen.

–

788,3315

5,000

93,310

8,820

3,500

9/9

–

–

–

9/9

–

5/5

2/2

6/66

–

–

2/2

9/9

6/6

–

2/2

9/9

–

5/5

–

SEK 525,000

SEK 717,500

SEK 317,500

SEK 690,000

SEK 690,000

Nil

Yes

No5

Nil

Yes

Yes

Nil

No6

Yes

Nil

Yes

Yes

Nil

Yes

Yes

4  C. Ashley Heppenstall holds 1,542,618 shares in Lundin Petroleum AB through an investment company, Rojaﬁ . C. Ashley Heppenstall is in the Nomination 
Committee’s and the Company’s opinion not deemed independent of the Company and Group management since he was the President and CEO of Lundin 
Petroleum until 2015, and not of the Company’s major shareholders since he is a director of several companies in which entities associated with the Lundin family 
are major shareholders. 

5  Lukas H. Lundin is in the Nomination Committee’s and the Company’s opinion not deemed independent of the Company’s major shareholder as Lukas H. Lundin is 

a member of the Lundin family that holds, through a family trust, Nemesia S.à.r.l., which holds 95,478,606 shares in the Company.

6  Torstein Sanness is a member of the Board of Directors as of 3 May 2018. Torstein Sanness is in the Nomination Committee’s and the Company’s opinion not deemed 

independent of the Company and Group management since he was the Managing Director of Lundin Norway AS, a subsidiary of the Company, until 2015.

Lundin Petroleum Annual Report 2018

29

GOVERNANCE | Corporate Governance Report 2018

Board committees
To maximise the efﬁ ciency of the Board’s work and to ensure 
a thorough review of speciﬁ c issues, the Board has established 
a Compensation Committee, an Audit Committee and in 2018, 
a new CR/HSE Committee. Considering the importance of CR/
HSE matters for the Company, the Board considered it was 
suitable to establish a full Board Committee to replace and 
build on the previous work of the CR/HSE Board representative. 
The tasks and responsibilities of the Committees are detailed in 
the terms of reference of each Committee, which are annually 
adopted as part of the Rules of Procedure of the Board. Terms of 
reference were adopted in 2018 also for the CR/HSE Committee. 
Minutes are kept at Committee meetings and matters discussed 
are reported to the Board. In addition, informal contacts take 
place between ordinary meetings as and when required by the 
operations.

Compensation Committee
The Compensation Committee assists the Board in Group 
management remuneration matters and receives information 
and prepares the Board’s and the AGM’s decisions on matters 
relating to the principles of remuneration, remunerations 
and other terms of employment of Group management. The 
objective of the Committee in determining compensation for 
Group management is to provide a compensation package 
that is based on market conditions, is competitive and takes 
into account the scope and responsibilities associated with the 
position, as well as the skills, experience and performance of 
the individual. The Committee’s tasks also include monitoring 
and evaluating programmes for variable remuneration, the 
application of the Policy on Remuneration as well as the current 
remuneration structures and levels in the Company. The 
Compensation Committee may request advice and assistance of 
external reward consultants. For further information regarding 
Group remuneration matters, see the remuneration section of 
this report on pages 35–37.

Compensation Committee work during 2018:
·  Ongoing review of the Performance Management Process 

through various work sessions across the year.

·  Discussions and recommendations to the Board in 

remuneration matters.

·  Review of the performance of the CEO and Group 

management as per the Performance Management Process.

·  Preparing a report regarding the Board’s evaluation of 

remuneration in 2017.

·  Continuous monitoring and evaluation of remuneration 

structures, levels, programmes and the Policy on 
Remuneration.

·  Preparing a proposal for the 2018 Policy on Remuneration for 

Board and AGM approval.

·  Consultation and meetings with Company stakeholders, 

including institutional investors, regarding the proposed LTIP 
2018.

·  Preparing a proposal for LTIP 2018 for Board and AGM 

approval through various work sessions and preparation 
discussions.

·  Review of fulﬁ lment of LTIP 2015 performance conditions and 

conﬁ rmation of vesting.

·  Review and approval of the CEO’s proposals for the principles 

of compensation of other employees.

·  Review and approval of the CEO’s proposals for 2018 LTIP 

awards.

·  Undertaking a remuneration benchmark study and various 

contacts and ongoing reviews in relation thereto during year.
·  Frequent contacts, ongoing dialogue and decisions by email 

outside of formal meetings to provide oversight and approvals 
for remuneration and severance terms as presented by Group 
management.

Audit Committee
The Audit Committee assists the Board in ensuring that the 
Company’s ﬁ nancial reports are prepared in accordance with 
International Financial Reporting Standards (IFRS), the Swedish 
Annual Accounts Act and accounting practices applicable 
to a company incorporated in Sweden and listed on Nasdaq 
Stockholm. The Audit Committee supervises the Company’s 
ﬁ nancial reporting and gives recommendations and proposals 
to ensure the reliability of the reporting. The Committee also 
supervises the efﬁ ciency of the Company’s ﬁ nancial internal 
controls, internal audit and risk management in relation to 
the ﬁ nancial reporting and provides support to the Board in 
the decision making processes regarding such matters. The 
Committee monitors the audit of the Company’s ﬁ nancial 
reports and also reports thereon to the Board. In addition, 
the Committee is empowered by the Committee’s terms of 
reference to make decisions on certain issues delegated to it, 
such as review and approval of the Company’s ﬁ rst and third 
quarter reports on behalf of the Board. The Audit Committee 
also regularly liaises with the Group’s statutory auditor as part 
of the annual audit process and reviews the audit fees and the 
auditor’s independence and impartiality. The Audit Committee 
further assists the Company’s Nomination Committee in the 
preparation of proposals for the election of the statutory auditor 
at the AGM.

The Audit Committee members have extensive experience 
in ﬁ nancial, accounting and audit matters. Peggy Bruzelius’ 
current and previous assignments include high level 
management positions in ﬁ nancial institutions and companies 
and she has chaired Audit Committees of other companies. 
C. Ashley Heppenstall is the Company’s previous CFO and CEO 
and Jakob Thomasen was previously CEO of Maersk Oil, and 
both have extensive experience in ﬁ nancial matters.

Audit Committee work during 2018:
·  Assessment of the 2017 year end report and the 2018 half year 
report for completeness and accuracy and recommendation for 
approval to the Board.

·  Assessment and approval of the ﬁ rst and third quarter reports 

2018 on behalf of the Board.

·  Evaluation of accounting issues in relation to the assessment 

of the ﬁ nancial reports.

·  Follow-up and evaluation of the results of the internal audit 

and risk management of the Group.

·  Three meetings with the statutory auditor to discuss the 

ﬁ nancial reporting, internal controls, risk management, etc.
·  Evaluation of the audit performance and the independence 

·  Preparing a proposal for remuneration and other terms of 

and impartiality of the statutory auditor.

employment for the CEO for Board approval.

·  Review of the CEO’s proposals for remuneration and other 

terms of employment of the other members of Group 
management for Board approval.

·  Review and approval of statutory auditor’s fees.
·  Assisting the Nomination Committee in its work to propose a 

statutory auditor for election at the 2019 AGM.

30

Lundin Petroleum Annual Report 2018

Board’s yearly work cycle 

·  Adoption of the budget and work programme
·  Consideration of the Board self-evaluation to 
  be submitted to the Nomination Committee
·  Audit Committee report regarding the third 
  quarter report
·  Performance assessment of the CEO
·  Consideration of the performance review of 
  Group management and Compensation 
  Committee remuneration proposals

·  Executive session with Group management
·  Detailed discussion of strategy issues
·  In-depth analysis of  the Company’s business 
·  Adoption of the half year report, reviewed by 
  the statutory auditor

Q4 Q1

Q3

Q2

·  Approval of the year end report
·  Consideration of recommendation to the AGM to declare 
  a dividend
·  Approval of remuneration proposals regarding 
  variable remuneration
·  Approval of the Annual Report
·  Review of the auditor’s report
·  Approval of the Policy on Remuneration for submission 
  to the AGM
·  Approval of the remuneration report  
·  Determination of the AGM details and approval of 
  the AGM materials

·  Audit Committee report regarding the ﬁrst quarter report
·  Annual CR/HSE management report and performance 
  assessment
·  Meeting with the auditor without management present 
  to discuss the audit process, risk management and 
  internal controls
·  Review of the Rules of Procedure
·  Statutory meeting following the AGM to conﬁrm Board 
  fees, Committee compensation, signatory powers, 
  appointment of Corporate Secretary and adoption of 
  the Rules of Procedure

Board of Directors work 2018

Nine board meetings were held in 2018 and in addition to the topics covered by the Board as per its yearly work cycle, the following 
signiﬁ cant matters were addressed by the Board during the year.
·  Discussing in detail the Company’s performance in 2017 and resolving to propose to the AGM that an inaugural cash dividend of SEK 4 per 

share be paid to the shareholders. 

·  Review and approval of the updated Code of Conduct mirroring the new corporate identity following the Company’s spin off of the non-

Norwegian assets. 

·  Resolving to constitute a new CR/HSE Committee and preparing and approving the Committee terms of reference.
·  Discussing in detail the ﬁ nancing of the Company, including the Company’s ﬁ nancial risk management, cash ﬂ ows, sources of funding, 
foreign exchange movements, hedging strategy and liquidity position and reviewing and approving an Amendment and Restatement 
Agreement with signiﬁ cantly improved terms in relation to the Company’s USD 5 billion reserve-based credit facility. 

·  Discussions regarding the Company’s risk management. 
·  Discussions regarding investor relations matters. 
·  Review and approval of the Company’s new Diversity Policy. 
·  Approval of the Company’s sale of shares in ShaMaran Corporation. 
·  Considering the Company’s production performance, forecasts and future outlook.
·  Considering and discussing in detail the well advanced Johan Sverdrup development project and remaining project risks, time schedule, 

operator performance and cost reductions and expectations.

·  Discussing the Company’s increased licence position and approving several licence acquisitions and divestments to optimise the 

Company’s acreage position and ensure future organic growth opportunities. 

·  Considering several business acquisition opportunities in Norway, as well as options for the Morskaya asset in Russia. 
·  Approval of the permanent cessation of production at the Brynhild ﬁ eld. 
·  Approval of a share repurchases, as per AGM authorisation, to optimise the Company’s capital structure and secure the Company’s 

obligations under its incentive programs. 

·  Assessing the Company’s oil and gas reserves and resources positions.
·  Discussing the Swedish Prosecution Ofﬁ ce’s on-going preliminary investigation into alleged complicity in violations of international 

humanitarian law in Sudan during 1997–2003, including the potential corporate ﬁ ne of SEK 3 million and forfeiture of economic beneﬁ ts 
of SEK 3.3 billion that the Prosecution Ofﬁ ce aims to claim in case of a potential trial, as well as the preliminary investigation into alleged 
instigation of interference in a judicial matter. 

·  Considering and discussing CR matters, including operations in the Barents Sea, climate change and the Company’s efforts to reduce its 

environmental impact, the Company’s partnership with the Lundin Foundation and CR trends and initiatives.

·  Considering and discussing the Company’s HSE performance, HSE assurance activities, including audits, and the new HSEQ Leadership 

Charter.

·  Considering the proposal for a performance based LTIP 2018, following the same principles as the previous LTIPs approved by the 

2014–2017 AGMs, including continued stakeholder engagement discussions, revising the applicable peer group, approving participants, 
allocating individual awards and approving the detailed plan rules, subject to 2018 AGM approval.

Lundin Petroleum Annual Report 2018

31

GOVERNANCE | Corporate Governance Report 2018

CR/HSE Committee
The CR/HSE Committee assists the Board to monitor the 
performance and key risks that the Company faces in relation to 
corporate responsibility and health, safety and environmental 
matters. The CR/HSE Committee’s responsability is to oversee 
the Company’s conduct and performance on CR/HSE matters, to 
inform the Board and make whatever recommendations to the 
Board it deems appropriate on any area within its remit where 
action or improvement is needed. The CR/HSE Committee’s tasks 
further include reviewing and monitoring CR/HSE policies and 
the effectiveness of CR compliance, as well as considering CR 
issues, risks, strategies and responses to climate change issues. 
The CR/HSE Committee reviews Group management’s proposals 
on HSE targets and goals, monitors the appropriateness of 
HSEQ audit strategies and plans, the execution and results of 
such plans and reviews and makes recommendations to the 
Board in relation to the Company’s sustainability report. More 
information about the Company’s CR/HSE activities can be 
found in the Responsibility section on pages 16–17 and in the 
Sustainability Report available on the Company’s website.

CR/HSE Committee work during 2018:
·  Review and approval of CR/HSE Committee terms of reference.
·  Review of policies and conduct of the Company in respect of 

CR matters. 

·  Review of the effectiveness of the compliance to the Lundin 

Petroleum Code of Conduct. 

·  Review of major CR issues or risks of public concern and the 

Company strategy to address them.

·  Review the Company’s strategy and response to climate change 

issues.

·  Review the standards, policies and conduct of the Company 
relating to the application of the HSEQ Leadership Charter, 
Health and Safety Policy and Environmental Policy.

·  Review of HSE performance and monitoring of potential and/
or large reputational risk for the Company with particular 
focus on corrective actions.

·  Monitor the appropriateness of HSEQ audit strategies and 

plans, and the execution and results of such plans.
·  Review of the cyber risks and awareness programme. 
·  Review of 2019 HSEQ plan. 
·  Discussing ESG assessments of Lundin Petroleum.

32

Lundin Petroleum Annual Report 2018

Remuneration of Board members
The remuneration of the Chairman and other Board members 
follows the resolution adopted by the AGM. The Board 
members, with the exception of the CEO, are not employed by 
the Company, do not receive any salary from the Company and 
are not eligible for participation in the Company’s incentive 
programmes. The Policy on Remuneration approved by the 
AGM also comprises remuneration paid to Board members for 
work performed outside the directorship.

The Board has implemented a policy for share ownership by 
Board members and each Board member is expected to own, 
directly or indirectly, at least 5,000 shares of the Company. 
The level shall be met within three years of appointment and 
during such period, Board members are expected to allocate at 
least 50 percent of their annual Board fees towards purchases 
of the Company’s shares.

The remuneration of the Board, including for work performed 
outside the directorship, is detailed further in the schedule on 
pages 28–29 and in the notes to the ﬁ nancial statements, see 
Note 28 on pages 84–85.

Evaluation of the Board’s work 
A formal review of the work of the Board was conducted in 
September 2018 through a questionnaire submitted to all 
Board members, with the objective of ensuring that the Board 
functions in an efﬁ cient manner and to enable the Board to 
improve on matters which may be raised. 

The overall feedback from the members of the Board was 
positive and showed that the Board functions well. The 
different backgrounds, knowledge and qualiﬁ cations of the 
individual members of the Board complement each other 
and the meetings are constructive with good discussions and 
feedback from Board members and management. The diversity 
and wide spectrum of qualiﬁ cations and experience of the 
Board members are considered as beneﬁ cial and the Board is 
viewed as competent for addressing actual and potential issues 
facing the Company. 

The size of the Board was considered appropriate, however, 
individual feedback received noted that there was room for 
additional directors, whilst a too large composition could 
make the Board less efﬁ cient. The Board members considered 
that their knowledge of the Company and the oil and gas 
industry in general had increased during the year and that 
Board members are well prepared for the meetings. The 
need for a retirement policy was considered, however, the 
Board acknowledged that there was already a natural process 
of renewing the Board as the Company adapts to the new 
environment. Visits to operational locations were appreciated 
and considered very useful for the understanding of the 
business. Committee work was believed to function well, with 
well appreciated Committee Chairs, and the composition 
of the Committees in general was deemed appropriate. 
Individual feedback received noted that management reports 
were excellent and that Board meetings were well prepared. 
The results of the Board evaluation were presented to the 
Nomination Committee.

i

More information on the Board members can be 
found on www. lundin-petroleum.com

Group management

Alex Schneiter

President and Chief 
Executive Ofﬁ cer

Nick Walker

Chief Operating 
Ofﬁ cer

Teitur Poulsen

Christine Batruch

Chief Financial 
Ofﬁ cer

Vice President 
Corporate 
Responsibility

Alex Budden

Vice President 
Corporate Affairs

Henrika Frykman

Vice President Legal

Sean Reddy

Vice President 
Human Resources 
and Shared Services

Edward Westropp

Vice President 
Investor Relations

Major topics addressed by Group management in 2018

·  Consideration of the ﬁ nancing of the Company, including different sources of funding, and negotiation of an Amendment and 

Restatement Agreement with signiﬁ cantly improved terms in relation to the Company’s USD 5 billion reserve-based credit facility.

·  Consideration of a sustainable dividend policy in view of the development of the Company’s activities.  
·  Management of the Norwegian acreage position, including pursuing new core areas of operation and solidifying existing core areas, 

through active licence acquisition and divestment management to optimise the Norwegian licence portfolio, including acquisitions of 
working interests in several discoveries.

·  Management of the on-going exploration activities, development projects, appraisal activities and production operations.
·  Continued focus on cost control measures and maximising operational efﬁ ciency and performance.
·  Consideration of organisational changes and improvements as well as considering new ventures and opportunities.
·  Development and adoption of a new Tax Policy and ongoing review of the Company’s transfer pricing policies and BEPS compliance. 
·  Ongoing analysis of climate change implications to the business and adaptation of the Company’s business model to address this issue 

from a risk and opportunity perspective.

·  Defence of the Swedish Prosecution Ofﬁ ce’s on-going preliminary investigation into alleged complicity in violations of international 

humanitarian law in Sudan during 1997–2003, including in respect of the potential corporate ﬁ ne of SEK 3 million and forfeiture of 
economic beneﬁ ts of SEK 3.3 billion that may become due upon the conclusion of a potential trial.

Management 
Management structure 
Lundin Petroleum’s Group and local management consists of 
highly experienced individuals with extensive worldwide oil 
and gas experience. The Company’s CEO, Alex Schneiter, is 
responsible for the management of the day-to-day operations of 
Lundin Petroleum. He is appointed by, and reports to, the Board. 
He in turn appoints the other members of Group management, 
who assist the CEO in his functions and duties, and in the 
implementation of decisions taken and instructions given by 
the Board, with the aim of ensuring that the Company meets its 
strategic objectives and continues to deliver responsible growth 
and long-term shareholder value.

The Company’s Investment Committee consists of, in addition 
to the CEO, the Chief Operating Ofﬁ ce (COO), Nick Walker, who 
is responsible for Lundin Petroleum’s exploration, development 

and production operations and HSE, and the Chief Financial 
Ofﬁ cer (CFO), Teitur Poulsen, who is responsible for the ﬁ nancial 
reporting, internal control, risk management, treasury function 
and economics. The Investment Committee assists the Board 
in discharging its responsibilities in overseeing the Company’s 
investment portfolio. The role of the Investment Committee 
is to determine that the Company has a clearly articulated 
investment policy, to develop, review and recommend to the 
Board investment strategies and guidelines in line with the 
Company’s overall policy, to review and approve investment 
transactions and to monitor compliance with investment 
strategies and guidelines. The responsibilities and duties include 
considering annual budgets, supplementary budget approvals, 
investment proposals, commitments, relinquishment of licences, 
disposal of assets and performing other investment related 
functions as the Board may designate. 

Lundin Petroleum Annual Report 2018

33

GOVERNANCE | Corporate Governance Report 2018

In addition to the members of the Investment Committee, 
Lundin Petroleum’s Group management comprises:

·  The Vice President Corporate Responsibility, Christine Batruch, 

who is responsible for the Group’s CR strategy, the Vice 
President Corporate Affairs, Alex Budden, who is responsible 
for corporate affairs and strategic communications within 
the Group, the Vice President Legal, Henrika Frykman, who is 
responsible for all legal and tax matters within the Group, the 
Vice President Human Resources and Shared Services, Sean 
Reddy, who is responsible for human resources and shared 
services and the Vice President Investor Relations Edward 
Westropp, who is responsible for investor relations and 
ﬁ nancial communications within the Group.

·  Local management, who are responsible for the day-to-day 

operational activities.

Group management tasks and duties 
The tasks of the CEO and the division of duties between the 
Board and the CEO are deﬁ ned in the Rules of Procedure and 
the Board’s instructions to the CEO. In addition to the overall 
management of the Company, the CEO’s tasks include ensuring 
that the Board receives all relevant information regarding 
the Company’s operations, including proﬁ t trends, ﬁ nancial 
position and liquidity, as well as information regarding 
important events such as signiﬁ cant disputes, agreements and 
developments in important business relations. The CEO is also 
responsible for preparing the required information for Board 
decisions and for ensuring that the Company complies with 
applicable legislation, securities regulations and other rules 
such as the Corporate Governance Code. Furthermore, the CEO 
maintains regular contacts with the Company’s stakeholders, 
including shareholders, the ﬁ nancial markets, business partners 
and public authorities. To fulﬁ l his duties, the CEO works closely 
with the Chairman of the Board to discuss the Company’s 
operations, ﬁ nancial status, up-coming Board meetings, 
implementation of decisions and other matters.

Under the leadership of the CEO, Group management is 
responsible for ensuring that the operations are conducted 

in compliance with the Code of Conduct, all Group policies, 
procedures and guidelines and the HSEQ Leadership Charter 
in a professional, efﬁ cient and responsible manner. Regular 
management meetings are held to discuss all commercial, 
technical, CR/HSE, ﬁ nancial, legal and other issues within the 
Group to ensure the established short- and long-term business 
objectives and goals will be met. A detailed weekly operations 
report is circulated to Group management summarising 
the operational events, highlights and issues of the week in 
question. Group management also travels frequently to oversee 
the ongoing operations, seek new business opportunities and 
meet with various stakeholders, including business partners, 
suppliers and contractors, government representatives and 
ﬁ nancial institutions. In addition, Group management liaises 
continuously with the Board, and in particular the Board 
Committees, in respect of ongoing matters and issues that 
may arise, and meets with the Board at least once a year at the 
executive session held in connection with a Board meeting in 
one of the operational locations.

Internal Audit 
The Internal Audit function is responsible for providing 
independent and objective assurance on internal control, 
governance and risk management. This work includes regular 
audits performed in accordance with an annual risk based 
internal audit plan, which is approved by the Audit Committee. 
The audit plan is derived from an independent risk assessment 
conducted by the Internal Audit function and is designed to 
address the most signiﬁ cant risks identiﬁ ed associated with the 
Company’s operations and processes. The audits are executed 
using a methodology for evaluating the design and effectiveness 
of internal controls to ensure that risks are adequately addressed 
and processes are operated effectively. Opportunities for 
improving the efﬁ ciency of the internal control, governance, 
and risk management processes which have been identiﬁ ed 
through the audits are reported to management for action. 

The Internal Audit Manager has a direct reporting line to the 
Audit Committee and submits regularly reports on ﬁ ndings 
identiﬁ ed in the audits together with updates on the status of 
management’s implementation of agreed actions. 

Sudan 

In 2010, the Swedish Prosecution Authority began a preliminary investigation into alleged complicity in violations of international 
humanitarian law in Sudan during 1997– 2003. The Company has cooperated extensively and proactively with the investigation by 
providing information regarding its operations in Block 5A in Sudan during the relevant time period and strongly believes that it was 
a force for development in Sudan. Ian H. Lundin and Alex Schneiter have been interviewed by the Swedish Prosecution Authority 
and have been notiﬁ ed of the suspicions that are the basis for the investigation. In 2018, the Company was notiﬁ ed by the Swedish 
Prosecution Authority that the Company may be liable to a corporate ﬁ ne of SEK 3 million and forfeiture of economic beneﬁ ts from the 
alleged offense in the amount of SEK 3,282 million, based on the proﬁ t of the sale of the Block 5A asset in 2003 of SEK 720 million. Any 
potential corporate ﬁ ne or forfeiture could only be imposed after the conclusion of a trial, should one occur. 

In 2018, the Swedish Prosecution Authority began a preliminary investigation into alleged interference in a judicial matter as a result 
of allegations of witness harassment. The Company and its representatives are not aware of any details of the alleged actions, despite 
several requests for details thereof, and reject any knowledge of, or involvement in, any wrongdoing. Ian H. Lundin and Alex Schneiter 
have been interviewed by the Swedish Prosecution Authority and have been notiﬁ ed of the suspicions that are the basis for the 
investigation. 

Neither investigation entails that charges have been, or will be, brought against any individuals or the Company. Lundin Petroleum 
remains convinced that there are absolutely no grounds for any allegations of wrongdoing by the Company or any Company 
representatives in respect of any of these allegations. More information regarding the past operations in Sudan during 1997–2003 can 
be found on www.lundinhistoryinsudan.com.

34

Lundin Petroleum Annual Report 2018

 
Remuneration
Group principles of remuneration 
Lundin Petroleum aims to offer all employees compensation 
packages that are competitive and in line with market 
conditions. These packages are designed to ensure that 
the Group can recruit, motivate and retain highly skilled 
individuals and reward performance that enhances 
shareholder value.

The Group’s compensation packages consist of four elements, 
being (i) base salary; (ii) yearly variable remuneration; (iii) 
long-term incentive plan (LTIP); and (iv) other beneﬁ ts. As part 
of the yearly assessment process, a Performance Management 
Process has been established to align individual and team 
performance to the strategic and operational goals and 
objectives of the overall business. Individual performance 
measures are formally agreed and key elements of variable 
remuneration are clearly linked to the achievement of such 
stated and agreed performance measures.

To ensure compensation packages within the Group 
remain competitive and in line with market conditions, the 
Compensation Committee undertakes yearly benchmarking 
studies. For each study, a peer group of international oil 
and gas companies of similar size and operational reach is 
selected, against which the Group’s remuneration practices 
are measured. The levels of base salary, yearly variable 
remuneration and long-term incentives are set at the median 
level, however, in the event of exceptional performance, 
deviations may be authorised. As the Group continuously 
competes with the peer group to retain and attract the very 
best talent in the market, both at operational and executive 
level, it is considered important that the Group’s compensation 
packages are determined primarily by reference to the 
remuneration practices within this peer group.

Policy on Remuneration for Group management
The remuneration of Group management follows the 
principles that are applicable to all employees, however, these 
principles must be approved by the shareholders at the AGM. 
The Compensation Committee therefore prepares yearly for 
approval by the Board and for submission for ﬁ nal approval to 
the AGM, a Policy on Remuneration for Group management. 
Based on the approved Policy on Remuneration, the 
Compensation Committee subsequently proposes to the Board 
for approval the remuneration and other terms of employment 
of the CEO. The CEO, in turn, proposes to the Compensation 
Committee, for approval by the Board, the remuneration and 
other terms of employment of the other members of Group 
management.

The yearly variable remuneration for Group management 
is assessed against annual performance targets that reﬂ ect 
the key drivers for value creation and growth in shareholder 
value. These annual performance targets include delivery 
against speciﬁ c production, reserves and resource replacement, 
ﬁ nancial, HSE, CR and strategic targets. Each member of Group 
management is set different performance weightings against 
each of the speciﬁ c targets reﬂ ecting their inﬂ uence on the 
performance outcome. The performance target structure and 
speciﬁ c targets are reviewed annually by the Compensation 
Committee to ensure that it aligns with the strategic direction 
and risk appetite of the Company and the performance target 
structure and speciﬁ c targets are approved by the Board.

Within the Policy on Remuneration, the Board of Directors 
may approve yearly variable remuneration in excess of 
twelve months base salary in circumstances or in respect of 
performance which it considers to be exceptional. To have this 
discretion is important to accommodate the uncertainties and 
cyclical nature of the oil and gas industry. 

LTIP 2018 
The 2018 AGM resolved to approve a performance based 
LTIP 2018, that follows the same principles as the previously 
approved LTIPs 2014–2017, for Group management and a 
number of key employees of Lundin Petroleum, which gives 
the participants the possibility to receive shares in Lundin 
Petroleum subject to the fulﬁ lment of a performance condition 
under a three year performance period commencing on 1 
July 2018 and expiring on 30 June 2021. The performance 
condition is based on the share price growth and dividends 
(Total Shareholder Return) of the Lundin Petroleum share 
compared to the Total Shareholder Return of a peer group of 
companies.

At the beginning of the performance period, the participants 
were granted awards which, provided that among others 
the performance condition is met, entitle the participant 
to be allotted shares in Lundin Petroleum at the end of the 
performance period. The number of performance shares that 
may be allotted to each participant is limited to a value of 
three times his/her annual gross base salary for 2018 and the 
total LTIP award made in respect of 2018 was 278,917.

The Board of Directors may reduce (including reduce to zero) 
the allotment of performance shares at its discretion, should it 
consider the underlying performance not to be reﬂ ected in the 
outcome of the performance condition, for example, in light 
of operating cash ﬂ ow, reserves and HSE performance. The 
participants will not be entitled to transfer, pledge or dispose 
of the LTIP awards or any rights or obligations under LTIP 
2018, or perform any shareholders’ rights regarding the LTIP 
awards during the performance period.

The LTIP awards entitle participants to acquire already existing 
shares. Shares allotted under LTIP 2018 are further subject to 
certain disposition restrictions to ensure participants build 
towards a meaningful shareholding in Lundin Petroleum. 
The level of shareholding expected of each participant is 
either 50 percent or 100 percent (200 percent for the CEO) 
of the participant’s annual gross base salary based on the 
participant’s position within the Group.

Performance monitoring and review
The Board is responsible for monitoring and reviewing on a 
continuous basis the work and performance of the CEO and 
shall carry out at least once a year a formal performance 
review. In 2018, the Compensation Committee undertook on 
behalf of the Board a review of the work and performance 
of Group management, including the CEO. The results were 
presented to the Board, together with proposals regarding 
the compensation of the CEO and other members of Group 
management. Neither the CEO nor other members of Group 
management were present at the Board meetings when such 
discussions took place.

The tasks of the Compensation Committee also include 
monitoring and evaluating the general application of the 

Lundin Petroleum Annual Report 2018

35

GOVERNANCE | Corporate Governance Report 2018

Policy on Remuneration, as approved by the AGM, and 
the Compensation Committee prepares in connection 
therewith a yearly report, for approval by the Board, on 
the application of the Policy on Remuneration and the 
evaluation of remuneration of Group management. As part 
of its review process, the statutory auditor of the Company 
also veriﬁ es on a yearly basis whether the Company has 
complied with the Policy on Remuneration. Both reports are 
available on the Company’s website.

Board’s Proposal for Remuneration to Group management 
to the 2019 AGM
For information regarding the Board’s proposal for 
remuneration to Group management to the 2019 AGM, 
including a new LTIP, see the Directors’ report, pages 
50–51.

POLICY ON REMUNERATION FOR GROUP 
MANAGEMENT AS APPROVED BY THE 2018 AGM

Application of the Policy
In this Policy on Remuneration, the term “Group 
Management” refers to the President and Chief Executive 
Ofﬁ cer, the Chief Operating Ofﬁ cer, the Chief Financial 
Ofﬁ cer and Vice President level employees. Group 
Management is expected to be comprised of seven executives 
in 2018. 

This Policy on Remuneration also comprises remuneration 
paid to members of the Board of Directors for work 
performed outside the directorship.

Objectives of the Policy
It is the aim of Lundin Petroleum to recruit, motivate and 
retain high calibre executives capable of achieving the 
objectives of the Group, and to encourage and appropriately 
reward performance that enhances shareholder value. 
Accordingly, the Group operates this Policy on Remuneration 
to ensure that there is a clear link to business strategy and 
a close alignment with shareholder interests and current 
best practice, and aims to ensure that Group Management 
is rewarded fairly for its contribution to the Group’s 
performance.

Compensation Committee
The Board of Directors of Lundin Petroleum has established 
the Compensation Committee to, among other things, 
administer this Policy on Remuneration. The Compensation 
Committee is to receive information and prepare the Board 
of Directors’ and the Annual General Meeting’s decisions 
on matters relating to the principles of remuneration, 
remunerations and other terms of employment of Group 
Management. The Compensation Committee meets regularly 
and its tasks include monitoring and evaluating programmes 
for variable remuneration for Group Management and the 
application of this Policy on Remuneration, as well as the 
current remuneration structures and levels in the Company.

The Compensation Committee may request the advice 
and assistance of external reward consultants, however, it 
shall ensure that there is no conﬂ ict of interest regarding 
other assignments that such consultants may have for the 
Company and Group Management. 

Elements of remuneration
There are four key elements to the remuneration of the Group 
management: 
a) base salary; 
b) yearly variable salary; 
c) long-term incentive plan; and 
d) other beneﬁ ts. 

Base salary
The executive’s base salary shall be based on market conditions, 
shall be competitive and shall take into account the scope 
and responsibilities associated with the position, as well as 
the skills, experience and performance of the executive. The 
executive’s base salary, as well as the other elements of the 
executive’s remuneration, shall be reviewed annually to ensure 
that such remuneration remains competitive and in line with 
market conditions. As part of this assessment process, the 
Compensation Committee undertakes yearly benchmarking 
studies in respect of the Company’s remuneration policy and 
practices. 

Yearly variable salary
The Company considers that yearly variable salary is an 
important part of the executive’s remuneration package 
where associated performance targets reﬂ ect the key drivers 
for value creation and growth in shareholder value. Through 
its Performance Management Process, the Company sets 
predetermined and measurable performance criteria for each 
executive, aimed at promoting long-term value creation for the 
Company’s shareholders. 

The yearly variable salary shall, in the normal course of 
business, be based upon a predetermined limit, being within 
the range of one to twelve monthly salaries (if any). The cost of 
yearly variable salary for 2018 is estimated to range between 
no payout at minimum level and MSEK 22.1 (excluding social 
costs) at maximum level, based on the current composition of 
Group Management. However, the Compensation Committee 
may recommend to the Board of Directors for approval yearly 
variable salary outside of this range in circumstances or in 
respect of performance, which the Compensation Committee 
considers to be exceptional. 

Long-term Incentive Plan
The Company believes that it is appropriate to structure its 
long-term incentive plans (LTIP) to align Group Management’s 
incentives with shareholder interests. Remuneration which 
is linked to the share price results in a greater personal 
commitment to the Company. Therefore, the Board believes that 
the Company’s LTIP for Group Management should be related to 
the Company’s share price. 

Information on the principal conditions of the proposed 2018 
LTIP for Group Management, which follows the same principles 
as the LTIP approved by the 2014 - 2017 Annual General 
Meetings, is available as part of the documentation for the 
Annual General Meeting on www.lundin-petroleum.com.

The cost at grant of the proposed 2018 LTIP is estimated to 
range between no cost at minimum level and MSEK 48.7 
(excluding social costs) at maximum level, based on the current 
composition of Group Management. 

36

Lundin Petroleum Annual Report 2018

 
Other Beneﬁ ts
Other beneﬁ ts shall be based on market terms and shall 
facilitate the discharge of each executive’s duties. Such beneﬁ ts 
include statutory pension beneﬁ ts comprising a deﬁ ned 
contribution scheme with premiums calculated on the full base 
salary. The pension contributions in relation to the base salary 
are dependent upon the age of the executive.

Severance arrangements
A mutual notice period of between one and twelve months 
applies between the Company and executives, depending on the 
duration of the employment with the Company. In addition, 
severance terms are incorporated into the employment contracts 
for executives that give rise to compensation, up to two years’ 
base salary, in the event of termination of employment due to 
a change of control of the Company. The Board of Directors is 
further authorised, in individual cases, to approve severance 
arrangements, in addition to the notice periods and the 
severance arrangements in respect of a change of control of the 
Company, where employment is terminated by the Company 
without cause, or otherwise in circumstances at the discretion 
of the Board. Such severance arrangements may provide for 
the payment of up to one year’s base salary; no other beneﬁ ts 
shall be included. Severance payments in aggregate (i.e. for 
notice periods and severance arrangements) shall be limited to a 
maximum of two years’ base salary. 

Remuneration to members of the Board 
In addition to Board’s fees resolved by the AGM, remuneration 
as per prevailing market conditions may be paid to members of 
the Board for work performed outside the directorship. 

Authorisation for the Board
The Board of Directors is authorised to deviate from the Policy 
on Remuneration in accordance with Chapter 8, Section 53 of 
the Swedish Companies Act in case of special circumstances in a 
speciﬁ c case.

Outstanding Remunerations 
Remunerations outstanding to Group Management comprise 
awards granted under the Company’s previous LTIP programs 
and include 203,553 LTIP Awards under the 2015 Performance 
Based Incentive Plan, 242,057 LTIP Awards under the 2016 
Performance Based Incentive Plan, 258,619 LTIP Awards under 
the 2017 Performance Based Incentive Plan, 1,700 unit bonus 
awards under the 2015 Unit Bonus Plan, 4,662 unit bonus 
awards under the 2016 Unit Bonus Plan, 4,119 unit bonus 
awards under the 2017 Unit Bonus Plan. Further information 
about these plans is available in note 29 of the Company’s 
Annual Report 2017. 

Lundin Petroleum Annual Report 2018

37

GOVERNANCE | Corporate Governance Report 2018

Internal control over 
financial reporting 

The control environment is the 
foundation of Lundin Petroleum’s 
system for internal control over 
financial reporting

Introduction
According to the Swedish Companies Act and the Corporate 
Governance Code, the Board has overall responsibility for 
establishing and monitoring an effective system for internal 
control. The purpose of this report is to provide shareholders and 
other parties with an understanding of how internal control is 
organised at Lundin Petroleum.

Lundin Petroleum’s system for internal control over ﬁ nancial 
reporting is based on the Integrated Framework (2013) issued 
by the Committee of Sponsoring Organizations of the Treadway 
Commission (COSO). The ﬁ ve components of this framework 
are control environment, risk assessment, control activities, 
information and communication and monitoring activities.

1

Control environment 
The control environment is the foundation of Lundin Petroleum’s 
system for internal control over ﬁ nancial reporting and is 
characterised by the fact that the main part of the Group’s 
operations is located in Norway where the Company has carried 
out operations for many years using well established processes. 
The control environment is deﬁ ned by the Company’s policies 
and procedures, guidelines and codes as well as its responsibility 
and authority structure. The business culture established within 
the Group is also fundamental to ensure highest level of ethics, 
morals and integrity.

2

Risk assessment
Risks relating to ﬁ nancial reporting are evaluated and monitored 
by the Board through the Audit Committee. The Group’s risk 
assessment process is used as a means to monitor that risks are 
managed and consists in identifying and evaluating risks and 
also determining the potential impact on the ﬁ nancial reporting. 
Regular reviews on local level as well as on Group level are made 
to assess any changes made in the Group that may affect internal 
control. 

3

Control activities
Control activities range from high level reviews of ﬁ nancial 
results in management meetings to detailed reconciliation of 
accounts and day to day review and authorisation of payments. 
The monthly review and analysis of the ﬁ nancial reporting 
made on Company level and Group level are important control 
activities performed to ensure that the ﬁ nancial reporting does 
not contain any signiﬁ cant errors and also to prevent fraud. In 
addition, it is common in the oil and gas industry that projects 
are organised through joint ventures, where the partners have 
audit rights over the joint venture. Regular audits control that 
costs are allocated and accounted for in accordance with the joint 
operating agreement.

4

Information and communication
Lundin Petroleum has processes in place aiming to ensure 
effective and correct information in regards to ﬁ nancial 
reporting, both internally within the organisation as well 
as externally to the public. All information regarding the 
Company’s policies, procedures and guidelines is available 
on the Group’s intranet and any updates and changes to 
reporting and accounting policies are issued via email and at 
regular ﬁ nance meetings. In addition, the Communication and 
Investor Relations Policy ensures that the public is provided 
with accurate, timely and relevant information. 

5

Monitoring
Monitoring of control activities is made at different levels 
of the organisation and involves both formal and informal 
procedures performed by management, process owners 
or control owners. In addition, the Group’s Internal Audit 
function maintains test plans and performs independent 
testing of selected controls to identify any weaknesses and 
opportunities for improvement. The results from the testing 
are presented to the external auditors who determine to what 
extent they can rely on this testing for the Group audit. 

The Internal Audit Manager has a direct reporting line to the 
Audit Committee and submits regularly reports on ﬁ ndings 
identiﬁ ed in the audits together with updates on the status of 
management’s implementation of agreed actions. The Audit 
Committee assists the Board in their role to ensure that steps 
are taken to address any weaknesses revealed in internal and 
external audits and to implement proposed actions. 

Control
Environment

Risk
Assessment

1

5

financial
reporting 
objectives

Monitoring

INTERNAL
CONTROL
PROCESS

2

4

3

Control
Activities

Information and
Communication

Joint venture audits 

It is common in the oil and gas industry that projects are 
organised through joint ventures with production licences 
awarded to a group of companies forming a joint venture. 
When entering into an exploration licence there is no 
guarantee that oil or gas will be found and in a joint venture 
the risk is shared between the partners. One partner is 
appointed to be the operator and is responsible for managing 
the operations, including the accounting for the joint venture. 
All partners have audit rights over the joint venture to ensure 
that costs are incurred in accordance with the joint operating 
agreement and that accounting procedures are followed.

38

Lundin Petroleum Annual Report 2018

 
Stockholm, 1 March 2019

The Board of Directors of Lundin Petroleum AB (publ) 

Auditor’s report on the Corporate Governance Statement

To the general meeting of the shareholders in Lundin Petroleum AB (publ), Corporate Identity Number 556610-8055

Engagement and responsibility
It is the board of directors who is responsible for the corporate governance statement for the year 2018 on pages 22–38 and that it 
has been prepared in accordance with the Annual Accounts Act.

The scope of the audit
Our examination has been conducted in accordance with FAR’s auditing standard RevU 16 The auditor’s examination of the corporate 
governance statement. This means that our examination of the corporate governance statement is different and substantially less in 
scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in 
Sweden. We believe that the examination has provided us with sufﬁ cient basis for our opinions.

Opinions
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 
2–6 the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the annual accounts 
and the consolidated accounts and are in accordance with the Annual Accounts Act.

Stockholm, 4 March 2019

PricewaterhouseCoopers AB

Johan Rippe 
Authorised Public Accountant  
Lead Partner 

Johan Malmqvist
Authorised Public Accountant

Lundin Petroleum Annual Report 2018

39

 
 
 
 
 
 
 
 
 
 
FINANCIAL REPORT

“

The strong free cash flow outlook 
for the next decade has resulted in 
us implementing an attractive and 
sustainable new dividend policy

Teitur Poulsen
Chief Financial Officer

Financial Report 

2018 has been a milestone year for Lundin Petroleum with our high 
quality asset base generating record high operating cash flow and 
EBITDA, with free cash flow of MUSD 663. 

This ﬁ nancial performance has enabled signiﬁ cant debt repayment, with a year-end 2018 net debt to EBITDA 
ratio of less than 1.8 times. The Company’s ﬁ nancial strength has improved markedly over the last two years and 
with a healthy outlook of continued free cash ﬂ ow generation, the Company’s ﬁ nancial position has allowed 
for a signiﬁ cantly increased dividend for 2018 of MUSD 500 and the Company is well positioned to grow this 
dividend over time, even at low oil prices.

Financial summary 

Production in Mboepd

Revenue and other income in MUSD

Operating cash f low in MUSD

EBITDA in MUSD

Free cash f low in MUSD

Net result in MUSD

Earnings/share in USD1

Net debt

2018

81.1

2,617.4

1,847.8

1,916.2

663.0

222.1

0.66

3,398.2

2017

86.1

1,997.0

1,530.0

1,501.5

203.7

380.9

1.13

3,883.6

The numbers included in the table above for 2017 are based on continuing operations.
1 Based on net result attributable to shareholders of the Parent Company

40

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT | Contents 

Financial Report 2018

Directors’ report 

Consolidated income statement 

Consolidated statement of comprehensive income 

Consolidated balance sheet 

Consolidated statement of cash ﬂ ow 

Consolidated statement of changes in equity 

Accounting policies 

Notes to the ﬁ nancial statements of the Group 
 - Note 1 – Revenue 
 - Note 2 – Production costs 
 - Note 3 – Segment information 
 - Note 4 – Finance income 
 - Note 5 – Finance costs 
 - Note 6 – Share in result of associated company 
 - Note 7 – Income tax 
 - Note 8 – Loss from sale of assets 
 - Note 9 – Discontinued operations 
 - Note 10 – Oil and gas properties 
 - Note 11 – Other tangible assets 
 - Note 12 – Goodwill 
 - Note 13 – Financial assets 
 - Note 13.1 – Other shares and participations 
 - Note 14 – Inventories 
 - Note 15 – Trade and other receivables 
 - Note 16 – Cash and cash equivalents 
 - Note 17 – Equity 
 - Note 17.1 – Share capital and share premium 
 - Note 17.2 – Other reserves 
 - Note 17.3 –Earnings per share 
 - Note 18 – Financial liabilities 
 - Note 19 – Provisions 
 - Note 20 – Trade and other payables 
 - Note 21 – Financial assets and liabilities 

42

53

54

55

56

57

58

64
64
64
64
66
66
66
66
68
68
69
71
71
71
72
72
72
72
73
73
73
74
74
75
76
76

 - Note 22 – Changes in liabilities with cash ﬂ ow 
   movements from ﬁ nancing activities 
 - Note 23 – Financial risks, sensitivity analysis and 
   derivative instruments 
 - Note 24 – Pledged assets 
 - Note 25 – Contingent liabilities and assets 
 - Note 26 – Related party transactions 
 - Note 27 – Average number of employees 
 - Note 28 – Remuneration to the Board of Directors, 
   Group management and other employees 
 - Note 29 – Long-term incentive plans 
 - Note 30 – Remuneration to the Group’s auditors 
 - Note 31 – Subsequent events 

Annual accounts of the Parent Company 

Parent Company income statement 

Parent Company comprehensive income statement  

Parent Company balance sheet 

Parent Company statement of cash ﬂ ow 

Parent Company statement of changes in equity 

78

78
82
82
82
83

84
86
88
88

89

90

90

91

92

92

Notes to the ﬁ nancial statements of the Parent Company  93
93
 - Note 1 – Finance income 
93
 - Note 2 – Finance costs 
93
 - Note 3 – Income taxes 
93
 - Note 4 – Other receivables 
 - Note 5 – Accrued expenses and prepaid income 
93
 - Note 6 – Pledged assets, contingent liabilities and assets  93
 - Note 7 – Remuneration to the auditor 
93
 - Note 8 – Proposed disposition of unappropriated 
   earnings 
 - Note 9 – Shares in subsidiaries 

93
94

Board assurance 

Auditor’s report 

95

96

Lundin Petroleum Annual Report 2018

41

FINANCIAL REPORT 

Directors’ Report 
Lundin Petroleum AB (publ) Reg No. 556610-8055

The address of Lundin Petroleum AB’s registered ofﬁ ce is 
Hovslagargatan 5, Stockholm, Sweden. 

Lundin Petroleum is an independent oil and gas exploration and 
production company with operations focused on Norway. 

The Group invested MUSD 12.5 in research and development 
(R&D) in 2018. The main goal for the R&D is to maximise the 
value of the existing assets, improve operational preparedness 
in new areas of operation and developing platforms for 
future business opportunities. This means improvement of 
subsurface understanding which beneﬁ ts both exploration and 
development activities. A large portion of the R&D investments 
have been used to focus on protection of the natural 
environment in the southern Barents Sea. 

The Parent Company has no foreign branches. 

Changes in the Group
The Morskaya licence in Russia has been relinquished during 
the year. 

On 24 April 2017, Lundin Petroleum completed the spin-off of 
its assets in Malaysia, France and the Netherlands (the IPC assets) 
into International Petroleum Corporation (IPC) by distributing 
the IPC shares, on a pro-rata basis, to Lundin Petroleum 
shareholders. The results of the IPC business are included in the 
Lundin Petroleum ﬁ nancial statements until the completion of 
the spin-off and are shown as discontinued operations in the 
comparative periods and are detailed in Note 9. 

Operational review
All the reported numbers and updates in the operational review 
relate to the ﬁ nancial year ended 31 December 2018 unless 
otherwise speciﬁ ed.

Corporate Structure as at 31 December 2018

Lundin Petroleum AB (S)

Lundin Petroleum Holding BV (N)

Lundin Petroleum SA (Sw)

Lundin Norway AS (No)

Lundin Russia BV (N)

Lundin Petroleum 
Marketing SA (Sw)

Lundin Petroleum 
Services BV (N)

Jurisdiction

(N)
(No)
(S)
(Sw)

Netherlands
Norway
Sweden
Switzerland

Lundin Lagansky BV (N) 

Note: The Group structure shows significant subsidiaries only. 
See the Parent Company Financial Statements Note 9 for full legal 
names and all subsidiaries.

42

Lundin Petroleum Annual Report 2018

Norway

Reserves and resources
Lundin Petroleum has 745.4 million barrels of oil equivalent 
(MMboe) of proved plus probable net reserves and 900.9 MMboe 
of proved plus probable plus possible net reserves as at 
31 December 2018 as certiﬁ ed by an independent third 
party. Lundin Petroleum also has discovered oil and gas 
resources which classify as contingent resources and which 
are not yet classiﬁ ed as reserves. The best estimate contingent 
resources net to Lundin Petroleum amounted to 225 MMboe 
as at 31 December 2018. The proved plus probable reserves 
replacement ratio for 2018 was 163 percent.

Production
Production was 81.1 thousand barrels of oil equivalent per day 
(Mboepd) (compared to 86.1 Mboepd for 2017) which was at 
the upper end of the updated guidance for the year of between 
78 and 82 Mboepd and 4 percent above the mid-point of the 
original production guidance of between 74 and 82 Mboepd. 
This performance is due to strong facilities and reservoir 
performance at both the Edvard Grieg ﬁ eld and the Alvheim 
area. The 2019 production guidance is between 75 and 95 
Mboepd.

Operating cost, including netting off tariff income, was USD 3.66 
per barrel which was below the revised full year guidance of 
less than USD 3.80 per barrel and 12 percent below the original 
guidance of USD 4.15 per barrel. This performance is due to a 
combination of reduced costs, increased production volumes 
and the termination of production from the Brynhild ﬁ eld 
during the year. The 2019 operating cost guidance, including 
netting off tarriff income, is USD 4.25 per barrel.

Production in Mboepd

2018

2017

Norway
Crude oil
Gas
Total production

Production in 
Mboepd

Edvard Grieg
Ivar Aasen
Alvheim
Volund

Bøyla

Brynhild
Gaupe

WI1

65%
1.385%
15%
35%

15%

51%2
40%

Quantity in Mboepd

1 Lundin Petroleum’s working interest (WI)
2 WI 90% up to 30 November 2017

71.9
9.2
81.1

77.6
8.5
86.1

2018

2017

63.6
0.9
9.3
6.5

0.7

0.0
0.1

81.1

66.7
0.7
12.4
3.9

1.1

1.2
0.2

86.1

Production from the Edvard Grieg ﬁ eld was above forecast, 
supported by continued strong production efﬁ ciency at 
98 percent. The PDO development drilling programme was 
completed in the middle of the year with all development well 
results in line with or better than prognosis and the overall 
drilling programme was completed below budget. Edvard 
Grieg reservoir performance continues to exceed expectations 
with signiﬁ cantly slower build-up of water production than 
anticipated, leading to around a six month extension of plateau 
production to mid-2020. The 4D seismic survey that has been 
acquired over the Edvard Grieg ﬁ eld as part of the reservoir 
monitoring programme, indicates that the water injection ﬂ ood 
front is further away from the main production wells than 
predicted by the current reservoir models. This information 
is still under review and has not been incorporated into the 
reservoir models used to support the year end 2018 reserves 
estimate. An inﬁ ll drilling programme is being planned at 
Edvard Grieg commencing in 2020 and sanction of this project 
is anticipated during 2019. Operating cost for the Edvard Grieg 
ﬁ eld, including netting off tariff income, was USD 3.95 per 
barrel.

Production from the Ivar Aasen ﬁ eld was slightly below forecast. 
During the second quarter 2018, two new water injection wells 
were successfully drilled to improve pressure support to the 
eastern area of the ﬁ eld.

Production from the Alvheim area, consisting of the Alvheim, 
Volund and the Bøyla ﬁ elds, was slightly ahead of forecast, 
supported by the strong reservoir performance and continued 
strong production efﬁ ciency for the Alvheim FPSO of 97 percent. 
The results of the inﬁ ll well in the Kameleon area of the 
Alvheim ﬁ eld were in line with expectations and the well was 
brought on line ahead of schedule during the fourth quarter 
2018. Combined with the two inﬁ ll wells in the Boa area of the 
ﬁ eld, brought on line at the beginning of the year, this largely 
offsets the natural production decline from the area. Operating 
cost for the Alvheim area was USD 4.96 per barrel.

For the Brynhild ﬁ eld, the decision has been taken to 
permanently shut-in production and work on a cessation 
plan is ongoing, which will be submitted in due course to the 
authorities for approval. The remaining book value for the ﬁ eld 
was written off at year end 2017.

Despite no remaining reserves being attributable to the Gaupe 
ﬁ eld, the ﬁ eld has produced intermittently subject to favourable 
economic conditions. As it is no longer economic to continue 
with Gaupe ﬁ eld production, the decision was taken in October 
2018 to cease production from the ﬁ eld.

Lundin Petroleum Annual Report 2018

43

 
FINANCIAL REPORT | Directors’ Report

Development
Johan Sverdrup 
Phase 1 of the Johan Sverdrup project is on schedule with 
approximately 85 percent completed. With the good progress, 
the expected schedule for Phase 1 ﬁ rst oil is November 2019.

2018 was a key installation year for Phase 1 of the project and 
the programme for the year was completed as planned. All 
of the four steel jackets have now been successfully installed 
offshore, as well as the topsides for the drilling platform and 
the riser platform. The power from shore cable has been 
installed and power supply from shore to the offshore facilities 
commenced in October 2018. Installation of the oil and gas 
export pipelines has been completed. Two accommodation units 
are located offshore and at peak approximately 800 personnel 
have been working on the hook-up of the installed offshore 
facilities, which is progressing on schedule.

Of the last two remaining topsides, the process platform topside 
sailed away from the Samsung Heavy Industries yard in South 
Korea in December 2018 and arrived at the Kværner Stord yard 
in Norway in February 2019. Construction of the living quarters 
topside at the Kværner yard has been completed and both these 
topsides are on schedule for installation in spring 2019.

Pre-drilling operations were completed signiﬁ cantly ahead of 
schedule with a total of eight pre-drilled producers and twelve 
water injectors completed. In December 2018, the drilling 
platform commenced tie-back operations on the eight pre-
drilled production wells.

The latest capital expenditure estimate for Phase 1 is gross 
NOK 86 billion (nominal) compared to the Phase 1 PDO estimate 
in 2015 of gross NOK 123 billion (nominal), representing a 
saving of over 30 percent, excluding additional foreign exchange 
rate savings in US dollar terms. The gross production capacity of 
Phase 1 is estimated at 440 Mbopd.

The Phase 2 PDO was submitted to the Norwegian Ministry 
of Petroleum and Energy in August 2018, with Phase 2 ﬁ rst 
oil scheduled in the fourth quarter 2022. Phase 2 involves an 
additional processing platform bridge linked to the Phase 1 
ﬁ eld centre, additional subsea facilities to allow the tie-in of 
additional wells to access the Avaldsnes, Kvitsøy and Geitungen 
satellite areas of the ﬁ eld and implementation of full ﬁ eld water 
alternating gas injection (WAG) for enhanced recovery. 28 new 
wells are planned to be drilled in connection with the Phase 
2 development. These additional facilities will take the gross 
plateau production capacity to 660 Mbopd. With the inclusion 
of WAG, the gross resource range has been further increased to 
between 2.2 and 3.2 billion boe. 

The Phase 2 capital expenditure is estimated at gross NOK 41 
billion (nominal), which represents over a 50 percent saving 
from the original estimate in the phase 1 PDO, and is due to a 
combination of market conditions and optimisation of the Phase 
2 facilities. The major topsides contracts and the jacket contract 
for the Phase 2 facilities have been awarded and detailed 
engineering is progressing to plan. Full ﬁ eld breakeven oil price 
is estimated at below 20 USD per barrel.

Appraisal
All four wells in the 2018 appraisal drilling and testing 
programme were successful. Combined with two new 
exploration discoveries that were made during 2018, this means 
that Lundin Petroleum has six potential projects being moved 
through the appraisal phase. These positive results contributed 
to increasing the booked contingent resources at year end 2018.

The Luno II appraisal well in PL359 on the Utsira High was 
successfully completed in March 2018 and encountered a gross 
oil column of 22 metres in Triassic sandstones with very good 
reservoir quality, which was signiﬁ cantly better than expected. 
Following the positive well results, the gross resource range for 
the Luno II discovery has been increased to between 40 and 
100 MMboe. The development concept for Luno II is a subsea tie-
back to the nearby Edvard Grieg platform. Phase 1 of the Luno 
II development project is expected to be sanctioned and the PDO 
submitted in the ﬁ rst quarter of 2019. To create commercial 
and operational alignment between the Edvard Grieg and 
Luno II partnerships, Lundin Petroleum has acquired Equinor’s 
15 percent interest in Luno II, increasing the working interest to 
65 percent.

Appraisal drilling and production testing operations on the 
Rolvsnes basement oil discovery in PL338C in the Utsira High 
area of the North Sea were completed in August 2018. The 
horizontal well conﬁ rmed good productivity from fractured 
and weathered basement reservoirs and achieved a constrained 
production rate of 7,000 bopd. The successful well and testing 
operations have led to a substantial increase in gross resources 
for Rolvsnes to between 14 and 78 MMboe from previously 
3 to 16 MMboe. The long-term production behavior from this 
reservoir needs to be understood better and the next step is 
to conduct an extended well test via a subsea tie-back of the 
suspended appraisal well to the Edvard Grieg platform. It is 
expected that the extended well test will be sanctioned in the 
ﬁ rst quarter of 2019 and implementation will be in parallel 
with the Luno II development project. The positive well result 
at Rolvsnes de-risks the similar on-trend prospectivity on the 
adjacent PL815 licence where an exploration well will be drilled 
on the Goddo prospect in 2019. The combined Rolvsnes and 
Goddo prospective area is estimated to contain gross potential 
resources of more than 250 MMboe.

Development

Field

WI

Operator

PDO Approval

Estimated gross 
reserves

Production start 
expected

Johan Sverdrup

22.6%

Equinor

August 2015

2.2–3.2 billion boe

November 2019

Expected 
gross plateau 
production

660 Mbopd

44

Lundin Petroleum Annual Report 2018

 
 
2018 appraisal well programme 

Licence

Operator

PL359

Lundin Norway

PL338C

Lundin Norway

PL609

PL203

Lundin Norway

Aker BP

 WI

65%

50%

40%

15%

Well

Luno II

Rolvsnes

Alta

Gekko

Spud Date

Status

February 2018

Completed March 2018

April 2018

April 2018

Completed August 2018

Completed September 2018

September 2018 

Completed October 2018

The extended production testing on the Alta discovery in the 
southern Barents Sea was successfully completed in September 
2018. The well was produced over a period of about two months 
with a maximum production rate of 18,000 bopd constrained by 
the surface facilities and with a total of approximately 660,000 
barrels of oil produced to a tanker. The results were better than 
expected, demonstrating excellent reservoir productivity and 
connectivity to a large volume of oil. The large amount of new 
information from the positive results from the Alta extended 
production test and latest generation 3D seismic survey (Topseis) 
over the entire Alta and Gohta area is still being evaluated. The 
contingent resources for the Alta and Gohta discoveries are 
therefore unchanged from year end 2017 and will be updated 
during 2019 when the future appraisal plans for the area is 
deﬁ ned and all the additional data has been processed.

The Gekko appraisal well located to the southeast of the 
Alvheim ﬁ eld was successfully completed in October 2018. 
The objective of the two branch well was to test the potential 
for improved reservoir quality away from the Gekko discovery 
well and determine the thickness of the oil column. Both well 
branches encountered good quality Heimdal sands with an 
approximately 6 metre oil rim below gas. Following the positive 
well results, the gross resource range for the Gekko discovery 
is between 28 and 52 MMboe. Options for the economic 
development of Gekko are being assessed.

Exploration
The 2018 exploration drilling programme was impacted by 
changing rig schedules and priorities, which resulted in a 
number of wells moving into 2019. Five exploration wells 
were completed in 2018 resulting in two potential commercial 

discoveries, Frosk and Lille Prinsen. Exploration and appraisal 
expenditure in 2018 was MUSD 311.

In February 2018, the Frosk prospect in the North Sea, located 
northwest of the Bøyla ﬁ eld, proved an oil discovery. The 
discovery is estimated to contain gross resources of between 
30 and 60 MMboe, which is signiﬁ cantly more than the pre-
drill estimates and has a positive impact on the assessment of 
further exploration potential in the area. Two follow-up wells 
on the Froskelår Main and Rumpetroll prospects in the adjacent 
PL869 will be drilled in the ﬁ rst half of 2019. The ﬁ rst of these 
wells, Froskelår Main, was drilled in February 2019 resulting 
in an oil and gas discovery with resources within the pre-drill 
estimate of 45 to 153 MMboe gross of which part may straddle 
the UK-Norwegian boundary in the North Sea. Operations are 
continuing at Froskelår Main with the drilling of two appraisal 
sidetracks. Additionally, a production test well on the Frosk 
discovery, to be tied into the Bøyla subsea facilities, will be 
drilled in the ﬁ rst half of 2019.

In May 2018, the Svanefjell prospect in PL659 in the southern 
Barents Sea proved a minor, non-commercial gas discovery.

In June 2018, the Lille Prinsen prospect in the North Sea, located 
northeast of the Ivar Aasen ﬁ eld, proved an oil discovery. The 
discovery is estimated to contain gross resources of between 
15 and 35 MMboe and with signiﬁ cant appraisal upside 
potential of over 100 MMboe. It is expected that Lille Prinsen 
will be economic to develop and an appraisal well is planned for 
2019.

2018 exploration well programme 

Licence

Operator

PL340

PL167

PL659

PL830

PL860

PL857

PL767

PL869

PL857

Aker BP

Equinor

Aker BP

Lundin Norway

MOL

Equinor

Lundin Norway

AkerBP

Equinor

WI

15%

20%

20%

40%

40%

20%

50%

20%

20%

Well

Frosk 

Spud Date

Result

January 2018

Oil discovery

Lille Prinsen

April 2018

Oil discovery

Svanefjell

May 2018

Minor gas discovery

Silfari

October 2018

Driva/Oppdal 

November 2018

Gjøkåsen Shallow

December 2018

Pointer/Setter

January 2019

Dry 

Dry

Dry

Dry

Froskelår Main

January 2019

Oil and gas discovery

Gjøkåsen Deep

January 2019

Ongoing

Lundin Petroleum Annual Report 2018

45

FINANCIAL REPORT | Directors’ Report

In December 2018, the Silfari prospect in PL830 located in the 
Froan Basin area of the Norwegian Sea encountered good quality 
Jurassic reservoir sands but with no hydrocarbon indications and 
the second Permian carbonate target encountered no reservoir 
intervals or hydrocarbons. The potential of the undrilled, 
adjacent Frøya High area is unaffected by the Silfari result.

In January 2019, the Driva/Oppdal dual target prospect in 
PL860 located in the Mandal High area of the North Sea was 
drilled and was dry. While the well encountered Paleocene and 
Rotliegendes reservoirs there were no hydrocarbons present. The 
second Mandal High area dual target well, Vinstra/Otta on the 
adjacent PL539 licence, will be drilled in 2019.

The Gjøkåsen prospect in PL857 located in the southern Barents 
Sea is a large, multi-horizon structure, remote from well control 
and as the deeper reservoir targets offset the shallow targets, 
it requires two wells to fully test the prospect. In February 
2019, the Gjøkåsen Shallow prospect was drilled and was dry. 
The result of the Gjøkåsen Shallow well has no impact on the 
prospectivity of the Gjøkåsen Deep target which is currently 
drilling. 

In February 2019, the Pointer/Setter prospect in PL767 in the 
southern Barents Sea was drilled and was dry. Drilling was 
conducted by the Leiv Eiriksson rig which is under a ﬂ exible 
contract with sufﬁ cient option slots to meet the Company’s 
operated 2019 drilling programme.

Licence awards and transactions
Lundin Petroleum continues to grow its exploration acreage 
position through licence rounds. In January 2018, the Company 
was awarded 14 licences in the 2017 APA licensing round, of 
which six as operator. In June 2018, the Company was awarded 
three licences in the 24th licensing round, of which one as 
operator. In January 2019, the Company was awarded 15 
licences in the 2018 APA licensing round, of which 9 as operator. 
Currently, the Company holds 82 licences in Norway, compared 
to 49 licences at the beginning of January 2018, which is an 
increase of approximately 70 percent.

In January 2018, Lundin Petroleum acquired a 10 percent 
working interest in each of PL539 and PL860 and a 30 percent 
working interest in each of PL820S and PL825 from Fortis 
Petroleum and also acquired a 20 percent working interest in 
PL860 from Equinor, increasing Lundin Petroleum’s working 
interest in PL860 to 40 percent and in PL539 to 20 percent.

In May 2018, Lundin Petroleum concluded a licence swap with 
DNO to create an initial entry position in the Tampen/Horda 

Platform area of the Norwegian North Sea. Lundin Petroleum 

received a 10 percent working interest in each of PL926 and 

PL929 and 15 percent in each of PL921 and PL924 in exchange 

for DNO receiving 10 percent working interests in each of PL825, 

PL767, PL902 and PL950. 

In June 2018, Lundin Petroleum concluded a licence swap with 
Edison in the southern Barents Sea where Lundin Petroleum 
received a 10 percent working interest in PL850, in exchange 

for Edison receiving a 10 percent working interest in PL952. In 
October 2018, Lundin Petroleum acquired a further 20 percent 
working interest in PL850 from Lime Petroleum, increasing the 
Company’s working interest in PL850 to 30 percent.

In October 2018, Lundin Petroleum acquired Equinor’s 15 
percent working interest in PL359 containing the Luno II 
oil discovery. The transaction involved a cash consideration 
payable to Equinor as well as Lundin Petroleum transferring its 
remaining interest in PL825 to Equinor.

In January 2019, Lundin Petroleum entered into a sales 
and purchase agreement involving the acquisition of Lime 
Petroleum’s 30 percent working interest in each of PL338C and 
PL338E and 20 percent working interest in PL815, which contain 
the Rolvsnes oil discovery and Goddo prospect. The transaction 
will increase the Company’s working interest in each of 
PL338C and PL338E to 80 percent and in PL815 to 60 percent. 
The transaction involves a cash consideration payable to Lime 
Petroleum and is subject to customary government approvals.

Russia
Lundin Petroleum has previously written down the entire 
contingent resources and book value for the Morskaya oil 
discovery as it was deemed unlikely that the discovery could 
commercially be developed in the foreseeable future. Having 
reviewed potential options, the partnership concluded that it is 
not possible for the partnership to create value from the asset 
and consequently the Morskaya licence has been relinquished. 

Health, safety and environment
During the year, one lost time incident and one medical 
treatment incident occurred, resulting in a Lost Time Incident 
Rate of 0.5 per million hours worked and a Total Recordable 
Incident Rate of 1.0 per million hours worked. There were no 
material safety or environmental incidents.

Financial review 
Result
The operating proﬁ t from continuing operations for the 
ﬁ nancial year amounted to MUSD 1,402.4 (MUSD 812.4). The 
increase compared to the comparative period was mainly driven 
by higher oil prices in combination with lower production 
costs and depletion costs, somewhat offset by lower production 
volumes. 

The net result from continuing operations for the year 
amounted to MUSD 222.1 (MUSD 380.9) and included a foreign 
currency exchange loss of MUSD 164.9 (gain of MUSD 255.3). 
The net result from continuing operations excluding 
foreign currency exchange results amounted to MUSD 387.0 
(MUSD 125.6). The increase compared to the comparative period 
was mainly driven by higher oil prices in combination with 
lower production costs and depletion costs, somewhat offset by 
lower production volumes and an after tax accounting gain of 
MUSD 98.1 as a result of the re-negotiated improved borrowing 
terms for the reserve-based credit facility that unwinds to the 
income statement over the remaining period of the facility. 

46

Lundin Petroleum Annual Report 2018

The net result from continuing operations attributable to 
shareholders of the Parent Company for the year amounted to 
MUSD 222.1 (MUSD 384.7) representing earnings per share of 
USD 0.66 (USD 1.13).

Earnings before interest, tax, depletion and amortisation 
(EBITDA) from continuing operations for the year amounted to 
MUSD 1,916.2 (MUSD 1,501.5) representing EBITDA per share 
of USD 5.65 (USD 4.41). Operating cash ﬂ ow from continuing 
operations for the year amounted to MUSD 1,847.8 (MUSD 
1,530.0) representing operating cash ﬂ ow per share of USD 5.46 
(USD 4.50).

Revenue and other income
Revenue and other income for the year amounted to 
MUSD 2,617.4 (MUSD 1,997.0) and was comprised of net sales of 
oil and gas, change in under/over lift position and other revenue 
as detailed in Note 1.

Net sales of oil and gas for the year amounted to MUSD 2,607.9 
(MUSD 1,958.3). The average price achieved by Lundin 
Petroleum for a barrel of oil equivalent from own production 
amounted to USD 67.89 (USD 51.63) and is detailed in the 
following table. The average Dated Brent price for the year 
amounted to USD 71.31 (USD 54.25) per barrel.

Net sales of oil and gas from own production for the year are 
detailed in Note 3 and were comprised as follows:

Sales from own production
Average price per boe expressed in USD

2018

2017

Crude oil sales
Norway
 – Quantity in Mboe
 – Average price per boe

Gas and NGL sales
Norway
 – Quantity in Mboe
 – Average price per boe

Total sales
 – Quantity in Mboe
 – Average price per boe

26,834.7
69.97

28,106.9
53.37

3,682.0
52.74

3,943.1
39.23

30,516.7
67.89

32,050.0
51.63

The table above excludes crude oil revenue from third party activities.

Net sales of crude oil from third party activities for the year 
amounted to MUSD 536.1 (MUSD 303.5) and mainly consisted 
of Grane Blend crude oil purchased from outside the Group by 
Lundin Petroleum Marketing SA and sold to the market.

Sales of oil and gas are recognised when the risk of ownership 
is transferred to the purchaser. Sales quantities in a period can 
differ from production quantities as a result of permanent and 
timing differences. Timing differences can arise due to under/
over lift of entitlement, inventory, storage and pipeline balances 
effects. The change in under/over lift position amounted to an 
expense of MUSD 23.3 (income of MUSD 13.8) in the year due to 
the timing of the cargo liftings compared to production.

Other income for the year amounted to MUSD 32.8 (MUSD 24.9) 
and included a quality differential compensation on Alvheim 
blended crude and tariff income of MUSD 29.4 (MUSD 21.7) 
which is due to net income from Ivar Aasen tariffs paid to 
Edvard Grieg.

Production costs
Production costs including inventory movements for the year 
amounted to MUSD 145.4 (MUSD 164.2) and are detailed in 
Note 2. The total production cost per barrel of oil equivalent 
produced is detailed in the table below:

Production costs 

2018

2017

Cost of operations
 – In MUSD
 – In USD per boe
Tariff and transportation expenses
 – In MUSD
 – In USD per boe
Operating costs
 – In MUSD
 – In USD per boe 1

Change in inventory position
 – In MUSD
 – In USD per boe
Other
 – In MUSD
 – In USD per boe
Production costs
 – In MUSD
 – In USD per boe

102.5
3.46

35.2
1.19

137.7
4.65

0.6
0.02

7.1
0.24

145.4
4.91

117.3
3.73

37.9
1.21

155.2
4.94

-0.4
-0.02

9.4
0.30

164.2
5.22

Note: USD per boe is calculated by dividing the cost by total production 
volume for the period.
1 The numbers in this table are excluding tariff income netting. Lundin 
Petroleum’s operating cost for the year of USD 4.65 (USD 4.94) per barrel 
is reduced to USD 3.66 (USD 4.25) when tariff income is netted off. 

The total cost of operations for the year amounted to 
MUSD 102.5 (MUSD 117.3). The total cost of operations 
excluding operational projects amounted to MUSD 93.0 
(MUSD 105.9). The reduction compared to the comparative 
period is the result of the termination of production from the 
Brynhild ﬁ eld during the year.

Lundin Petroleum Annual Report 2018

47

FINANCIAL REPORT | Directors’ Report

The cost of operations per barrel for the year amounted 
to USD 3.46 (USD 3.73) including operational projects and 
USD 3.14 (USD 3.37) excluding operational projects.

Finance income
Finance income for the year amounted to MUSD 192.2 
(MUSD 256.7) and is detailed in Note 4.

Tariff and transportation expenses for the year amounted to 
MUSD 35.2 (MUSD 37.9) or USD 1.19 (USD 1.21) per barrel. 

Other costs for the year amounted to MUSD 7.1 (MUSD 9.4) and 
related to the business interruption insurance. The comparative 
period also included the operating cost share arrangement on 
the Brynhild ﬁ eld whereby the amount of operating cost varied 
with the oil price until the end of May 2017. This arrangement 
was being marked-to-market against the oil price curve.

Depletion and decommissioning costs
Depletion and decommissioning costs for the year amounted 
to MUSD 458.0 (MUSD 567.3) at an average rate of USD 15.46 
(USD 18.05) per barrel and are detailed in Note 10. The lower 
depletion costs for the year compared to the comparative period 
is due to the lower depletion rate per barrel for the Edvard Grieg 
ﬁ eld as a result of the increased reserves per year end 2017 and 
lower production volumes. 

Exploration costs
Exploration costs expensed in the income statement for the 
year amounted to MUSD 53.2 (MUSD 73.1) and are detailed in 
Note 10. Exploration and appraisal costs are capitalised as they 
are incurred. When exploration drilling is unsuccessful, the 
capitalised costs are expensed. All capitalised exploration costs 
are reviewed on a regular basis and are expensed where their 
recoverability is considered highly uncertain.       

Impairment costs of oil and gas properties
Impairment costs in the income statement for the year 
amounted to MUSD – (MUSD 30.6) and are detailed in note 10. 
The impairment costs in the comparative period were triggered 
by the partial sale of the Brynhild ﬁ eld in PL148 where a 
39 percent working interest was divested.

Loss from sale of assets
Loss from sale of assets in the income statement for the 
year amounted to MUSD – (MUSD 14.4) and related in the 
comparative period to the after tax result on the divestment 
of a 39 percent working interest in the Brynhild ﬁ eld and are 
detailed in Note 8.

Purchase of crude oil from third parties
Purchase of crude oil from third parties for the year amounted 
to MUSD 533.8 (MUSD 303.3) and related mainly to Grane 
Blend crude oil purchased from outside the Group by Lundin 
Petroleum Marketing SA.

General, administrative and depreciation expenses
The general administrative and depreciation expenses for the 
year amounted to MUSD 24.6 (MUSD 31.7) which included 
a charge of MUSD 3.9 (MUSD 4.3) in relation to the Group’s 
long-term incentive plans (LTIP), see also Note 29. Fixed asset 
depreciation expenses for the year amounted to MUSD 2.6 
(MUSD 2.5).

During the year the reserve-based credit facility was successfully 
re-negotiated resulting in the interest rate margin over LIBOR 
being reduced from 3.15 percent to a current rate of 2.25 
percent effective as of 1 June 2018. The amendment of the 
interest rate margin has resulted in an accounting gain of 
MUSD 183.7 (MUSD –) in accordance with IFRS 9. When a 
ﬁ nancial liability, measured at amortised cost, is modiﬁ ed 
without this resulting in derecognition, a gain or loss should 
be recognised in the income statement based on IFRS 9. The 
gain or loss is calculated as the difference between the original 
contractual cash ﬂ ows and the modiﬁ ed cash ﬂ ows discounted 
at the original effective interest rate.

Other ﬁ nancial income amounted to MUSD 3.3 (MUSD 0.4) and 
included the change in fair value under IFRS 9 of the shares held 
in ShaMaran. The shares held in ShaMaran were sold during the 
year at the prevailing market price.

Finance costs
Finance costs for the year amounted to MUSD 345.4 
(MUSD 186.6) and are detailed in Note 5.

The net foreign currency exchange loss for the year amounted to 
MUSD 164.9 (gain of MUSD 255.3). Foreign exchange movements 
occur on the settlement of transactions denominated in foreign 
currencies and the revaluation of working capital and loan 
balances to the prevailing exchange rate at the balance sheet 
date where those monetary assets and liabilities are held in 
currencies other than the functional currencies of the Group’s 
reporting entities. Lundin Petroleum has hedged certain foreign 
currency capital expenditure amounts against the US Dollar 
and for the year, the net realised exchange gain on these 
settled foreign exchange hedges amounted to MUSD 5.2 (loss of 
MUSD 1.8).

The US Dollar strengthened against the Euro during the year 
resulting in a net foreign currency exchange loss on the US 
Dollar denominated external loan, which is borrowed by a 
subsidiary using Euro as functional currency. In addition, 
the Norwegian Krone weakened against the Euro in the 
year, generating a net foreign currency exchange loss on an 
intercompany loan balance denominated in Norwegian Krone.

Interest expenses for the year amounted to MUSD 88.7 
(MUSD 115.0) and represented the portion of interest charged 
to the income statement. An additional amount of interest 
of MUSD 87.6 (MUSD 63.5) associated with the funding of the 
Norwegian development projects was capitalised in the year. 
The total interest expense is slightly lower compared to the 
comparative period mainly due to lower drawn debt under the 
reserve-based credit facility offset by higher interest rates. The 
result on interest rate hedge settlements amounted to a gain 
of MUSD 3.5 (loss of MUSD 17.4) and is reported as ﬁ nancial 
income.

48

Lundin Petroleum Annual Report 2018

The amortisation of the deferred ﬁ nancing fees for the year 
amounted to MUSD 17.8 (MUSD 17.5) and related to the fees 
incurred in establishing the reserve-based credit facility. The fees 
are being expensed over the expected life of the facility. 

Loan facility commitment fees for the year amounted to 
MUSD 13.0 (MUSD 11.1) with the increase compared to the 
comparative period being the result of the lower drawn debt 
under the reserve-based credit facility somewhat offset by 
a lower margin for commitment fees as agreed through the 
amendment of the facility effective as of 1 June 2018.

The loan modiﬁ cation fees for the year amounted to MUSD 17.3 
(MUSD –) and related to the fees incurred for the re-negotiated 
reserve-based credit facility resulting in the interest rate margin 
over LIBOR being reduced from 3.15 percent to a current rate 
of 2.25 percent effective as of 1 June 2018. The net accounting 
gain when offsetting these loan modiﬁ cation fees against the 
reported loan modiﬁ cation gain amounted to MUSD 166.4. The 
associated deferred taxes amounted to MUSD 68.3 resulting in 
an after tax accounting gain of MUSD 98.1 that unwinds to the 
income statement over the remaining period of the facility. 

The unwinding of the loan modiﬁ cation gain for the year 
amounted to MUSD 26.1 (MUSD –) and related to the expensing 
of the accounting gain from the re-negotiated improved 
borrowing terms for the reserve-based credit facility over the 
period of usage of the facility.

The Group operates in various countries and ﬁ scal regimes 
where corporate income tax rates are different from the 
regulations in Sweden. Corporate income tax rates for the 
Group vary between 12.5 and 78 percent. The effective tax rate 
for the year is affected by items which do not receive a full 
tax credit such as the reported net foreign currency exchange 
results, Norwegian ﬁ nancial items and by the uplift allowance 
applicable in Norway for development expenditures against the 
offshore tax regime.

Non-controlling interest
The net result attributable to non-controlling interest for the 
year amounted to MUSD – (MUSD -3.8) and related in the 
comparative period to the non-controlling interest’s share in 
Mintley Caspian Ltd., which is the holding company of Lundin 
Petroleum´s investment in Russia, which was fully consolidated 
up to the end of the third quarter 2017. The investment in 
Mintley Caspian Ltd. was deconsolidated at the end of the third 
quarter 2017 and the results are now reported as share in result 
of associated company.

Balance sheet
Non-current assets
Oil and gas properties amounted to MUSD 5,341.1 
(MUSD 4,937.1) and are detailed in Note 10.

Development, exploration and appraisal expenditure incurred 
for the year was as follows:

Share in result of associated company
Share in result of associated company for the year amounted 
to MUSD -1.3 (MUSD -0.4) and related to the share in the result 
of the investment in Mintley Caspian Ltd and are detailed in 
Note 6.

Development expenditure 
in MUSD

Norway

Development expenditures

2018

701.9

701.9

2017

950.0

950.0

Tax
The overall tax charge for the year amounted to MUSD 1,025.8 
(MUSD 501.2) and is detailed in Note 7.

Development expenditure of MUSD 701.9 (MUSD 950.0) was 
incurred in Norway during the year, primarily on the Johan 
Sverdrup and Edvard Grieg ﬁ elds. In addition an amount of 
MUSD 87.6 (MUSD 63.5) of interest was capitalised.

The current tax charge for the year amounted to MUSD 90.4 
(MUSD -0.5) of which MUSD 89.0 (MUSD -1.5) related to Norway. 
The current tax charge for Norway related to Corporate Tax only 
with no current tax charge to the income statement in relation 
to the Special Petroleum Tax (SPT) as the Company continues 
to be sheltered from SPT tax losses. The paid tax installments 
in Norway during the year amounted to MUSD 14.8 which has 
resulted in an increase in current tax liabilities compared to the 
comparative period.

The deferred tax charge for the year amounted to MUSD 935.4 
(MUSD 501.7) and related to Norway. The deferred tax amount 
arises primarily where there is a difference in depletion for tax 
and accounting purposes.

Exploration and appraisal expenditure 
in MUSD

Norway

Russia

Exploration and appraisal expenditure

2018

310.6

–

310.6

2017

227.1

1.1

228.2

Exploration and appraisal expenditure of MUSD 310.6 
(MUSD 227.1) was incurred in Norway during the year, primarily 
for the appraisal wells Luno II in PL359, Rolvsnes in PL338C and 
Alta in PL609, the exploration wells Frosk in PL340, Svanefjell 
in PL659, Lille Prinsen in PL167, Silfari in PL830 and Driva/
Oppdal in PL860 as well as for Phase 2 of the Johan Sverdrup 
project. The income associated with the oil produced during 
the extended production test of the Alta appraisal well in PL609 
during the third quarter was offset against the capitalised 
appraisal expenditure in the year.

Lundin Petroleum Annual Report 2018

49

FINANCIAL REPORT | Directors’ Report

Other tangible ﬁ xed assets amounted to MUSD 13.6 (MUSD 13.2) 
and are detailed in Note 11.

Goodwill associated with the accounting for the Edvard Grieg 
transaction during 2016 amounted to MUSD 128.1 (MUSD 128.1) 
and is detailed in Note 12.

Financial assets amounted to MUSD 0.4 (MUSD 6.7) and are 
detailed in Note 13. The comparative period included the shares 
held in ShaMaran which were sold during the year to a related 
party as mentioned in Note 26.

Derivative instruments amounted to MUSD 2.7 (MUSD 26.5) and 
related to the marked-to-market gain on the outstanding interest 
rate and currency hedge contracts due to be settled after twelve 
months and are detailed in Note 21.

Current assets
Inventories amounted to MUSD 36.5 (MUSD 33.7) and included 
both well supplies and hydrocarbon inventories and are detailed 
in Note 14.

Trade and other receivables amounted to MUSD 219.3 
(MUSD 304.4) and are detailed in Note 15. Trade receivables, 
which are all current, amounted to MUSD 153.7 (MUSD 202.7) 
and included invoiced cargoes. Underlift amounted to MUSD 4.6 
(MUSD 29.4) and was attributable to an underlift position on 
the producing ﬁ elds. Joint operations debtors relating to various 
joint venture receivables amounted to MUSD 17.0 (MUSD 15.6). 
Prepaid expenses and accrued income amounted to MUSD 26.9 
(MUSD 29.3) and represented mainly prepaid operational and 
insurance expenditure. Other current assets amounted to 
MUSD 17.1 (MUSD 27.4) and included a short-term receivable 
from IPC in relation to certain working capital balances 
following the IPC spin-off amounting to MUSD 14.0 and other 
miscellaneous receivable balances.

Derivative instruments amounted to MUSD 34.0 (MUSD 7.7) and 
related to the marked-to-market gain on the outstanding interest 
rate and currency hedge contracts due to be settled within 
twelve months and are detailed in Note 21.

Cash and cash equivalents amounted to MUSD 66.8 (MUSD 71.4). 
Cash balances are held to meet ongoing operational funding 
requirements.

Non-current liabilities
Financial liabilities amounted to MUSD 3,262.0 (MUSD 3,880.0) 
and are detailed in Note 18. Bank loans amounted to 
MUSD 3,465.0 (MUSD 3,955.0) and related to the outstanding 
loan under the reserve-based credit facility. Capitalised 
ﬁ nancing fees relating to the establishment of the facility 
amounted to MUSD 54.1 (MUSD 75.0) and are being amortised 
over the expected life of the facility. The closing balance 
associated with the capitalised loan modiﬁ cation gain amounted 
to MUSD 148.9 (MUSD –) and is being amortised over the 
expected life of the facility.

Provisions amounted to MUSD 489.1 (MUSD 420.6) and are 
detailed in Note 19. The provision for site restoration amounted 
to MUSD 483.9 (MUSD 414.6) and related to the long-term 
portion of the future decommissioning obligations. The increase 
mainly reﬂ ects the additional liability for Edvard Grieg and for 
the Johan Sverdrup development project. The short-term portion 
of the future decommissioning obligations was classiﬁ ed as 
current liabilities.

Deferred tax liabilities amounted to MUSD 2,103.0 
(MUSD 1,302.2) and are detailed in Note 7. The provision mainly 
arises on the excess of book value over the tax value of oil and 
gas properties. Deferred tax assets are netted off against deferred 
tax liabilities where they relate to the same jurisdiction.

Derivative instruments amounted to MUSD 64.9 (MUSD 3.1) and 
related to the marked-to-market loss on outstanding interest 
rate and currency hedge contracts due to be settled after twelve 
months and are detailed in Note 21.

Current liabilities
Trade and other payables amounted to MUSD 204.6 
(MUSD 259.0) and are detailed in Note 20. Overlift amounted 
to MUSD 5.4 (MUSD 12.8) and was attributable to an overlift 
position in relation to the Edvard Grieg ﬁ eld. Joint operations 
creditors and accrued expenses amounted to MUSD 147.4 
(MUSD 188.9) and related to activity in Norway. Other accrued 
expenses amounted to MUSD 17.6 (MUSD 19.5) and other 
current liabilities amounted to MUSD 7.6 (MUSD 7.7).

Derivative instruments amounted to MUSD 20.0 (MUSD 6.4) and 
related to the marked-to-market loss on outstanding interest rate 
and currency hedge contracts due to be settled within twelve 
months and are detailed in Note 21.

Current tax liabilities amounted to MUSD 70.4 (MUSD 0.6) and 
related mainly to Corporate Tax due in Norway as detailed in 
Note 7.

Current provisions amounted to MUSD 12.5 (MUSD 7.7) and 
are detailed in Note 19. The short-term portion of the future 
decommissioning obligations amounted to MUSD 6.6 (MUSD –) 
and the current portion of the provision for Lundin Petroleum’s 
Unit Bonus Plan amounted to MUSD 5.9 (MUSD 7.7).

Annual General Meeting
The Annual General Meeting will be held in Stockholm on 
29 March 2019.

Board’s Proposal for Remuneration to Group 
Management
The intention of the Board of Directors is to propose to the 
2019 AGM the adoption of a Policy on Remuneration for 2019 
that follows in essence the same principles as applied in 2018 
and that contains similar elements of remuneration for Group 
management as the 2018 Policy on Remuneration being base 
salary, yearly variable remuneration, Long-term Incentive Plan 
(LTIP) and other beneﬁ ts.

50

Lundin Petroleum Annual Report 2018

 
The Board will propose that the AGM also resolve on a long-
term, performance-based incentive plan in respect of Group 
management and a number of key employees of Lundin 
Petroleum, which follows similar principles as the LTIPs 
approved by the 2014 - 2018 Annual General Meetings. LTIP 
2019 gives the participants the possibility to receive shares in 
Lundin Petroleum subject to the fulﬁ lment of a performance 
condition under a three year performance period commencing 
on 1 July 2019 and expiring on 30 June 2022. The performance 
condition is based on the share price growth and dividends 
(Total Shareholder Return) of the Lundin Petroleum share 
compared to the Total Shareholder Return of a peer group 
of companies. At the beginning of the performance period, 
the participants will be granted awards free of charge which, 
provided that the performance condition is met, entitle the 
participant to be allotted free of charge shares in Lundin 
Petroleum at the end of the performance period.

The number of performance shares upon allotment is limited 
to a value of three times each participant’s annual gross base 
salary for 2019. The total number of performance shares that 
may be allotted under LTIP 2019 is 500,000, corresponding to 
approximately 0.15 percent of the total number of outstanding 
shares in Lundin Petroleum. The Board of Directors may reduce 
(including reduce to zero) allotment of performance shares at its 
discretion, should it consider the underlying performance not 
to be reﬂ ected in the outcome of the performance condition, for 
example, in light of operating cash ﬂ ow, reserves, and health 
and safety performance.

The participants will not be entitled to transfer, pledge or 
dispose of the LTIP awards or any rights or obligations under 
LTIP 2019, or perform any shareholders’ rights regarding the 
LTIP awards during the performance period. The LTIP awards 
entitle participants to acquire already existing shares. The 
Board of Directors will consider means to secure the Company’s 
expected ﬁ nancial exposure related to LTIP 2019. One method 
would be to enter into an equity swap agreement with a third 
party on terms in accordance with market practice, whereby 
the third party in its own name shall be entitled to acquire and 
transfer shares in Lundin Petroleum to the participants.

The details of the proposal are available on 
www.lundin-petroleum.com.

Remuneration as per prevailing market conditions may further 
be paid to members of the Board of Directors for work
performed outside the directorship.

In addition, as in previous years, the Board of Directors will 
further seek authorisation to deviate from the Policy on 
Remuneration in case of special circumstances in a speciﬁ c case.

For a detailed description of the Policy on Remuneration applied 
in 2018, see the Corporate Governance report on pages 36–37. 
The remuneration to Board and Group management is detailed 
in Notes 28 and 29.

Share information
For the number of shares outstanding and the repurchases of 
own shares, see Note 17.1. 

For the AGM resolution on the authorisation to issue new shares, 
see page 25, Corporate Governance Report.

Dividend
In accordance with the updated dividend policy, the Board of 
Directors propose that the Annual General Meeting resolves 
on a dividend for 2018 of USD 1.48 per share, corresponding 
to USD 500 million (rounded off), to be paid in quarterly 
instalments of USD 0.37 per share, corresponding to USD 125 
million (rounded off). Before payment, each quarterly dividend 
of USD 0.37 per share shall be converted into a SEK amount, 
and paid out in SEK, based on the USD to SEK exchange rate 
published by Sweden’s central bank (Riksbanken) four business 
days prior to each record date (rounded off to the nearest whole 
SEK 0.01 per share). The ﬁ nal USD equivalent amount received 
by the shareholders may therefore slightly differ depending 
on what the USD to SEK exchange rate is on the date of the 
dividend payment. The SEK amount per share to be distributed 
each quarter will be announced in a press release four business 
days prior to each record date.

The ﬁ rst dividend payment is expected to be paid around 
5 April 2019, with an expected record date of 2 April 2019 and 
expected ex-dividend date of 1 April 2019. The second dividend 
payment is expected to be paid around 8 July 2019, with an 
expected record date of 3 July 2019 and expected ex-dividend 
date of 2 July 2019. The third dividend payment is expected 
to be paid around 7 October 2019, with an expected record 
date of 2 October 2019 and an expected ex-dividend date of 
1 October 2019. The fourth dividend payment is expected to be 
paid around 9 January 2020, with an expected record date of 
3 January 2020 and an expected ex-dividend date of 2 January 
2020.

In order to comply with Swedish company law, a maximum 
total SEK amount shall be pre-determined to ensure that the 
dividend distributed does not exceed the available distributable 
reserves of the Company and such maximum amount for the 
2018 dividend has been set to a cap of SEK 7.665 billion (i.e., 
SEK 1.916 billion per quarter). If the total dividend would exceed 
the cap of SEK 7.665 billion, the dividend will be automatically 
adjusted downwards so that the total dividend corresponds to 
the cap of SEK 7.665 billion. 

For details of the updated dividend policy, see page 25.

Lundin Petroleum Annual Report 2018

51

FINANCIAL REPORT | Directors’ Report

Proposed disposition of unappropriated earnings
The 2019 Annual General Meeting has an unrestricted equity at 
its disposal of MSEK 54,256.0, including the net result for the 
year of MSEK 1,657.8.

Changes in Board of Directors
At the 2019 AGM, all the current members of the Board of 
Directors will be proposed for re-election by the Nomination 
Committee. 

Based on the proposed dividend, the Board of Directors propose 
that the Annual General Meeting dispose of the unrestricted 
equity as follows:

MSEK

The Board of Directors proposes that the 
shareholders are paid a dividend of USD 1.48 per 
share 1
Brought forward

Unrestricted equity

Financial statements
The result of the Group’s operations and ﬁ nancial position at 
the end of the ﬁ nancial year are shown in the following income 
statement, statement of comprehensive income, balance sheet, 
statement of cash ﬂ ow, statement of changes in equity and 
related notes, which are presented in US Dollars.

4,666.0 

49,590.0

54,256.0

The Parent Company’s income statement, balance sheet, 
statement of cash ﬂ ow, statement of changes in equity and 
related notes presented in Swedish Krona can be found on pages 
89–94.

1   The amount is based on the USD to SEK exchange rate published by 

Sweden’s central bank (Riksbanken) as at 25 February 2019. The amount 
is based on the number of shares in circulation on 25 February 2019 and 
the total dividend amount may change by the record dates as a result 
of repurchases of own shares or as a result of issue of new shares. The 
dividend is USD denominated, ﬂ uctuations in the USD to SEK exchange 
rate between 25 February 2019 and approval of the dividend proposal by 
the Annual General Meeting will have an impact on the total dividend 
amount reported in SEK. If the dividend proposal is approved by the 
Annual General Meeting, the dividend will be recorded as a liability in 
USD on the date of the Annual General Meeting and the SEK equivalent 
of the USD liability will ﬂ uctuate until the fourth tranche is converted 
from USD to SEK. 

Based on a comprehensive review of the ﬁ nancial position of 
the Company and the Group as a whole, as well as the proposed 
authorisation to repurchase shares, the Board of Directors is of 
the opinion that the proposed dividend is justiﬁ able in view of 
the requirements that the nature and scope of, and risks involved 
in the Company’s operations, place on the size of the Company’s 
and Group’s equity, as well as their consolidation needs, liquidity 
and position in other respects. The Board of Directors considered 
that there is negative equity at Group level, however such equity 
is based on historical accounting determinations of book value, 
depreciations and foreign exchange results, and does not take 
into account the fair market value of the assets held by the 
Group. The Board of Directors’ full statement in accordance with 
Chapter 18, Section 4 of the Swedish Companies Act is available 
on www.lundin-petroleum.com. 

Subsequent events
Subsequent events are detailed in Note 31. 

Risk management
For a detailed description of risk management, see the Strategic 
report on pages 18–21. 

Corporate Governance Report
Lundin Petroleum has issued a Corporate Governance report, 
which is separate from the Financial Statements. The Corporate 
Governance report is included in this document, on pages 
22–38.

Sustainability Report
Lundin Petroleum has issued a Sustainability Report, which 
is separate from the Financial Statements. The Sustainability 
Report is available on www.lundin-petroleum.com.

Report on Payments to Government
Lundin Petroleum has issued a Report on Payments to 
Government, which is separate from the Financial Statements. 
The Report on Payments to Government is available on 
www.lundin-petroleum.com.

52

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT 

Consolidated Income Statement 
for the Financial Year Ended 31 December

Expressed in MUSD

Revenue and other income

Revenue

Other income

Cost of sales

Production costs

Depletion and decommissioning costs

Exploration costs

Impairment costs of oil and gas properties

Loss from sale of assets

Other cost of sales

Gross proﬁ t

General, administration and depreciation expenses

Operating proﬁ t

Net ﬁ nancial items

Finance income

Finance costs

Share in result of associated company

Proﬁ t before tax 

Income tax

Net result from continuing operations

Discontinued operations

Net result – IPC

Net result

Attributable to:

Shareholders of the Parent Company

Non-controlling interest

Earnings per share – USD1

From continuing operations

From discontinued operations

Earnings per share – fully diluted – USD1

From continuing operations

From discontinued operations

 1 Based on net result attributable to shareholders of the Parent Company.

Note

2018

1

2

10

10

10

8

3

4

5

6

7

9

17.3

17.3

2,607.9

9.5

2,617.4

-145.4

-458.0

-53.2

–

–

-533.8

1,427.0

-24.6

1,402.4

192.2

-345.4

-153.2

-1.3

1,247.9

-1,025.8

222.1

–

222.1

222.1

–

222.1

0.66

–

0.65

–

2017

1,958.3

38.7

1,997.0

-164.2

-567.3

-73.1

-30.6

-14.4

-303.3

844.1

-31.7

812.4

256.7

-186.6

70.1

-0.4

882.1

-501.2

380.9

46.5

427.4

431.2

-3.8

427.4

1.13

0.14

1.13

0.14

Lundin Petroleum Annual Report 2018

53

 
FINANCIAL REPORT 

Consolidated Statement of Comprehensive Income 
for the Financial Year Ended 31 December

Expressed in MUSD

Net result

Items that may be subsequently reclassiﬁ ed to proﬁ t or loss:

Exchange differences foreign operations

Cash ﬂ ow hedges

Available-for-sale ﬁ nancial assets

Other comprehensive income

Total comprehensive income

Attributable to:

Shareholders of the Parent Company

Non-controlling interest

2018

222.1

1.5

-74.1

–

-72.6

149.5

149.5

–

149.5

2017

427.4

-96.2

76.4

4.9

-14.9

412.5

416.3

-3.8

412.5

54

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT 

Consolidated Balance Sheet 
for the Financial Year Ended 31 December

Expressed in MUSD

ASSETS

Non-current assets

Oil and gas properties

Other tangible ﬁ xed assets

Goodwill

Financial assets

Derivative instruments

Total non-current assets

Current assets

Inventories

Trade and other receivables

Derivative instruments

Cash and cash equivalents

Total current assets

TOTAL ASSETS

EQUITY AND LIABILITIES

Equity

Share capital

Additional paid in capital

Other reserves

Retained earnings

Net result

Total equity

Liabilities

Non-current liabilities

Financial liabilities

Provisions

Deferred tax liabilities

Derivative instruments

Total non-current liabilities

Current liabilities

Trade and other payables

Derivative instruments

Current tax liabilities

Provisions 

Total current liabilities

Total liabilities

TOTAL EQUITY AND LIABILITIES

Note

2018

2017

10

11

12

13

21

14

15

21

16

17.1

17.1

17.2

18

19

7

21

20

21

7

19

5,341.1

13.6

128.1

0.4

2.7

5,485.9

36.5

219,3

34.0

66.8

356.6

4,937.1

13.2

128.1

6.7

26.5

5,111.6

33.7

304.4

7.7

71.4

417.2

5,842.5

5,528.8

0.5

339.7

-518.3

-428.0

222.1

-384.0

3,262.0

489.1

2,103.0

64.9

5,919.0

204.6

20.0

70.4

12.5

307.5

6,226.5

5,842.5

0.5

527.9

-445.7

-864.7

431.2

-350.8

3,880.0

420.6

1,302.2

3.1

5,605.9

259.0

6.4

0.6

7.7

273.7

5,879.6

5,528.8

Lundin Petroleum Annual Report 2018

55

FINANCIAL REPORT 

Consolidated Statement of Cash Flow 
for the Financial Year Ended 31 December

Expressed in MUSD

Note

Cash ﬂ ows from operating activities

Net result

Adjustments for:

Exploration costs

Depletion, depreciation and amortisation

Impairment of oil and gas properties

Current tax

Deferred tax

Impairment of other shares

Long-term incentive plans

Foreign currency exchange gain/loss

Interest expense

Loan modiﬁ cation gain

Loan modiﬁ cation fees

Unwinding of loan modiﬁ cation gain

Capitalised ﬁ nancing fees

Other 

Interest received

Interest paid

Income taxes paid/received

Changes in working capital:

Changes in inventories

Changes in underlift position
Changes in receivables

Changes in overlift position

Changes in liabilities
Total cash ﬂ ows from operating activities

Cash ﬂ ows from investing activities

Investment in oil and gas properties

Investment in other ﬁ xed assets
Investment in other shares and participations1

Decommissioning costs paid
Disposal of ﬁ xed assets2

Other
Total cash ﬂ ows from investing activities

Cash ﬂ ows from ﬁ nancing activities

Changes in long-term liabilities

Financing fees paid

Cash funded from/to discontinued operations

Dividends paid

Purchase of own shares
Total cash ﬂ ows from ﬁ nancing activities

Changes in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Currency exchange difference in cash and cash equivalents
Cash and cash equivalents of deconsolidated operations
Cash and cash equivalents at the end of the year

22

2018

222.1

53.2

460.6
–

90.4

935.4

–

14.6

162.5

88.7

-183.7

17.3

26.1

17.8

12.8

1.1

-176.0

-15.8

-2.8

24.8
57.4

-7.4

-80.8
1,718.3

-1,060.1

-3.2

9.3

-1.3

–

–
-1,055.3

-490.0

-17.3

–

-153.1

-14.3
-674.7

-11.7
71.4
7.1
–
66.8

2017

380.9

73.1

570.9
30.6

-0.5

501.7

11.2

12.7

-258.0

115.0

–

–

–

17.5

26.4

1.0

-177.3

82.2

-3.8

-2.0
126.9

-17.1

-192.1
1,299.3

-1,178.2

-1.6

-1.3

-0.4

93.7

-7.8

-1,095.6

-188.7

–

31.7

–

-28.0

-185.0

18.7
56.1
-3.2
-0.2
71.4

1 Cash received on the sale of the shares held in ShaMaran
2 Cash received on the divestment of a 39 percent working interest in the Brynhild ﬁ eld on closing including settlement of net working capital.

The effects of currency exchange differences due to the translation of foreign group companies have been excluded as these effects do 
not affect the cash ﬂ ow. Cash and cash equivalents comprise cash and short-term deposits maturing within less than three months.

56

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT 

Consolidated Statement of Changes in Equity
for the Financial Year Ended 31 December

Expressed in MUSD

Balance at 1 January 2017

Comprehensive income

Net result

Currency translation difference

Cash ﬂ ow hedges

Available-for-sale ﬁ nancial assets

Total comprehensive income

Transactions with owners

Change in consolidation

Distribution of IPC assets

Purchase of own shares

Spin off IPC

Share based payments 3

Value of employee services 4

Total transactions with owners

Balance at 31 December 2017

Comprehensive income

Net result

Currency translation difference

Cash ﬂ ow hedges

Total comprehensive income

Transactions with owners

Cash distributions

Purchase of own shares

Share based payments 3

Value of employee services 4

Total transactions with owners

Balance at 31 December 2018

Attributable to owners of the Parent Company

Share 
capital1

Additional 
paid-in-
capital

Other 
reserves2

Retained 
earnings

0.5

979.1

-430.8

-787.4

–

–

–

–

–

–

–

–

–

–

–

–

0.5

–

–

–

–

–

–

–

–

–

0.5

–

–

–

–

–

–

-410.0

-28.0

–

-13.2

–

-451.2

527.9

–

–

–

–

-153.1

-14.3

-20.8

–

-188.2

339.7

–

-96.2

76.4

4.9

-14.9

–

–

–

–

–

–

–

431.2

–

–

–

431.2

-82.0

–

–

–

–

4.7

-77.3

-445.7

-433.5

–

1.5

-74.1

-72.6

–

–

–

–

–

222.1

–

–

222.1

–

–

–

5.5

5.5

-518.3

-205.9

Non-
controlling
interest

Total 
equity

-113.6

-352.2

-3.8

427.4

–

–

–

-96.2

76.4

4.9

-3.8

412.5

117.1

–

–

0.3

–

–

117.4

–

–

–

–

–

–

–

–

–

–

–

35.1

-410.0

-28.0

0.3

-13.2

4.7

-411.1

-350.8

222.1

1.5

-74.1

149.5

-153.1

-14.3

-20.8

5.5

-182.7

-384.0

Total

-238.6

431.2

-96.2

76.4

4.9

416.3

-82.0

-410.0

-28.0

–

-13.2

4.7

-528.5

-350.8

222.1

1.5

-74.1

149.5

-153.1

-14.3

-20.8

5.5

-182.7

-384.0

1 Lundin Petroleum AB’s issued share capital described in detail in Note 17.1.

2 Other reserves are described in detail in Note 17.2.

3 Represents the cost to hedge the equity-settled share-based long-term incentive plan as described in Note 29.

4 Represents the fair value at the date of grant of the equity-settled share-based long-term incentive plan that is recognised over the vesting period as 

described in Note 29.

Lundin Petroleum Annual Report 2018

57

FINANCIAL REPORT 

Accounting Policies

Basis of preparation
Lundin Petroleum’s annual report has been prepared in 
accordance with prevailing International Financial Reporting 
Standards (IFRS) and International Financial Reporting 
Interpretation Committee (IFRIC) interpretations adopted by 
the EU Commission and the Swedish Annual Accounts Act 
(1995:1554). In addition, RFR 1 “Supplementary Rules for Groups” 
has been applied as issued by the Swedish Financial Reporting 
Board. The Parent Company applies the same accounting 
policies as the Group, except as speciﬁ ed in the Parent Company 
accounting policies on page 89.

asset and lease liability, while lease payments are to be reﬂ ected 
as interest expense and a reduction of lease liability. Effective 
from 1 January 2019, the Group has made the following transition 
choices in relation to IFRS 16: (a) application of the modiﬁ ed 
retrospective method, (b) right of use assets will be measured at 
an amount equal to the lease liability and (c) leases with a less 
than 12 months remaining lease term at year end 2018 will not be 
reﬂ ected as leases. The Group has made the following application 
policy choice: short-term leases (less than 12 months) and leases of 
low value assets will not be reﬂ ected in the balance sheet, but will 
be expensed as incurred.

The preparation of ﬁ nancial statements in conformity with IFRS 
requires the use of certain critical accounting estimates and also 
requires management to exercise its judgement in the process 
of applying the Group’s accounting policies. The areas involving 
a higher degree of judgement or complexity, or areas where 
assumptions and estimates are signiﬁ cant to the consolidated 
ﬁ nancial statements are disclosed under the headline “Critical 
accounting estimates and judgements”. The consolidated 
ﬁ nancial statements have been prepared under the historical cost 
convention, except for items that are required to be accounted 
for at fair value as detailed in the Group’s accounting policies. 
Intercompany transactions and balances have been eliminated.

Accounting standards, amendments and interpretations
As from 1 January 2018, Lundin Petroleum has applied the 
following new accounting standards: 

Lundin Petroleum has assessed the impact of IFRS 16 on the 
ﬁ nancial statements of the Group and only identiﬁ ed one relevant 
contract containing a lease with no material impact on the 
ﬁ nancial statements of the Group.

Principles of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has control. 
The Group controls an entity when it is exposed to, or has rights 
to, variable returns from its involvement with the entity and 
has the ability to affect those returns through its power over the 
entity. The existence and effect of potential voting rights that 
are currently exercisable or convertible are considered when 
assessing the Group’s control. Subsidiaries are fully consolidated 
from the date on which control is transferred to the Group and 
are de-consolidated from the date that control ceases.

IFRS 9 Financial instruments, the standard addresses the 
classiﬁ cation, measurement and recognition of ﬁ nancial assets 
and ﬁ nancial liabilities, introduces new rules for hedge accounting 
and a new impairment model for ﬁ nancial assets. Based on 
this standard, the investment in ShaMaran Petroleum Corp. 
(ShaMaran) was booked at fair value of the shares with movements 
in the fair value of the shares being directly recognised in the 
consolidated income statement. The ShaMaran shares were sold 
during the year. The Group applies the new rules retrospectively 
from 1 January 2018 and the comparatives are not restated.

The Group applies the acquisition method to account for 
business combinations. The consideration transferred for 
the acquisition of a subsidiary is the fair values of the assets 
transferred, the liabilities incurred to the former owners of 
the acquiree and the equity interests issued by the Group. The 
consideration transferred includes the fair value of any asset or 
liability resulting from a contingent consideration arrangement. 
Identiﬁ able assets acquired and liabilities and contingent 
liabilities assumed in a business combination are measured 
initially at their fair values at the acquisition date.

Based on IFRS 9, a net accounting gain of MUSD 166.4 was 
recognised during the reporting period as a result of the re-
negotiated improved borrowing terms for the reserve-based credit 
facility taking effect as of 1 June 2018. 

IFRS 15 Revenue from contract with customers, the standard 
addresses revenue recognition and establishes principles for 
reporting useful information to users of ﬁ nancial statements. 
Based on this standard, certain transactions are no longer reported 
as revenue but as other revenue instead. The Group applies the 
new rules using the full retrospective approach which means that 
the comparatives have been restated.

The Group has not adopted the following standards and 
interpretations that are not mandatory for the ﬁ nancial year 2018. 
The Group has assessed the impact on the Group’s consolidated 
ﬁ nancial statements for the standards with an effective date of 
1 January 2019.

IFRS 16 Leases will replace IAS 17. The new standard requires 
recognition in the balance sheet for each contract, with some 
exceptions, that meets the deﬁ nition of a lease as a right of use 

The non-controlling interest in a subsidiary represents the 
portion of the subsidiary not owned by the Group. The equity 
of the subsidiary relating to the non-controlling shareholders is 
shown as a separate item within equity for the Group. The Group 
recognises any non-controlling interest on an acquisition-by-
acquisition basis, either at fair value or at the non-controlling 
interest’s proportionate share of the recognised amounts of the 
acquiree’s identiﬁ able net assets.

Inter-company transactions, balances, income and expenses 
on transactions between group companies are eliminated. 
Proﬁ ts and losses resulting from intercompany transactions are 
also eliminated. Accounting policies of subsidiaries have been 
changed where necessary to ensure consistency with the policies 
adopted by the group.

Joint arrangements
Oil and gas operations are conducted by the Group as co-licences 
in unincorporated joint operations with other companies, These 
joint operations are a type of joint arrangement whereby the 
parties have joint control. The Group’s ﬁ nancial statements 
account for the production, capital costs, operating costs and 

58

Lundin Petroleum Annual Report 2018

current assets and liabilities relating to its working interests in 
joint arrangements.

Information about incorporated joint arrangements is available 
on www.lundin-petroleum.com/operations/

Associated companies 
An investment in an associated company is an investment in 
an undertaking where the Group exercises signiﬁ cant inﬂ uence 
but not control, generally accompanying a shareholding of at 
least 20 percent but not more than 50 percent of the voting 
rights. Such investments are accounted for in the consolidated 
ﬁ nancial statements in accordance with the equity method 
and are initially recognised at cost. The difference between 
the acquisition cost of shares in an associated company and 
the net fair value of the assets, liabilities and contingent 
liabilities of the associated company recognised at the date of 
acquisition is recognised as goodwill. The goodwill is included 
within the carrying amount of the investment and is assessed 
for impairment as part of the investment. The Group’s share 
in the post-acquisition results of the associated company is 
recognised in the income statement and the Group’s share in 
post-acquisition movements in other comprehensive income 
of the associated company are recognised directly in other 
comprehensive income of the Group. When the Group’s 
accumulated share of losses in an associated company equals or 
exceeds its interest in the associated company, the Group does 
not recognise further losses, unless it has incurred obligations or 
made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its 
associates are eliminated to the extent of the Group’s percentage 
in the associates. Unrealised losses are also eliminated unless 
the transaction provides evidence of an impairment of the asset 
transferred. 

Foreign currencies
Items included in the ﬁ nancial statements of each of the 
Group’s entities are measured using the currency of the primary 
economic environment in which the entity operates (functional 
currency). The consolidated ﬁ nancial statements are presented 
in US Dollars, which is the currency the Group has elected to 
use as the presentation currency.

Transactions and balances
Monetary assets and liabilities denominated in foreign 
currencies are translated at the rates of exchange prevailing 
at the balance sheet date and foreign exchange currency 
differences are recognised in the income statement. Transactions 
in foreign currencies are translated at exchange rates prevailing 
at the transaction date. Exchange differences are included in 
ﬁ nance income/costs in the income statement except deferred 
exchange differences on qualifying cash ﬂ ow hedges which are 
recorded in other comprehensive income. 

Presentation currency
The balance sheets and income statements of foreign Group 
companies are translated for consolidation purposes using the 
current rate method. All assets and liabilities are translated at 
the balance sheet date rates of exchange, whereas the income 
statements are translated at average rates of exchange for the 
year, except for transactions where it is more relevant to use the 

rate of the day of the transaction. The translation differences 
which arise are recorded directly in the foreign currency 
translation reserve within other comprehensive income. Upon 
disposal of a foreign operation, the translation differences 
relating to that operation will be transferred from equity to the 
income statement and included in the result on sale. Translation 
differences arising from net investments in subsidiaries, used for 
ﬁ nancing exploration activities, are recorded directly in other 
comprehensive income.

For the preparation of the annual ﬁ nancial statements, the 
following currency exchange rates have been used.

31 December 2018

31 December 2017

Average Period end

Average Period end

1 USD equals NOK

8.1329

8.6885

8.2712

1 USD equals EUR

0,8464

0,8734

0.8855

1 USD equals SEK

8.6921

8.9562

8.5481

8.2050

0.8338

8.2080

Classification of assets and liabilities
Non-current assets, long-term liabilities and provisions consist 
of amounts that are expected to be recovered or paid more than 
twelve months after the balance sheet date. Current assets and 
current liabilities consist solely of amounts that are expected 
to be recovered or paid within twelve months after the balance 
sheet date.

Oil and gas properties
Oil and gas properties are recorded at historical cost less 
depletion. All costs for acquiring concessions, licences or 
interests in production sharing contracts and for the survey, 
drilling and development of such interests are capitalised on a 
ﬁ eld area cost centre basis.

Costs directly associated with an exploration well are capitalised. 
If it is determined that a commercial discovery has not been 
achieved, these exploration costs are charged to the income 
statement. During the exploration and development phases, 
no depletion is charged. The ﬁ eld will be transferred from the 
non-production cost pool to the production cost pool within oil 
and gas properties once production commences, and accounted 
for as a producing asset. Routine maintenance and repair costs 
for producing assets are expensed as production costs when they 
occur.

Net capitalised costs to reporting date, together with anticipated 
future capital costs for the development of the proved and 
probable reserves determined at the balance sheet date price 
levels, are depleted based on the year’s production in relation 
to estimated total proved and probable reserves of oil and gas, 
in accordance with the unit of production method. Depletion of 
a ﬁ eld area is charged to the income statement through cost of 
sales once production commences.

Proved reserves are those quantities of petroleum which, by 
analysis of geological and engineering data, can be estimated 
with reasonable certainty to be commercially recoverable, from 
a given date forward, from known reservoirs and under current 
economic conditions, operating methods and governmental 
regulations. Proved reserves can be categorised as developed 

Lundin Petroleum Annual Report 2018

59

FINANCIAL REPORT | Accounting Policies

or undeveloped. If deterministic methods are used, the term 
reasonable certainty is intended to express a high degree of 
conﬁ dence that the quantities will be recovered. If probabilistic 
methods are used, there should be at least a 90 percent 
probability that the quantities actually recovered will equal or 
exceed the estimates. 

Probable reserves are those unproved reserves which analysis 
of geological and engineering data indicate are less likely to be 
recovered than Proved reserves but more certain to be recovered 
than Possible reserves. It is equally likely that actual remaining 
quantities recovered will be greater than or less than the sum of 
the estimated Proved plus Probable reserves (2P). In this context, 
when probabilistic methods are used, there should be at least a 
50 percent probability that the actual quantities recovered will 
equal or exceed the 2P estimate. 

Proceeds from the sale or farm-out of oil and gas concessions in 
the exploration stage are offset against the related capitalised 
costs of each cost centre, with any excess of net proceeds over 
the costs capitalised included in the income statement. In the 
event of a sale in the exploration stage, any deﬁ cit is included in 
the income statement.

Impairment tests are performed annually or when there are 
facts and circumstances that suggest that the carrying value 
of an asset capitalised costs within each ﬁ eld area less any 
provision for site restoration costs, royalties and deferred 
production or revenue related taxes is higher than the 
anticipated future net cash ﬂ ow from oil and gas reserves 
attributable to the Group’s interest in the related ﬁ eld areas. 
Capitalised costs cannot be carried unless those costs can be 
supported by future cash ﬂ ows from that asset. Provision 
is made for any impairment, where the net carrying value, 
according to the above, exceeds the recoverable amount, which 
is the higher of value in use and fair value less costs to sell, 
determined through estimated future discounted net cash ﬂ ows 
using prices and cost levels used by Group management in their 
internal forecasting. If there is no decision to continue with a 
ﬁ eld speciﬁ c exploration programme, the costs will be expensed 
at the time the decision is made.

Other tangible assets
Other tangible assets are stated at cost less accumulated 
depreciation. Depreciation is based on cost and is calculated on 
a straight line basis over the estimated economic life of 20 years 
for real estate and three to ﬁ ve years for ofﬁ ce equipment and 
other assets. 

Additional costs to existing assets are included in the assets’ net 
book value or recognised as a separate asset, as appropriate, only 
when it is probable that future economic beneﬁ ts associated 
with the item will ﬂ ow to the Group and the cost of the item can 
be measured reliably. The net book value of any replaced parts 
is written off. Other additional expenses are deemed to be repair 
and maintenance costs and are charged to the income statement 
when they are incurred.

The net book value is written down immediately to its 
recoverable amount when the net book value is higher. The 
recoverable amount is the higher of an asset’s fair value less cost 
to sell and value in use.

60

Lundin Petroleum Annual Report 2018

Goodwill
Goodwill is initially measured as the excess of the aggregate 
of the consideration transferred and the fair value of non-
controlling interest over the net identiﬁ able assets acquired and 
liabilities assumed. If this consideration is lower than the fair 
value of the net assets acquired, the difference is recognised in 
proﬁ t or loss.

Goodwill is also recognised as the offsetting accounting entry to 
the deferred tax liability booked on the difference between the 
assigned fair value of an asset and the related tax base acquired 
in a business combination.

Impairment of assets including goodwill
At each balance sheet date the Group assesses whether there 
is an indication that an asset may be impaired. Where an 
indicator of impairment exists or when impairment testing for 
an asset is required, the Group makes a formal assessment of 
the recoverable amount. Where the carrying value of an asset 
exceeds its recoverable amount the asset is considered impaired 
and is written down to its recoverable amount.

The recoverable amount is the higher of fair value less costs to 
sell and value in use. Value in use is calculated by discounting 
estimated future cash ﬂ ows to their present value using a 
discount rate that reﬂ ects current market assessments of the 
time value of money and the risks speciﬁ c to the asset. When 
the recoverable amount is less than the carrying value an 
impairment loss is recognised with the expensed charge to the 
income statement. If indications exist that previously recognised 
impairment losses no longer exist or are decreased, the 
recoverable amount is estimated. When a previously recognised 
impairment loss is reversed the carrying amount of the asset 
is increased to the estimated recoverable amount but the 
increased carrying amount may not exceed the carrying amount 
after depreciation that would have been determined had no 
impairment loss been recognised for the asset in prior years.

Financial assets and liabilities
Assets and liabilities are recognised initially at fair value plus 
transaction costs and subsequently measured at amortised cost 
unless stated otherwise. Financial assets are derecognised when 
the rights to receive cash ﬂ ows from the investments have 
expired, or have been transferred and the Group has transferred 
substantially all risks and rewards of ownership.

Lundin Petroleum recognises the following ﬁ nancial assets and 
liabilities:

Financial Assets at Amortised Cost
Financial assets that are held for collection of contractual 
cash ﬂ ows where those cash ﬂ ows represent solely payments 
of principal and interest are measured at amortised cost. The 
Group’s loans and receivables consist of ﬁ xed or determined 
cash ﬂ ows related solely to principal and interest amounts 
or contractual sales of oil and gas. The Group’s intent is to 
hold these receivables until cash ﬂ ows are collected. Loans 
and receivables are recognised initially at fair value, net of 
any transaction costs incurred and subsequently measured at 
amortised cost. 

Financial assets at Fair Value through Proﬁ t or Loss (FVTPL)
Financial assets measured at FVTPL are assets which do not 
qualify as ﬁ nancial assets at amortised cost or at fair value 
through other comprehensive income.

Financial Liabilities at Amortised Cost
Financial liabilities are measured at amortised cost, unless they 
are required to be measured at FVTPL, or the Group has opted 
to measure them at FVTPL. Borrowings and accounts payable 
are recognised initially at fair value, net of any transaction costs 
incurred, and subsequently at amortised cost using the effective 
interest method.

Financial Liabilities at FVTPL
Financial liabilities measured at FVTPL are liabilities which 
include embedded derivatives and cannot be classiﬁ ed as 
amortised cost.

Impairment of Financial Assets
The measurement of impairment of ﬁ nancial assets is based 
on the expected credit losses model. For the trade and other 
receivables, the Group applies the simpliﬁ ed approach which 
requires the use of the lifetime expected loss provision for 
all trade receivables. In estimating the lifetime expected loss 
provision, the Group considered historical industry default 
rates as well as credit ratings of major customers. Additional 
disclosure related to the Group’s ﬁ nancial assets is included in 
Note 21.

Derivatives used for hedging
Derivative ﬁ nancial instruments are used to manage economic 
exposure to market risks relating to foreign currency exchange 
rates and interest rates. Policies and procedures are in place 
with respect to required documentation and approvals for the 
use of derivative ﬁ nancial instruments. Derivative ﬁ nancial 
instruments are initially recognised at fair value on the date 
a derivative contract is entered into and are subsequently 
remeasured at their fair value. Where speciﬁ c ﬁ nancial 
instruments are executed, The Group assesses, both at the time 
of purchase and on an ongoing basis, whether the ﬁ nancial 
instrument used in the particular transaction is effective in 
offsetting changes in fair values or cash ﬂ ows of the transaction.

The Group has only cash ﬂ ow hedges which qualify for hedge 
accounting. The effective portion of changes in the fair value 
of derivatives that qualify as cash ﬂ ow hedges are recognised 
in other comprehensive income. The gain or loss relating 
to the ineffective portion, if any, is recognised immediately 
in the income statement. Amounts accumulated in other 
comprehensive income are transferred to the income statement 
in the period when the hedged item will affect the income 
statement. When a hedging instrument no longer meets the 
requirements for hedge accounting, expires or is sold, any 
accumulated gain or loss recognised in other comprehensive 
income remains in shareholders’ equity until the forecast 
transaction no longer is expected to occur, at which point it is 
transferred to the income statement

Inventories
Inventories of consumable well supplies are stated at the lower 
of cost and net realisable value, cost being determined on a 
weighted average cost basis. Net realisable value is the estimated 
selling price in the ordinary course of business, less applicable 
variable selling expenses. Inventories of hydrocarbons are 
stated at the lower of cost and net realisable value. Under or 
overlifted positions of hydrocarbons are valued at market prices 
prevailing at the balance sheet date. An underlift of production 
from a ﬁ eld is included in the current receivables and valued 
at the reporting date spot price or prevailing contract price 
and an overlift of production from a ﬁ eld is included in the 
current liabilities and valued at the reporting date spot price or 
prevailing contract price. 

Cash and cash equivalents
Cash and cash equivalents include cash at bank, cash in hand 
and interest bearing securities with original maturities of three 
months or less.

Equity
Share capital consists of the registered share capital for the 
Parent Company. Share issue costs associated with the issuance 
of new equity are treated as a direct reduction of proceeds. 
Excess contribution in relation to the issuance of shares is 
accounted for in the item additional paid-in-capital.

Where any Group company purchases the Company’s equity 
share capital (treasury shares), the consideration paid, including 
any directly attributable incremental costs (net of income taxes) 
is deducted from equity attributable to the Company’s equity 
holders until these shares are cancelled or sold. Where these 
shares are subsequently sold, any consideration received, net 
of any directly attributable incremental transaction costs and 
related income tax effects, is included in equity attributable to 
the Company’s equity holders.

The change in fair value of hedging instruments which qualify 
for hedge accounting is accounted for in the hedge reserve. 
Upon settlement of the hedge instrument, the hedged item will 
be transferred to the income statement. The currency translation 
reserve contains unrealised translation differences due to the 
conversion of the functional currencies into the presentation 
currency.

Retained earnings contain the accumulated results attributable 
to the shareholders of the Parent Company.

Provisions
A provision is reported when the Company has a legal or 
constructive obligation as a consequence of an event and 
when it is more likely than not that an outﬂ ow of resources is 
required to settle the obligation and a reliable estimate can be 
made of the amount.

Provisions are measured at the present value of the expenditures 
expected to be required to settle the obligation using a discount 
rate that reﬂ ects current market assessments of the time value 
of money and the risks speciﬁ c to the obligation. The increase 
in the provision due to passage of time is recognised as ﬁ nance 
costs.

Lundin Petroleum Annual Report 2018

61

FINANCIAL REPORT | Accounting Policies

On ﬁ elds where the Group is required to contribute to site 
restoration costs, a provision is recorded to recognise the future 
commitment. An asset is created, as part of the oil and gas 
property, to represent the discounted value of the anticipated 
site restoration liability and depleted over the life of the ﬁ eld on 
a unit of production basis. The corresponding accounting entry 
to the creation of the asset recognises the discounted value of 
the future liability. The discount applied to the anticipated 
site restoration liability is subsequently released over the life 
of the ﬁ eld and is charged to ﬁ nancial expenses. Changes in 
site restoration costs and reserves are treated prospectively and 
consistent with the treatment applied upon initial recognition.

Borrowings
Borrowings are recognised initially at fair value, net of 
transaction costs incurred. Borrowings are subsequently stated 
at amortised costs using the effective interest method, with 
interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the 
amortised cost of a ﬁ nancial liability and of allocating interest 
expense over the relevant period. The effective interest rate is 
the rate that exactly discounts estimated future cash payments 
through the expected life of the ﬁ nancial liability, or a shorter 
period where appropriate.

Revenue
Revenues from the sale of oil and gas are recognised in the 
income statement net of royalties taken in kind. Sales of oil 
and gas are recognised upon delivery of products and customer 
acceptance. Incidental revenues from the production of oil and 
gas are offset against capitalised costs of the related cost centre 
until quantities of proven and probable reserves are determined 
and commercial production has commenced.

Lifting or offtake arrangements for oil and gas produced in 
certain of the Group’s jointly owned operations are such that 
each participant may not receive and sell its precise share of 
the overall production in each period. The resulting imbalance 
between cumulative entitlement and cumulative production 
after permanent differences less stock is underlift or overlift. 
Underlift and overlift are valued at market value and included 
within receivables and payables respectively. Movements during 
an accounting period are reﬂ ected through the change in under/
overlift position as part of other income.

Service income, generated by providing technical and 
management services to joint operations, is recognised upon 
performance of services and is recognised as other income. 

Borrowing costs
Borrowing costs attributable to the acquisition, construction or 
production of qualifying assets are added to the cost of those 
assets. Qualifying assets are assets that take a substantial period 
of time to complete for their intended use or sale. Investment 
income earned on the temporary investment of speciﬁ c 
borrowings pending to be used for the qualifying asset, is 
deducted from the borrowing costs eligible for capitalisation.

This applies on the interest on borrowings to ﬁ nance ﬁ elds 
under development which is capitalised within oil and gas 

properties until production commences. All other borrowing 
costs are recognised in the income statement in the period 
in which they occur. Interest on borrowings to ﬁ nance the 
acquisition of producing oil and gas properties is charged to the 
income statement as incurred.

Employee benefits
Short-term employee beneﬁ ts
Short-term employee beneﬁ ts such as salaries, social premiums 
and holiday pay, are expensed when incurred.

Pension obligations
Pensions are the most common long-term employee beneﬁ ts. 
The pension schemes are funded through payments to insurance 
companies. The Group’s pension obligations consist mainly of 
deﬁ ned contribution plans. A deﬁ ned contribution plan is a 
pension plan under which the Group pays ﬁ xed contributions. 
The Group has no further payment obligations once the 
contributions have been paid. The contributions are recognised 
as an expense when they are due.

The Group has one obligation under a deﬁ ned beneﬁ t plan. 
The relating liability recognised in the balance sheet is valued 
at the discounted estimated future cash outﬂ ows as calculated 
by an external actuarial expert. Actuarial gains and losses are 
recognised in other comprehensive income. The Group does not 
have any designated plan assets.

Share-based payments
Cash-settled share-based payments are recognised in the 
income statement as expenses during the vesting period and 
as a liability in relation to the long-term incentive plan. The 
liability is measured at fair value and revalued using the Black 
& Scholes pricing model at each balance sheet date and at the 
date of settlement, with any change in fair value recognised in 
the income statement for the period. Equity-settled share-based 
payments are recognised in the income statement as expenses 
during the vesting period and as equity in the Balance Sheet. 
The option is measured at fair value at the date of grant using an 
options pricing model and is charged to the income statement 
over the vesting period without revaluation of the value of the 
option.

Income taxes
The components of tax are current and deferred. Tax is 
recognised in the income statement, except to the extent that it 
relates to items recognised in other comprehensive income or 
directly in equity, in which case it is matched.

Current tax is tax that is to be paid or received for the year 
in question and also includes adjustments of current tax 
attributable to previous periods.

Deferred income tax is a non-cash charge provided, using the 
liability method, on temporary differences arising between 
the tax bases of assets and liabilities and their carrying 
values. Temporary differences can occur, for example, where 
investment expenditure is capitalised for accounting purposes 
but the tax deduction is accelerated, or where site restoration 
costs are provided for in the ﬁ nancial statements but not 
deductible for tax purposes until they are actually incurred. 
However, the deferred income tax is not accounted for if it arises 

62

Lundin Petroleum Annual Report 2018

from initial recognition of an asset or liability in a transaction 
other than a business combination that at the time of the 
transaction affects neither accounting nor taxable proﬁ t nor 
loss. Deferred income tax is provided on temporary differences 
arising on investments in subsidiaries and associates, except 
where the timing of the reversal of the temporary difference is 
controlled by the Group and it is probable that the temporary 
difference will not reverse in the foreseeable future. Deferred 
income tax is determined using tax rates (and laws) that have 
been enacted or substantively enacted by the balance sheet date 
and are expected to apply when the related deferred income tax 
asset is realised or the deferred income tax liability is settled. 
Deferred income tax assets are recognised to the extent that it 
is probable that future taxable proﬁ t will be available against 
which the temporary differences can be utilised.

corporate assumptions. Lundin Petroleum carried out its annual 
impairment tests in conjunction with the annual reserves 
audit process. The calculation of the impairment requires the 
use of estimates. For the purpose of determining a potential 
impairment the assumptions that management uses to estimate 
the future cash ﬂ ows to calculate the recoverable amounts are 
future oil and gas prices and expected production volumes. 
These assumptions and judgements of management that are 
based on them are subject to change as new information 
becomes available. Changes in economic conditions can also 
affect the rate used to discount future cash ﬂ ow estimates and 
the discount rate applied is reviewed throughout the year. 
Goodwill relating to acquisitions of oil and gas properties forms 
part of the impairment testing of oil and gas properties and is 
tested at least once a year.

Deferred tax assets are offset against deferred tax liabilities in 
the balance sheet where they relate to the same jurisdiction. 

Segment reporting
Operating segments are reported in a manner consistent with 
the internal reporting provided to the chief operating decision 
maker being Group management, which, due to the unique 
nature of each country’s operations, commercial terms or ﬁ scal 
environment, is at a country level. Information for segments 
is only disclosed when applicable. Segmental information is 
presented in Note 3, Note 7 and Note 10.

Critical accounting estimates and judgements
The management of Lundin Petroleum has to make estimates 
and judgements when preparing the ﬁ nancial statements of the 
Group. Uncertainties in the estimates and judgements could 
have an impact on the carrying amount of assets and liabilities 
and the Group’s result. The most important estimates and 
judgements in relation thereto are:

Estimates in oil and gas reserves
Estimates of oil and gas reserves are used in the calculations 
for impairment tests and accounting for depletion and site 
restoration. Standard recognised evaluation techniques are used 
to estimate the proved and probable reserves. These techniques 
take into account the future level of development required to 
produce the reserves. An independent reserves auditor reviews 
these estimates, see page 105 Reserve Quantity Information. 
Changes in estimates of oil and gas reserves, resulting in 
different future production proﬁ les, will affect the discounted 
cash ﬂ ows used in impairment testing, the anticipated date of 
site decommissioning and restoration and the depletion charges 
in accordance with the unit of production method. Changes 
in estimates in oil and gas reserves could for example result 
from additional drilling, observation of long-term reservoir 
performance or changes in economic factors such as oil price 
and inﬂ ation rates.

Information about the carrying amounts of the oil and gas 
properties and the amounts charged to income, including 
depletion, exploration costs, and impairment costs is presented 
in Note 10.

Impairment of oil and gas properties
Key assumptions in the impairment models relate to prices 
and costs that are based on forward curves and the long-term 

Information about the carrying amounts of the oil and gas 
properties and impairment of oil and gas properties is presented 
in Note 3 and Note 10.

Provision for site restoration
Amounts used in recording a provision for site restoration are 
estimates based on current legal and constructive requirements 
and current technology and price levels for the removal of 
facilities and plugging and abandoning of wells. Due to changes 
in relation to these items, the future actual cash outﬂ ows in 
relation to the site decommissioning and restoration can be 
different. To reﬂ ect the effects due to changes in legislation, 
requirements and technology and price levels, the carrying 
amounts of site restoration provisions are reviewed on a regular 
basis.

The effects of changes in estimates do not give rise to prior year 
adjustments and are treated prospectively over the estimated 
remaining commercial reserves of each ﬁ eld. While the Group 
uses its best estimates and judgement, actual results could differ 
from these estimates.

Information about the carrying amounts of the Provision for site 
restoration is presented in Note 19.

Income tax 
A tax liability is recognised when a future payment, in 
application of a tax regulation, is considered probable and can 
be reasonably estimated. The exercise of judgment is required to 
assess the impact of new events on the amount of the liability. 

Deferred tax assets are recognised for unused tax losses to the 
extent that it is probable that future taxable proﬁ ts will be 
available against which the losses can be utilised. Estimation 
and judgement is required to determine the value of the 
deferred tax asset, based upon the timing and level of future 
taxable proﬁ ts.

Events after the balance sheet date
All events up to the date when the ﬁ nancial statements were 
authorised for issue and which have a material effect in the 
ﬁ nancial statements have been disclosed. Subsequent events are 
presented in Note 31.

Lundin Petroleum Annual Report 2018

63

FINANCIAL REPORT 

Notes to the Financial Statements 
of the Group

Note 1  Revenue and Other Income
MUSD

2018

2017

Revenue

Crude oil from own production
Crude oil from third party activities
Condensate
Gas
Net sales of oil and gas 

Other income
Change in under/over lift position
Other revenue
Other income

Revenue and other income

1,877.6
536.1
41.8
152.4
2,607.9

-23.3
32.8
9.5

2,617.4

For further information on revenue, see the Directors Report on page 47.

Note 2  Production Costs

MUSD

Cost of operations
Tariff and transportation expenses
Change in inventory position
Other production costs

Production costs

2018

102.5
35.2
0.6
7.1

145.4

For further information on production costs, see the Directors Report on pages 47–48.

Note 3  Segment Information 

1,500.2
303.5
43.0
111.6
1,958.3

13.8
24.9
38.7

1,997.0

2017

117.3
37.9
-0.4
9.4

164.2

The Group operates within several geographical areas with a focus on Norway following the IPC spin-off during 2017. Operating segments are 
reported at country level which is consistent with the internal reporting provided to Group management.

The following tables present segment information regarding; revenue and other income, production costs, depletion and decommissioning 
costs, exploration costs, impairment costs of oil and gas properties, loss from sale of assets, other cost of sales, gross proﬁ t/loss and certain asset 
and liability information regarding the Group’s business segments. In addition segment information is reported in Note 7 and Note 10.

Revenues are derived from various external customers. There were no intercompany sales or purchases in the year or in the previous year 
other than to Lundin Petroleum Marketing SA which performs marketing activities for Norway. These intercompany transactions are reported 
into segment Norway and therefore there are no reconciling items towards the amounts stated in the income statement. Within each segment, 
revenues from transactions with a single external customer amount to ten percent or more of revenue for that segment. Approximately 34 
percent of the total revenue is contracted with one customer. The Parent Company is included in Other in the table below.

MUSD

Norway
Crude oil from own production
Condensate
Gas
Net sales of oil and gas

Change in under/over lift position

Other revenue
Revenue and other income
Production costs
Depletion and decommissioning costs
Exploration costs
Impairment costs of oil and gas properties
Loss from sale of assets
Gross proﬁ t

64

Lundin Petroleum Annual Report 2018

2018

2017

1,877.6
41.8
152.4
2,071.8

-23.3

32.8
2,081.3
-145.4
-458.0
-53.2
–
–
1,424.7

1,500.2
43.0
111.6
1,654.8

13.8

24.4
1,693.0
-164.2
-567.3
-72.0
-30.6
-14.4
844.5

Note 3 continued

MUSD

Other

Crude oil from third party activities
Net sales of oil and gas
Other revenue
Revenue and other income
Exploration costs
Other cost of sales
Gross proﬁ t/loss

2018

536.1
536.1
–
536.1
–
-533.8
2.3

2017

303.5
303.5
0.5
304.0 
-1.1
-303.3
-0.4

MUSD

2018

2017

Total from continuing operations
Crude oil from own production
Crude oil from third party activities
Condensate
Gas
Net sales of oil and gas
Change in under/over lift position
Other revenue
Revenue and other income
Production costs
Depletion and decommissioning costs
Exploration costs
Impairment costs of oil and gas properties
Loss from sale of assets
Other cost of sales
Gross proﬁ t

MUSD

Norway
Sweden
Other
Corporate
Intercompany balance elimination
Assets/liabilities per country 

Shareholders’ equity
Total equity for the Group

1,877.6
536.1
41.8
152.4
2,607.9
-23.3
32.8
2,617.4
-145.4
-458.0
-53.2
–
–
-533.8
1,427.0

2018

5,762.7
3.9
104.8
2,596.8
-2,625.7
5,842.5

N/A
N/A

1,500.2
303.5
43.0
111.6
1,958.3
13.8
24.9
1,997.0
-164.2
-567.3
-73.1
-30.6
-14.4
-303.3
844.1

Assets

Equity and Liabilities

2017

2018

5,427.7
1.5
170.3
3,237.4
-3,308.1
5,528.8

N/A
N/A

5,206.2
3.7
104.2
3,538.1
-2,625.7
6,226.5

-384.0
-384.0

2017

4,998.4
23.7
185.7
3,979.9
-3,308.1
5,879.6

-350.8
-350.8

5,528.8

Total consolidated

5,842.5

5,528.8

5,842.5

For detailed information of the oil and gas properties per country, see also Note 10.

For further information on revenue and other income, production costs, depletion and decommissioning costs, exploration costs, impairment 
costs of oil and gas properties, loss from sale of assets and other cost of sales, see the Directors Report on pages 47–48.

Lundin Petroleum Annual Report 2018

65

 
 
 
 
 
 
 
FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 4  Finance Income

MUSD

Foreign currency exchange gain, net
Loan modiﬁ cation gain
Interest income
Gain on interest rate hedge settlement
Fair value change of other shares
Guarantee fees
Finance income 

2018

–
183.7
1.7
3.5
3.3
–
192.2

For further information on ﬁ nance income, see the Directors Report on page 48.

Note 5  Finance Costs

MUSD

Foreign currency exchange loss, net
Interest expense
Loss on interest rate hedge settlement
Unwinding of site restoration discount
Amortisation of deferred ﬁ nancing fees
Loan facility commitment fees
Loan modiﬁ cation fees
Unwinding of loan modiﬁ cation gain
Impairment of other shares
Other 
Finance costs

2018

164.9
88.7
–
16.4
17.8
13.0
17.3
26.1
–
1.2
345.4

2017

255.3
–
1.0
–
–
0.4
256.7

2017

–
115.0
17.4
13.7
17.5
11.1
–
–
11.2
0.7
186.6

Exchange rate variations result primarily from ﬂ uctuations in the value of the USD currency against a pool of currencies which mainly 
includes, amongst others, EUR and NOK. Lundin Petroleum has USD denominated debt recorded in subsidiaries using a functional currency 
other than USD. For further information on the foreign exchange movement, see the Directors Report on page 48.

For further information on ﬁ nance costs, see the Directors Report on pages 48–49. 

Note 6  Share in Result of Associated Company

MUSD

Group´s share of net result
Total result from share in result of associated company

2018

1.3
1.3

2017

0.4
0.4

The result from share in associated company consisted of the 70 percent non-controlling equity share of the result of Mintley Caspian Ltd 
owned by Lundin Petroleum. The results of Mintley Caspian Ltd have been fully consolidated into the Lundin Petroleum consolidated accounts 
until 30 September 2017.

Note 7  Income Taxes

Tax charge 
MUSD

Current tax
Norway
Russia
Switzerland
Current tax 

Deferred tax
Norway
Deferred tax 

Total tax

2018

89.0
–
1.4
90.4

935.4
935.4

1,025.8

2017

-1.5
0.1
0.9
-0.5

501.7
501.7

501.2

For further information on income taxes, see the Directors Report on page 49.

66

Lundin Petroleum Annual Report 2018

Note 7 continued

The tax on the Group’s proﬁ t before tax differs from the theoretical amount that would arise using the tax rate of Sweden as follows:

MUSD

Proﬁ t before tax
Tax calculated at the corporate tax rate in Sweden 22% (22%)

Effect of foreign tax rates
Tax effect of expenses non-deductible for tax purposes
Tax effect of uplift on expenses
Tax effect of income not subject to tax
Tax effect of utilisation of unrecorded tax losses 
Tax effect of creation of unrecorded tax losses
Adjustments to prior year tax assessments
Tax credit 

2018

1,247.9
-274.5

-815.2
-63.6
103.1
31.2
–
-5.7
-1.1
-1,025.8

2017

882.1
-194.1

-398.7
-76.3
108.4
69.4
1.1
-12.4
1.4
-501.2

The tax rate in Norway is 78 percent and is the primary reason for the effect of foreign tax rates in the table above. The effect of non-deductible 
expenses mainly relates to non-deductible foreign currency exchange losses. The uplift on expenses relates to uplift on development expenses 
for oil and gas assets in Norway. The effect of non-taxable income mainly relates to the reported loan modiﬁ cation gain.

There is no tax charge/credit relating to components of other comprehensive income.

Corporation tax liability - current and deferred
MUSD

Norway
Switzerland
Russia
Total

Current

Deferred

2018

69.5
0.9
–
70.4

2017

2018

–
0.3
0.3
0.6

2,103.0
–
–
2,103.0

2017

1,302.2
–
–
1,302.2

For further information on tax liabilities, see the Directors Report on page 50.

Speciﬁ cation of deferred tax assets and tax liabilities 1
MUSD

Deferred tax assets
Unused uplift/tax loss carry forwards
Other deductible temporary differences

Deferred tax liabilities
Accelerated allowances
Deferred tax on excess values

2018

184.9
14.4
199.3

2,301.6
0.7
2,302.3

2017

526.7
18.4
545.1

1,846.4
0.9
1,847.3

1  The speciﬁ cation of deferred tax assets and tax liabilities does not agree to the face of the balance sheet due to the netting off of balances in the balance 

sheet when they relate to the same jurisdiction.

The deferred tax asset is primarily relating to unused uplift carry forward in Norway for an amount of MUSD 184.9 (MUSD 391.4) and tax loss 
carried forwards in Norway of MUSD – (MUSD 135.3). Deferred tax assets in relation to uplift/tax loss carry forwards are only recognised in so 
far that there is a reasonable certainty as to the timing and the extent of their realisation.

The deferred tax liability arises mainly on accelerated allowances, being the difference between the book and the tax value of oil and gas 
properties in Norway. The deferred tax liability will be released over the life of the assets as the book value is depleted for accounting purposes.

Unrecognised tax losses
The Group has Dutch tax loss carry forwards of approximately MUSD 34 (MUSD 29). The tax losses can be carried forward and utilised for up 
to 9 years. The related deferred tax asset has not been recognised due to the uncertainty of the timing and extent of the utilisation of the tax 
losses. 

The Group also has Swedish tax loss carry forwards of approximately MUSD 83 (MUSD 73). The related deferred tax asset has not been 
recognised due to the uncertainty of the timing and extent of the utilisation of the tax losses.

Lundin Petroleum Annual Report 2018

67

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 8  Loss from Sale of Assets 

On 30 November 2017, Lundin Petroleum completed the divestment of a 39 percent working interest in the Brynhild ﬁ eld to CapeOmega 
with an effective date of 1 January 2017. The transaction involved a consideration of MUSD 93.7, including historical tax and uplift balances. 
The transaction resulted in a net after tax accounting loss of MUSD 14.4 arising from the difference between the consideration received and 
the book value of the associated assets being divested. The after tax accounting loss is reported as loss from sale of assets as detailed in the 
following table. There are no losses from sale of assets in 2018.

MUSD

Assets

Oil and gas properties

Deferred tax
Total assets divested

Liabilities
Site restoration provision
Working capital
Total liabilities divested

Net assets divested

Consideration received
Net after tax accounting loss

2017

–
143.9
143.9

32.0
3.8
35.8

108.1

93.7
14.4

Note 9  Discontinued Operations

On 24 April 2017, Lundin Petroleum completed the spin-off of its assets in Malaysia, France and The Netherlands (the IPC assets) into a newly 
formed company called International Petroleum Corporation (IPC) by distributing the IPC shares, on a pro-rata basis to Lundin Petroleum 
shareholders. The results of the IPC business are included in the Lundin Petroleum ﬁ nancial statements until the spin-off date and are shown 
as discontinued operations. There are no results from discontinued operations in 2018.

MUSD

Revenue and other income
Cost of sales
Production costs
Depletion and decommissioning costs
Depletion of other assets
Exploration costs
Impairment costs of oil and gas properties
Gross proﬁ t/loss

Sale of assets
General, administration and depreciation expenses
Operating proﬁ t/loss

Net ﬁ nancial items
Finance income
Finance costs

Proﬁ t/loss before tax

Income tax

Gain on distribution of assets
Net result from discontinued operations

68

Lundin Petroleum Annual Report 2018

2017

69.1

-17.4
-19.1
-10.4
0.1
–
22.3

–
-2.3
20.0

–
-24.1
-24.1

-4.1

11.2
-5.3

51.8
46.5

Note 10  Oil and Gas Properties 

MUSD

Production cost pools

Non-production cost pools

2018 production cost pools
MUSD

Cost
1 January
Additions
Change in estimates
Currency translation difference
31 December

Depletion
1 January
Depletion charge for the year
Currency translation difference
31 December

Net book value 

2017 production cost pools
MUSD

Cost
1 January
Additions
Spin off IPC
Change in estimates
Currency translation difference
31 December

Depletion
1 January
Depletion charge for the year
Spin off IPC
Impairment
Currency translation difference
31 December

Net book value 

31 December 
2018

31 December 
2017

1,759.3

3,581.8

5,341.1

2,169.7

2,767.4

4,937.1

Norway

4,892.0
161.5
-15.4
-286.8
4,751.3

-2,722.3
-451.7
182.0
-2,992.0

1,759.3

Norway

France

Netherlands

Malaysia

Total

4,351.6
290.6
–
26.6
223.2
4,892.0

-2,016.2
-568.4
–
-30.6
-107.1
-2,722.3

2,169.7

306.3
0.9
-328.6
–
21.4
–

-142.2
-4.6
162.2
–
-15.4
–

119.2
0.6
-124.1
–
4.3
–

-107.3
-1.9
113.1
–
-3.9
–

423.8
1.3
-425.1
–
–
–

-293.4
-12.6
306.0
–
–
–

5,200.9
293.4
-877.8
26.6
248.9
4.892.0

-2,559.1
-587.5
581.3
-30.6
-126.4
-2,722.3

–

–

–

2,169.7

Depletion from continuing operations amounted to MUSD 451.7 (MUSD 568.4) and is included within the depletion and decommissioning costs 
line in the income statement. Depletion from discontinued operations amounted to MUSD – (MUSD 19.1) and is included within the net result 
from discontinued operations line in the income statement.

Lundin Petroleum Annual Report 2018

69

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 10 continued

2018 non-production cost pools
MUSD

1 January
Additions
Expensed exploration costs
Change in estimates
Currency translation difference
31 December 

2017 non-production cost pools
MUSD

1 January
Additions
Expensed exploration costs
Spin off IPC
Change in estimates
Currency translation difference
31 December 

Norway

2,767.4
1,087.4
-53.2
-6.7
-213.1
3,581.8

Norway

France Netherlands

Russia

Malaysia

Total

1,720.6
1,028.3
-72.0
–
-2.4
92.9
2,767.4

6.9
0.1
–
-7.2
–
0.2
–

7.1
0.1
–
-7.5
–
0.3
–

–
1.1
-1.1
–
–
–
–

–
-0.1
0.1
–
–
–
–

1,734.6
1,029.5
-73.0
-14.7
-2.4
93.4
2,767.4

Expensed exploration costs from continuing operations amounted to MUSD 53.2 (MUSD 73.1) and are included within the exploration costs 
line in the income statement. Expensed exploration costs from discontinued operations amounted to MUSD – (MUSD -0.1) and is included 
within the net result from discontinued operations line in the income statement.

Impairment
Lundin Petroleum carried out its impairment testing at 31 December 2018 on an asset basis in conjunction with the annual reserves audit 
process. In the assessment Lundin Petroleum used a combination of the oil price forward curve at year end and the price deck as used by ERCE 
for the year-end 2018 reserves certiﬁ cation process as a basis for its price forecast, a future cost inﬂ ation factor of 2% (2%) per annum and a 
discount rate of 8% (8%) to calculate the future post-tax cash ﬂ ows. 

Non-cash impairment costs amounted to MUSD – (MUSD 30.6) with the impairment costs in the comparative period relating to the Brynhild 
ﬁ eld in PL148. 

Capitalised borrowing costs
During 2018, MUSD 87.6 (MUSD 63.5) of capitalised interest costs were added to oil and gas properties and relate to Norwegian development 
projects. The interest rate for capitalised borrowing costs is calculated at the external facility borrowing rate of LIBOR plus a margin of 3.15% 
per annum until May 2018 and LIBOR plus a margin of 2.25% from June 2018.

Development expenditure commitments
The Group is contractually committed to development projects with a remaining commitment as at 31 December 2018 of approximately 
USD 1.9 billion, mainly relating to the Johan Sverdrup project and excluding the Luno II project and the Rolvsnes extended well test.

Exploration and appraisal expenditure commitments
The Group participates in joint operations with third parties in oil and gas exploration and appraisal activities. The Group is contractually 
committed under various concession agreements to complete certain exploration and appraisal programmes. The commitments as at 
31 December 2018 are estimated to be MUSD 118.1 (MUSD 52.8) of which third parties who are joint operations partners will contribute 
approximately MUSD 82.2 (MUSD 31.1).

70

Lundin Petroleum Annual Report 2018

Note 11  Other Tangible Assets 

MUSD

Cost
1 January
Additions
Spin off IPC
Change in consolidation
Currency translation difference
31 December

Depreciation
1 January
Depreciation charge for the year
Spin off IPC
Change in consolidation
Currency translation difference
31 December

Net book value

2018

Real 
estate

Other

Total

FPSO

2017

Real 
estate

Other

Total

10.6
–
–
–
–
10.6

-1.2
–
–
–
–
-1.2

9.4

30.4
3.2
–
–
-1.6
32.0

-26.6
-2.6
–
–
1.4
-27.8

41.0
3.2
–
–
-1.6
42.6

-27.8
-2.6
–
–
1.4
-29.0

4.2

13.6

204.8
–
-205.5
–
0.7
–

-54.8
-10.4
65.2
–
–
–

–

11.2
–
–
-0.6
–
10.6

-1.8
–
–
0.6
–
-1.2

9.4

36.5
1.6
-8.6
-0.4
1.3
30.4

-29.8
-2.8
6.8
0.3
-1.1
-26.6

252.5
1.6
-214.1
-1.0
2.0
41.0

-86.4
-13.2
72.0
0.9
-1.1
-27.8

3.8

13.2

The depreciation charge for the year is based on cost and an estimated useful life of three to ﬁ ve years for ofﬁ ce equipment and other 
assets. Real estate is depreciated using an estimated useful life of 20 years and taking into account its residual value. Depreciation from 
continuing operations amounted to MUSD 2.6 (MUSD 2.5) and is included within the general, administration and depreciation line in the 
income statement. Depreciation from discontinued operations amounted to MUSD – (MUSD 0.3) and is included within the net result from 
discontinued operations line in the income statement. 

Note12  Goodwill 

MUSD

1 January

Change

31 December

2018

128.1

–

128.1

2017

128.1

–

128.1

The Group’s goodwill arose from the acquisition of a further 15 percent interest in the Edvard Grieg ﬁ eld in 2016. Goodwill was included in 
the Group’s impairment testing as per 31 December 2018 and will be tested for impairment annually as part of the annual impairment testing 
of oil and gas properties. 

Note 13  Financial Assets 

MUSD

Other shares and participations

Other 

31 December 
2018

31 December 
2017

–

0.4

0.4

6.3

0.4

6.7

Lundin Petroleum Annual Report 2018

71

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 13.1  Other Shares and Participations 

ShaMaran Petroleum Corp.

31 December 2018

Number of shares

–

Share %

–

Book amount
MUSD

31 December 2017
Book amount
MUSD

–
–

6.3
6.3

The shares held in ShaMaran Petroleum Corp. were sold during the year based on the quoted market share price of ShaMaran, amounting to 
MUSD 9.3.

The fair value of ShaMaran was calculated using the quoted share price at the Toronto Stock Exchange at the balance sheet date and is detailed 
below.

ShaMaran Petroleum Corp. 
MUSD

1 January
Additions
Fair value movement 
Disposals
Currency translation difference
31 December 

Note 14  Inventories 

MUSD

Hydrocarbon stocks

Drilling equipment and consumable materials

Note 15  Trade and Other Receivables 

MUSD

Trade receivables
Underlift
Joint operations debtors
Prepaid expenses and accrued income
IPC working capital 
Other 

2018

6.3
–
3.3
-9.3
-0.3
–

2017

8.9
1.4
-6.2
–
2.2
6.3

31 December 
2018

31 December 
2017

3.3

33.2

36.5

4.1

29.6

33.7

31 December 
2018

31 December 
2017

153.7
4.6
17.0
26.9
14.0
3.1
219.3

202.7
29.4
15.6
29.3
23.5
3.9
304.4

The trade receivables relate mainly to hydrocarbon sales to a limited number of independent customers from whom there is no recent history 
of default. The trade receivables balance is current and the provision for bad debt is nil.

The IPC working capital relates to a residual receivable from IPC for working capital balances following the IPC spin-off which is due by mid-
2019.

Note 16  Cash and Cash Equivalents 

Cash and cash equivalents include only cash at hand or on bank. No short-term deposits are held as at 31 December 2018.

72

Lundin Petroleum Annual Report 2018

Note 17  Equity 

Note 17.1  Share Capital and Share Premium

Share capital

Additional paid 
in capital

MUSD

Number of shares

Par value 
MSEK

Par value
 MUSD

31 December 2016

340,386,445

Distributions
Purchase of own shares
Share based payments
Movements

–
–
–
–

31 December 2017

340,386,445

Distributions
Purchase of own shares
Share based payments
Movements

–
–
–
–

31 December 2018

340,386,445

3.5

–
–
–
–

3.5

–
–
–
–

3.5

0.5

–
–
–
–

0.5

–
–
–
–

0.5

MUSD

979.1

-410.0
-28.0
-13.2
-451.2

527.9

-153.1
-14.3
-20.8
-188.2

339.7

Included in the number of shares issued at 31 December 2018 are 1,873,310 shares (1,233,310 shares) which Lundin Petroleum holds in its own 
name. During 2017, Lundin Petroleum purchased 1,233,310 of its own shares at an average price of SEK 186.14 based on the approval granted 
at the AGM 2017. During 2018, Lundin Petroleum purchased an additional 640,000 of its own shares at an average price of SEK 186.77 based 
on the approval granted at the AGM 2018 resulting in 1,873,310 of its own shares held at the end of the year.

The AGM of Lundin Petroleum held on 3 May 2018 in Stockholm approved an inaugural cash dividend distribution for the year 2017 of 
SEK 4.00 per share and the dividend was distributed on 11 May 2018. Based on the number of shares outstanding, excluding own shares held 
by the Company, the dividend distribution amounted to MSEK 1,354.1, equaling MUSD 153.1 based on the exchange rate on the date of AGM 
approval. 

Note 17.2  Other Reserves 

MUSD

1 January 2017

Total comprehensive income

31 December 2017

Total comprehensive income

31 December 2018

Available-for- 
sale reserve 

Hedge reserve

Currency translation 
reserve

-4.9

4.9

–

–

–

-76.7

76.4

-0.3

-74.1

-74.4

-349.2

Total

-430.8

-96.2

-14.9

-445.4

-445.7

1.5

-72.6

-443.9

-518.3

Lundin Petroleum Annual Report 2018

73

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 17.3  Earnings Per Share 

Earnings per share are calculated by dividing the net result attributable to shareholders of the Parent Company by the weighted average 
number of shares for the year.

Net result attributable to shareholders of the Parent Company, USD

From continuing operations

From discontinued operations

Weighted average number of shares for the year
Earnings per share, USD

From continuing operations

From discontinued operations

2018

2017

222,148,241
–
222,148,241

384,692,005
46,460,065
431,152,070

338,592,250

340,237,772

0.66
–
0.66

1.13
0.14
1.27

Weighted average diluted number of shares for the year

339,513,634

341,380,316

Earnings per share, USD

From continuing operations

From discontinued operations
Earnings per share fully diluted, USD

Note 18  Financial Liabilities 

MUSD

Bank loans

Capitalised ﬁ nancing fees

Capitalised loan modiﬁ cation gain

31 December 
2018

31 December 
2017

3,465.0

-54.1

-148.9

3,262.0

3,955.0

-75.0

–

3,880.0

0.65
–
0.65

1.13
0.14
1.27

Capitalised ﬁ nancing fees amounted to MUSD 54.1 (MUSD 75.0) and related to the establishment costs of the reserve-based credit facility. The 
capitalised ﬁ nancing fees are being amortised over the duration of the facility.

Capitalised loan modiﬁ cation gain amounted to MUSD 148.9 (MUSD –) and related to the re-negotiated improved borrowing terms for the 
reserve-based credit facility. The capitalised loan modiﬁ cation gain is being amortised over the duration of the facility.

For further information, see Note 21

74

Lundin Petroleum Annual Report 2018

Note 19  Provisions 

MUSD

1 January 2018
Additions
Changes in estimates
Payments
Unwinding of discount
Currency translation difference
31 December 2018

Non-current
Current
Total

MUSD

1 January 2017
Additions
Changes in estimates
Disposals
Payments
Unwinding of discount
Spin off IPC
Currency translation difference
31 December 2017

Non-current
Current
Total

Site 
Restoration

414.6
101.3
-15.9
-1.3
16.4
-24.6
490.5

483.9
6.6
490.5

LTIP

10.1
7.7
–
–
-8.1
–
–
–
9.7

2.8
6.9
9.7

LTIP

9.7
10.3
–
-10.8
–
-0.9
8.3

2.4
5.9
8.3

Pension 
provision

Other

1.2
0.1
–
-0.1
–
–
1.2

1.2
–
1.2

2.8
0.3
–
-1.5
–
–
1.6

1.6
–
1.6

Farm in 
payment

Pension 
provision

Other

5.0
–
–
–
–
–
-5.2
0.2
–

–
–
–

1.2
0.1
–
–
-0.1
–
–
–
1.2

1.2
–
1.2

3.5
0.9
–
–
-0.3
–
-1.4
0.1
2.8

2.0
0.8
2.8

Site 
Restoration

407.1
78.3
24.2
-32.0
-3.8
13.7
-91.1
18.2
414.6

414.6
–
414.6

Total

428.3
112.0
-15.9
-13.7
16.4
-25.5
501.6

489.1
12.5
501.6

Total

426.9
87.0
24.2
-32.0
-12.3
13.7
-97.7
18.5
428.3

420.6
7.7
428.3

Site Restoration provision
In calculating the present value of the site restoration provision, a pre-tax discount rate of 3.5 percent (3.5 percent) was used which is based 
on long-term risk-free interest rate projections. The additions in 2018 mainly relate to the liability associated with Norwegian development 
projects. Based on the estimates used in calculating the site restoration provision as at 31 December 2018, approximately 85 percent of the 
total amount is expected to be settled after more than 15 years.

LTIP provision
For more information on the Group’s LTIP, see Note 29. 

Pension provision
In May 2002, the Compensation Committee recommended to the Board of Directors, and the Board of Directors approved, a pension to be paid 
to Adolf H. Lundin upon his resignation as Chairman of the Board of Directors and his appointment as Honorary Chairman. It was further 
agreed that upon the death of Adolf H. Lundin, the monthly payments would be paid to his wife, Eva Lundin, for the duration of her life.

Pension payments totalling an annual amount of TCHF 138 (TCHF 138) are payable to Eva Lundin. The Company may, at its option, buy out the 
obligation to make the pension payments through a lump sum payment in the amount of TCHF 1,800 (TCHF 1,800). 

Lundin Petroleum Annual Report 2018

75

 
FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 20  Trade and Other Payables 

MUSD

Trade payables

Overlift

Joint operations creditors and accrued expenses

Other accrued expenses

Other 

31 December 
2018

31 December 
2017

26.6

5.4

147.4

17.6

7.6

204.6

30.1

12.8

188.9

19.5

7.7

259.0

Note 21  Financial Assets and Liabilities 

Financial assets and liabilities by category
The accounting policies for ﬁ nancial assets and liabilities have been applied to the line items below:

31 December 2018
MUSD

Other non-current ﬁ nancial assets
Derivative instruments
Joint operations debtors
Other current receivables1
Cash and cash equivalents

31 December 2018
MUSD

Financial liabilities
Derivative instruments
Joint operations creditors
Other current liabilities

31 December 2017
MUSD

Other shares and participations
Other non-current ﬁ nancial assets
Derivative instruments
Joint operations debtors
Other current receivables1
Cash and cash equivalents

Loan receivables and 
other receivables at 
amortised cost

Financial assets 
at amortised cost

Fair value 
recognised in 
proﬁ t/loss

Derivatives used 
for hedging

–
–
17.0
170.8
66.8
254.6

0.4
–
–
–
–
0.4

–
–
–
4.6
–
4.6

–
36.7
–
–
–
36.7

Other liabilities at 
amortised cost

Financial liabilities 
at amortised cost

Fair value 
recognised in 
proﬁ t/loss

Derivatives used 
for hedging

–
–
147.4
104.6
252.0

3,262.0
–
–
–
3,262.0

–
–
–
12.8
12.8

–
84.9
–
–
84.9

Loan receivables and 
other receivables at 
amortised cost

Financial assets 
at amortised cost

Assets at 
fair value 
in OCI2

Fair value 
recognised in 
proﬁ t/loss

Derivatives 
used for 
hedging

–
–
–
15.6
230.1
71.4
317.1

–
0.4
–
–
–
–
0.4

6.3
–
–
–
–
–
6.3

–
–
–
–
29.4
–
29.4

–
–
34.2
–
–
–
34.2

Total

0.4
36.7
17.0
175.4
66.8
296.3

Total

3,262.0
84.9
147.4
110.0
3,604.3

Total

6.3
0.4
34.2
15.6
259.5
71.4
387.4

76

Lundin Petroleum Annual Report 2018

Note 21 continued

31 December 2017
MUSD

Financial liabilities
Derivative instruments
Joint operations creditors
Other current liabilities

Other liabilities at 
amortised cost

Financial liabilities 
at amortised cost

Fair value 
recognised in 
proﬁ t/loss

Derivatives used 
for hedging

–
–
188.9
38.4
227.3

3,880.0
–
–
–
3,880.0

–
–
–
12.8
12.8

–
9.5
–
–
9.5

Total

3,880.0
9.5
188.9
51.2
4,129.6

1 Prepayments are not included in other current assets, as prepayments are not deemed to be ﬁ nancial instruments.
2 Other comprehensive income.

The fair value of loan receivables and other receivables is a fair approximation of the book value.

For ﬁ nancial assets and liabilities measured at fair value in the balance sheet, the following fair value measurement hierarchy is used:
– Level 1: based on quoted prices in active markets;
– Level 2: based on inputs other than quoted prices as within level 1, that are either directly or indirectly observable;
– Level 3: based on inputs which are not based on observable market data.

Based on this hierarchy, ﬁ nancial assets and liabilities measured at fair value can be detailed as follows:

31 December 2018
MUSD

Assets
Derivative instruments – non-current
Derivative instruments – current
Underlift

Liabilities
Derivative instruments – non-current
Derivative instruments – current
Overlift

31 December 2017
MUSD

Assets
Other shares and participations
Derivative instruments – non-current
Derivative instruments – current
Underlift

Liabilities
Derivative instruments - non-current
Derivative instruments - current
Overlift

Level 1

Level 2

Level 3

–
–
4.6
4.6

–
–
5.4
5.4

2.7
34.0
–
36.7

64.9
20.0
–
84.9

–
–
–
–

–
–
–
–

Level 1

Level 2

Level 3

6.3
–
–
29.4
35.7

–
–
12.8
12.8

–
26.5
7.7
–
34.2

3.1
6.4
–
9.5

–
–
–
–
–

–
–
–
–

Lundin Petroleum Annual Report 2018

77

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 21 continued

The outstanding derivative instruments can be speciﬁ ed as follows:

Fair value of outstanding derivative instruments in 
the balance sheet 
MUSD

31 December 2018

31 December 2017

Assets

Liabilities

Assets

Liabilities

Interest rate swap
Currency hedge
Total

Non-current
Current
Total

36.7
–
36.7

2.7
34.0
36.7

8.1
76.8
84.9

64.9
20.0
84.9

28.3
5.9
34.2

26.5
7.7
34.2

6.7
2.8
9.5

3.1
6.4
9.5

The fair value of the interest rate swap is calculated using the forward interest rate curve applied to the outstanding portion of the swap 
transaction. The effective portion of the interest rate swap as at 31 December 2018 amounted to a net receivable of MUSD 28.6 (MUSD 21.6).

The fair value of the currency hedge is calculated using the forward exchange rate curve applied to the outstanding portion of the outstanding 
currency hedging contracts. The effective portion of the currency hedge as at 31 December 2018 amounted to a net payable of MUSD 76.8 
(receivable of MUSD 3.1).

Note 22  Changes in Liabilities with Cash Flow Movements from Financing Activities 

The changes in liabilities whose cash ﬂ ow movements are disclosed as part of ﬁ nancing activities in the cash ﬂ ow statement are as follows.

At 1 January 
2018

Cash 
ﬂ ows

Loan 
modiﬁ cation 
gain

Amortisation 
of deferred 
ﬁ nancing fees

Unwinding of 
loan modiﬁ cation 
gain

Foreign 
exchange 
movement

At 31 
December 
2018

Non-cash changes

Financial liabilities

3,880.0

-490.0

-183.7

17.8

26.1

11.8

3,262.0

Financial liabilities
Other non-current liabilities

At 1 January 
2017

4,048.3
33.8
4,082.1

Cash 
ﬂ ows

-190.0
1.3
-188.7

Amortisation  
of deferred 
ﬁ nancing fees

Spin off 
IPC

Change in 
consolidation

Foreign 
exchange 
movement

At 31 
December 
2017

17.5
–
17.5

8.6
–
8.6

–
-35.1
-35.1

-4.4
–
–

3,880.0
–
3,880.0

Non-cash changes

Note 23  Financial Risks, Sensitivity Analysis and Derivative Instruments 

As an international oil and gas exploration and production company, Lundin Petroleum is exposed to ﬁ nancial risks such as currency risk, 
interest rate risk, credit risks, liquidity risks as well as the risk related to the ﬂ uctuation in the oil price. The Group seeks to control these risks 
through sound management practice and the use of internationally accepted ﬁ nancial instruments, such as oil price, interest rate and foreign 
exchange hedges. Lundin Petroleum uses ﬁ nancial instruments solely for the purpose of minimising risks in the Group’s business.

For further information on risks in the ﬁ nancial reporting, see the section Internal Control over ﬁ nancial reporting in the Corporate 
Governance report on page 38 and Risk Management on pages 18–21.

Capital management 
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to meet its committed 
work programme requirements in order to create shareholder value. The Group may put in place new credit facilities, repay debt, or other 
such restructuring activities as appropriate. Group management continuously monitors and manages the Group’s net debt position in order 
to assess the requirement for changes to the capital structure to meet objectives and to maintain ﬂ exibility. Lundin Petroleum is not subject to 
any externally imposed capital requirements.

78

Lundin Petroleum Annual Report 2018

Note 23 continued

Apart from the updated dividend policy, no signiﬁ cant changes were made to the objectives, policies or processes during 2018.

Lundin Petroleum monitors capital on the basis of net debt and ﬁ nancial agreements. Net debt is calculated as bank loans as shown in the 
balance sheet less cash and cash equivalents.

MUSD

31 December 2018

31 December 2017

Bank loans
Cash and cash equivalents
Net debt

3,465.0
-66.8
3,398.2

3,955.0
-71.4
3,883.6

The decrease in net debt compared to 2017 is mainly due to the positive free cash ﬂ ow generated during 2018.

Interest rate risk
Interest rate risk is the risk to the earnings due to uncertain future interest rates.

Lundin Petroleum is exposed to interest rate risk through the reserve-based credit facility, see also Liquidity risk below. The interest rate for 
capitalised borrowing costs is calculated at the reserve-based credit facility borrowing rate of LIBOR plus a margin of 2.25% per annum (margin 
of 3.15% per annum decreased to 2.25% per annum from June 2018). Lundin Petroleum will assess the beneﬁ ts of interest rate hedging on 
borrowings on a continuous basis. If the hedging contract provides a reduction in the interest rate risk at a price that is deemed acceptable to 
the Group, then Lundin Petroleum may choose to enter into an interest rate hedge.

The total interest expense for 2018 amounted to MUSD 176.3 which included MUSD 87.6 of capitalised interest related to borrowings for the 
Group’s development activities. A 100 basis point shift in the interest rate would have resulted in a change in the total interest expense for the 
year of MUSD 7.8, taking into account the Group’s interest rate hedges for 2018.

The Group has entered into interest rate hedging as follows:

Borrowings 
MUSD

Fixing of ﬂ oating LIBOR 
Rate per annum

3,000
2,000

2,000
2,000

1.42%
2.15%

2.67%
2.74%

Settlement period

Jan 2019 – Dec 2019
Jan 2020 – Dec 2020

Jan 2021 – Dec 2021
Jan 2022 – Dec 2022

Currency risk
Lundin Petroleum is a Swedish company which is operating globally and therefore attracts substantial foreign exchange exposure, both on 
transactions as well as on the translation from functional currency for entities to the Group’s presentational currency of the US Dollar. The 
main functional currencies of Lundin Petroleum’s subsidiaries are Norwegian Krone (NOK) and Euro (EUR), as well as US Dollar, making 
Lundin Petroleum sensitive to ﬂ uctuations of these currencies against the US Dollar.

Transaction exposure
Lundin Petroleum’s policy on currency rate hedging is, in case of currency exposure, to consider setting the rate of exchange for known 
costs in non-US Dollar currencies to US Dollars in advance so that future US Dollar cost levels can be forecasted with a reasonable degree 
of certainty. The Group will take into account the current rates of exchange and market expectations in comparison to historic trends and 
volatility in making the decision to hedge.

Lundin Petroleum Annual Report 2018

79

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 23 continued

The Group has entered into currency hedging contracts ﬁ xing the rate of exchange from US Dollar into NOK to meet part of its future NOK 
capital requirements relating to the Johan Sverdrup ﬁ eld development and to meet part of its future NOK Corporate Tax requirements as 
summarised in the table below. 

Buy

MNOK 3,822.4
MNOK 2,405.0

MNOK 2,130.0
MNOK 1,200.0
MNOK    410.0

Sell

MUSD 464.0
MUSD 306.0

MUSD 272.7
MUSD 158.2
MUSD   51.0

Average contractual 
exchange rate

Settlement
period

NOK 8.24:USD 1
NOK 7.86:USD 1

NOK 7.81:USD 1
NOK 7.59:USD 1
NOK 8.04:USD 1

Jan 2019 – Dec 2019
Jan 2020 – Dec 2020

Jan 2021 – Dec 2021
Jan 2022 – Dec 2022
Jan 2023 – Dec 2023

Under IAS 39, subject to hedge effectiveness testing, all of the hedges are treated as effective and changes to the fair value are reﬂ ected in 
other comprehensive income. At 31 December 2018, a net current receivable of MUSD 14.0 (MUSD 1.3) and a net non-current receivable of 
MUSD -62.2 (MUSD 23.4) have been recognised representing the fair value of the outstanding currency and interest rate hedges. 

Foreign exchange exposure
The following table summarises the effect that a change in these currencies against the US Dollar would have on operating proﬁ t through the 
conversion of the income statements of the Group’s subsidiaries from functional currency to the presentation currency US Dollar for the year 
ended 31 December 2018.

Operating result in the ﬁ nancial statements, MUSD

1,402.4

1,402.4

Shift of currency exchange rates 
EUR/USD
SEK/USD
NOK/USD
Total effect on operating result, MUSD

Average rate 2018
0.8464
8.6921
8.1329

10% USD weakening 
0.7695
7.9019
7.3935
-49.0

10% USD strengthening
0.9310
9.5613
8.9462
44.5

The foreign currency risk to the Group’s income and equity from conversion exposure is not hedged. 

As described in the Directors’ report on page 48, the foreign exchange result in the income statement is mainly impacted by foreign exchange 
movements on the revaluation of the loan and working capital balances. A 10 percent strengthening in the US Dollar currency rate against the 
other Group currency rates would result in an additional MUSD 314.9 reported foreign exchange loss in the income statement.

The impact on the foreign exchange result from a change in the US Dollar currency compared to the other Group currencies is mainly due to 
the bank loan denominated in US Dollar.

Price of oil and gas
Price of oil and gas are affected by the normal economic drivers of supply and demand as well as the ﬁ nancial investors and market 
uncertainty. Factors that inﬂ uence these include operational decisions, natural disasters, economic conditions, political instability or conﬂ icts 
or actions by major oil exporting countries. Price ﬂ uctuations can affect Lundin Petroleum’s ﬁ nancial position.

The table below summarises the effect that a change in the oil price would have had on the net result and equity at 31 December 2018:

Net result in the ﬁ nancial statements, MUSD
Possible shift
Total effect on net result, MUSD

222.1
-10%
-45.6

222.1
10%
45.6

The impact on the net result from a change in oil price is reduced due to the 78 percent tax rate in Norway.

Lundin Petroleum’s policy is to adopt a ﬂ exible approach towards oil price hedging, based on an assessment of the beneﬁ ts of the hedge 
contract in speciﬁ c circumstances. Based on analysis of the circumstances, Lundin Petroleum will assess the beneﬁ ts of forward hedging 
monthly sales contracts for the purpose of establishing cash ﬂ ow. If it believes that the hedging contract will provide an enhanced cash ﬂ ow 
then it may choose to enter into an oil price hedge.

For the year ended 31 December 2018, the Group did not enter into oil price hedging contracts and there are no oil price hedging contracts 
outstanding as at 31 December 2018.

80

Lundin Petroleum Annual Report 2018

 
Note 23 continued

Credit risk
Lundin Petroleum’s policy is to limit credit risk by limiting the counter-parties to major banks and oil companies. Where it is determined 
that there is a credit risk for oil and gas sales, the policy is to require an irrevocable letter of credit for the full value of the sale. The policy on 
joint operations parties is to rely on the provisions of the underlying joint operating agreements to take possession of the licence or the joint 
operations partner’s share of production for non-payment of cash calls or other amounts due.

As at 31 December 2018, the Group’s trade receivables amounted to MUSD 153.7 (MUSD 202.7). There is no recent history of default and there 
are no expected losses. Other long-term and short-term receivables are considered recoverable and no provision for bad debt was accounted for 
as at 31 December 2018. Cash and cash equivalents are maintained with banks having strong long-term credit ratings.

Liquidity risk
Liquidity risk is deﬁ ned as the risk that the Group could not be able to settle or meet its obligations on time or at a reasonable price. Group 
treasury is responsible for liquidity, funding as well as settlement management. In addition, liquidity and funding risks and related processes 
and policies are overseen by Group management.

In February 2016, Lundin Petroleum entered into a committed seven year senior secured reserve-based credit facility of USD 5.0 billion. The 
facility was amended during the second quarter of 2018 resulting in the interest rate margin over LIBOR being reduced from 3.15 percent to a 
current rate of 2.25 percent. The facility is secured against certain cash ﬂ ows generated by the Group. The amount available under the facility 
is recalculated every twelve months based upon the calculated cash ﬂ ow generated by certain producing ﬁ elds and ﬁ elds under development 
at an oil price and economic assumptions agreed with the banking syndicate providing the facility. The facility is secured by a pledge over the 
shares of certain Group companies, a pledge over the Company’s working interest in some production  licences and a charge over some of the 
bank accounts of the pledged companies. 

The amendment of the interest rate margin has resulted in an accounting gain of MUSD 183.7 in accordance with IFRS 9. When a ﬁ nancial 
liability, measured at amortised cost, is modiﬁ ed without this resulting in derecognition, a gain or loss should be recognised in the income 
statement based on IFRS 9. The gain or loss is calculated as the difference between the original contractual cash ﬂ ows and the modiﬁ ed cash 
ﬂ ows discounted at the original effective interest rate. The net accounting gain when offsetting against the incurred loan modiﬁ cation fees 
of MUSD 17.3 amounted to MUSD 166.4. The associated deferred taxes amounted to MUSD 68.3 resulting in a post-tax accounting gain of 
MUSD 98.1.

The facility agreement provides that an “event of default” occurs where the Group does not comply with certain material covenants or 
where certain events occur as speciﬁ ed in the agreement, as are customary in ﬁ nancing agreements of this size and nature. Two of the 
main covenants are the net debt to EBITDA and the EBITDA to ﬁ nancial charges testing the ability to repay debt. If such an event of default 
occurs and subject to any applicable cure periods, the external lenders may take certain speciﬁ ed actions to enforce their security, including 
accelerating the repayment of outstanding amounts under the facility.

The table below analyses the Group’s ﬁ nancial liabilities into relevant maturity groupings based on the remaining period at the balance sheet 
date to the contractual maturity date. Loan repayments are made based upon a net present value calculation of the assets’ future cash ﬂ ows. 
No loan repayments are currently forecast under this calculation.

MUSD

31 December 2018

31 December 2017

Non-current
Repayment within 1–2 years:
– Derivative instruments
Repayment within 2–5 years:
– Bank loans
– Derivative instruments

Current
Repayment within 6 months:
– Trade payables
– Overlift
– Tax liabilities
– Joint operations creditors
– Other current liabilities
– Derivative instruments
Repayment after 6 months:
– Tax liabilities
– Derivative instruments

19.3

3,465.0
45.6
3,529.9

26.6
5.4
14.8
147.4
7.6
9.0

55.6
11.0
277.4

–

3,955.0
3.1
3,958.1

30.1
12.8
0.6
188.9
7.7
3.2

–
3.2
246.5

Lundin Petroleum Annual Report 2018

81

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 24  Pledged Assets

In February 2016, Lundin Petroleum entered into a committed seven year senior secured reserve-based credit facility of USD 5.0 billion with 
the terms being successfully re-negotiated during 2018 as mentioned in note 23. The facility is a reserve-based credit facility secured against 
certain cash ﬂ ows generated by the Group. The amount available under the facility is recalculated every twelve months based upon the 
calculated cash ﬂ ow generated by certain producing ﬁ elds and ﬁ elds under development at an oil price and economic assumptions agreed 
with the banking syndicate providing the facility. The facility is secured by a pledge over the shares of certain Group companies, a pledge over 
the Company’s working interest in some production  licences and a charge over some of the bank accounts of the pledged companies. The 
pledged assets at 31 December 2018 amounted to MUSD 6,154.3 (MUSD 6,715.3) and represented the carrying value of the pledge of the Group 
companies whose shares are pledged as described in the Parent Company section on page 93. 

Note 25  Contingent Liabilities and Assets

The Swedish Prosecution Authority issued a notiﬁ cation of a corporate ﬁ ne and forfeiture of economic beneﬁ ts against Lundin Petroleum in 
relation to past operations in Sudan from 1997 to 2003. The notiﬁ cation indicated that the Prosecutor might seek a corporate ﬁ ne of MSEK 
3 and forfeiture of economic beneﬁ ts from the alleged offense in the amount of MSEK 3,282, based on the proﬁ t of the sale of the Block 5A 
asset in 2003 of MSEK 720. Any potential corporate ﬁ ne or forfeiture would only be imposed after the conclusion of a trial, should one occur. 
The investigation is in its ninth year and Lundin Petroleum remains convinced that there are absolutely no grounds for any allegations of 
wrongdoing by any Company representative and the Company will ﬁ rmly contest any corporate ﬁ ne or forfeiture of economic beneﬁ ts. The 
Company considers this to be a contingent liability and therefore no provision has been recognised.

As part of the IPC spin-off that was completed on 24 April 2017, the Company has indemniﬁ ed IPC for certain legal proceedings related to 
the period before spin-off. The Company has not provided for any costs in relation hereto as per 31 December 2018 as it does not believe the 
proceedings will lead to any liability for the Company.

Note 26  Related Party Transactions

Lundin Petroleum recognises the following related parties: associated companies, jointly controlled entities, key management personnel and 
members of their close family or other parties that are partly, directly or indirectly, controlled by key management personnel or of its family or 
of any individual that controls, or has joint control or signiﬁ cant inﬂ uence over the entity.

During the year, the Group has entered into transactions with related parties on a commercial basis and the material transactions are described 
below:

MUSD

Sale of oil and related products 

Purchases of oil and related products

Sale of services

Purchase of services

Interest income

2018

879.5

296.2

4.2

1.8

0.5

2017

176.2

–

3.4

1.9

–

Equinor (previously Statoil) is a related party as Equinor’s holding in Lundin Petroleum amounts to 20.1 percent. The Group has sold oil and 
related products to the Equinor group on an arm’s-length basis amounting to MUSD 879.5 for the year (MUSD 176.2). The Group has purchased 
oil and related products from the Equinor group on an arm’s-length basis amounting to MUSD 296.2 for the year (MUSD –).

The Group has acquired from the Equinor group a 15 percent working interest in PL359 containing the Luno II oil discovery. The transaction 
involved a cash consideration payable to Equinor as well as Lundin Petroleum transferring its 20 percent working interest in PL825 to Equinor. 
The transaction completed in December 2018. 

The related party transactions concern other parties that are controlled by key management personnel. Key management personnel include 
members of the Board of Directors and Group management. The remuneration to the Board of Directors and Group management is disclosed 
in Note 28. 

As at the date of the IPC spin-off, the Group had a residual receivable for working capital from IPC of MUSD 27.4 which has been reduced to 
MUSD 14.0 (MUSD 23.5). This receivable is reported as current asset as it is due by mid-2019.

The Group has sold the shares in ShaMaran to Zebra Holdings and Investments (Guernsey) Ltd. based on the quoted market share price of 
ShaMaran amounting to MUSD 9.3.

82

Lundin Petroleum Annual Report 2018

 
Note 27  Average Number of Employees

Average number of employees per country

Parent Company in Sweden

Subsidiaries abroad 
Norway
Switzerland
Netherlands
Russia 1
Total subsidiaries abroad

Total 

2018

2017

Total 
employees

of which men

Total 
employees

of which men

2

370
35
1
–
406

408

1

2

273
20
1
–
294

295

354
34
1
16
405

407

1

266
21
1
10
298

299

1 The Russian business has been fully consolidated into the Lundin Petroleum consolidated accounts until 30 September 2017 and as such, there is no 

number of employees reported for 2018 as the Russian business is an associated company since 30 September 2017.

Board members and Group management

Parent Company in Sweden
Board members1

Subsidiaries abroad

Group management

Total Group

2018

2017

Total at 
year end

of which men

Total at 
year end

of which men

8

8

16

5

6

11

7

7

14

4

5

9

1 Alex Schneiter, Chief Executive Ofﬁ cer (CEO) and Board Member is only included in Group management.

Lundin Petroleum Annual Report 2018

83

106
178

1,325
20,910

22,519
8,822

Total 
2018

255
79
5,332
60
82
79
79
36
6,002

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 28  Remuneration to the Board of Directors, Group Management and Other Employees

2017

Social security 
costs

Salaries and other 
remuneration

Social security 
costs

Salaries, other remuneration and social security costs
TUSD

Parent Company in Sweden
Board members
Employees

Subsidiaries abroad

Group management
Other employees

Total 
of which pension costs

2018

Salaries 
and other 
remuneration

628
386

11,802
94,773

107,589

122
222

1,584
22,240

24,168
8,758

569
314

10,625
84,730

96,238

Salaries and other 
remuneration for the 
Board members and 
Group management 1
TUSD

Parent Company in 
Sweden
Board members
Ian H. Lundin
Peggy Bruzelius
C. Ashley Heppenstall
Lukas H. Lundin
Grace Reksten Skaugen
Jakob Thomasen
Cecilia Vieweg
Torstein Sanness
Total Board members

Subsidiaries abroad

Group management

Alex Schneiter
Other 3 
Total Group 
management

Fixed Board 
remuneration/ 
base salary 

Other 
beneﬁ ts1

Short-term 
variable 
remuneration 2

Performance 
based 
incentive plan

Remuneration 
for Committee 
work

Remuneration 
for special 
assignments 
outside of 

directorship Pension

127
60
60
60
60
60
60
30
517

855
2,410

3,265

–
–
–
–
–
–
–
–
–

42
396

438

–
–
–
–
–
–
–
–
–

855
1,905

2,760

–
–
4,646
–
–
–
–
–
4,646

2,926
2,413

5,339

13
19
13
–
22
19
19
6
111

–
–

–

115
–
613
–
–
–
–
–
728

–
–

–

–
–
–
–
–
–
–
–
–

175
441

4,853
7,565

616

12,418

1  Other beneﬁ ts include school fees and health insurance for Group management.
2  This column shows bonuses awarded for achievements in 2018 based on the Policy on Remuneration for Group management, see page 35.
3  Comprises Chief Financial Ofﬁ cer, Chief Operating Ofﬁ cer, Vice President Corporate Responsibility, Vice President Legal, Vice President Corporate 

Affairs, Vice President Investor Relations and Vice President Human Resources and Shared Services. 

Note: The performance based incentive plan that was awarded in 2015 when C. Ashley Heppenstall was the CEO of the Company vested in 2018. The   
amount mentioned in the table above relates to this award and does not relate to his work as Board Member. No further awards to C. Ashley Heppenstall 
are outstanding.

84

Lundin Petroleum Annual Report 2018

Note 28 continued

Salaries and other 
remuneration for the 
Board members and 
Group management1
TUSD

Parent Company in 
Sweden
Board members
Ian H. Lundin
Peggy Bruzelius
C. Ashley Heppenstall
Lukas H. Lundin
Grace Reksten Skaugen
Jakob Thomasen
Magnus Unger 
Cecilia Vieweg
Total Board members

Subsidiaries abroad

Group management

Alex Schneiter
Other3 
Total Group 
management

Fixed Board 
remuneration/ 
base salary 

Other 
beneﬁ ts1

Short-term 
variable 
remuneration 2

Performance 
based 
incentive plan 

Remuneration 
for Committee 
work

Remuneration  
for special 
assignments 
outside of 
directorship

Pension

Total 
2017

126
60
60
60
60
31
29
60
486

772
2,048

2,820

–
–
–
–
–
–
–
–
–

19
269

288

–
–
–
–
–
–
–
–
–

965
1,601

2,566

–
–
3,516
–
–
–
–
–
3,516

2,183
2,768

4,951

12
18
12
–
12
6
6
17
83

–
–

–

175
–
609
–
–
–
18
–
802

–
–

–

–
–
–
–
–
–
–
–
–

313
78
4,197
60
72
37
53
77
4,887

176
404

4,115
7,090

580

11,205

¹   Other beneﬁ ts include school fees and health insurance for Group management.
2   This column shows bonuses awarded for achievements in 2017, including a discretionary award to the CEO and some other members of Group 

management. 

3   Comprises nine persons as part of Group management moved to IPC following the IPC spin-off. Comprises Chief Financial Ofﬁ cer (both pre and post 
IPC spin-off), Chief Operating Ofﬁ cer, Vice President Corporate Responsibility, Vice President Legal (both pre and post IPC spin-off), Vice President 
Communications and Investor Relations, Vice President Corporate Finance and Vice President Human Resources and Shared Services. 

Note: The performance based incentive plan that was awarded in 2014 when C. Ashley Heppenstall was the CEO of the Company vested in 2017. The 
amount mentioned in the table above relates to this award and does not relate to his work as Board Member.

Board members
There are no severance pay agreements in place for any non-executive directors and such directors are not eligible to participate in any of the 
Group’s incentive programmes. 

Group management
The pension contribution for Group management is between 15 percent and 18 percent of the qualifying income for pension purposes. The 
Company provides for 60 percent of the pension contribution and the employee for the remaining 40 percent. Qualifying income is deﬁ ned as 
annual base salary and short-term variable remuneration and is capped at approximately TCHF 846 (TCHF 846). The normal retirement age for 
the CEO is 65 years.

A mutual termination period of between three months and twelve months applies between the Company and Group management, depending 
on the duration of the employment with the Company. In addition, severance terms are incorporated into the employment contracts for 
executives that give rise to compensation, up to two years’ base salary, in the event of termination of employment due to a change of control 
of the Company. The Board of Directors is further authorised, in individual cases, to approve severance arrangements, in addition to the notice 
periods and the severance arrangements in respect of a change of control of the Company, where employment is terminated by the Company 
without cause, or otherwise in circumstances at the discretion of the Board. Such severance arrangements may provide for the payment 
of up to one year’s base salary; no other beneﬁ ts shall be included. Severance payments in aggregate (i.e. for notice periods and severance 
arrangements) shall be limited to a maximum of two years’ base salary.

See page 35–37 of the Corporate Governance report for further information on the Group’s principles of remuneration and the Policy on 
Remuneration for the Group management for 2018.

Lundin Petroleum Annual Report 2018

85

FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 29  Long-term Incentive Plans

The Company maintains the long-term incentive plans (LTIP) described below. 

Unit Bonus Plan
In 2008, Lundin Petroleum implemented an LTIP scheme consisting of a Unit Bonus Plan which provides for an annual grant of units that 
will lead to a cash payment at vesting. The LTIP has a three year duration whereby the initial grant of units vested equally in three tranches: 
one third after one year; one third after two years; and the ﬁ nal third after three years. The cash payment is conditional upon the holder of 
the units remaining an employee of the Group at the time of payment. The share price for determining the cash payment at the end of each 
vesting period will be the average of the Lundin Petroleum closing share price for the ﬁ ve trading days prior to and following the actual vesting 
date adjusted for any dividend payments between grant date and vesting date. The exercise price at vesting date 31 May 2018 was SEK 279.67.

LTIPs that follow the same principles as the 2008 LTIP have subsequently been implemented each year. 

The following table shows the number of units issued under the LTIPs, the amount outstanding as at 31 December 2018 and the year in which 
the units will vest. 

Unit Bonus Plan

Outstanding at the beginning of the period
Awarded during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period

Vesting date
31 May 2019
31 May 2020
31 May 2021
Outstanding at the end of the period

2015

135,902
–
-2,980
-132,922
–

–
–
–
–

2016

224,043
–
-5,544
-110,705
107,794

107,794
–
–
107,794

 Plan

2017

288,216
–
-6,120
-94,032
188,064

94,032
94,032
–
188,064

2018

–
226,389
–
–
226,389

75,463
75,463
75,463
226,389

Total

648,161
226,389
-14,644
-337,659
522,247

277,289
169,495
75,463
522,247

The costs associated with the Unit Bonus Plan are as given in the following table.

Unit Bonus Plan 
MUSD

2014

2015
2016
2017
2018

2018

–
3.4
2.1
2.9
1.9
10.3

2017

1.5
1.9
2.4
1.7
–
7.5

LTIP awards are recognised in the ﬁ nancial statements pro rata over their vesting period. The total carrying amount for the provision for the 
Unit Bonus Plan including social costs at 31 December 2018 amounted to MUSD 8.3 (MUSD 9.7). The provision is calculated based on Lundin 
Petroleum’s share price at the balance sheet date. The closing share price at 31 December 2018 was SEK 221.40.

Performance Based Incentive Plan
The 2014–2018 AGMs resolved a long-term performance based incentive plan in respect of Group management and a number of key 
employees. 

The 2018 plan is effective from 1 July 2018 and the 2018 award has been accounted for from the second half of 2018. The awards made in 
respect of 2018 vest over three years from 1 July 2018 subject to certain performance conditions being met. Each award was fair valued at the 
date of grant at SEK 167.10 using an option pricing model. 

The 2017 plan is effective from 1 July 2017 and vests over three years from 1 July 2017 subject to certain performance conditions being met. 
Each award was fair valued at the date of grant at SEK 100.10 using an option pricing model. 

86

Lundin Petroleum Annual Report 2018

 
Note 29 continued

The 2016 plan is effective from 1 July 2016 and vests over three years from 1 July 2016 subject to certain performance conditions being met. 
The outstanding number of awards increased compared to the original number of awards as a result of the dividend distribution of the IPC 
business as per the plan rules. Each original award was fair valued at the date of grant at SEK 89.30 using an option pricing model. Awards 
given to employees now employed by IPC following the IPC spin-off have been pro-rated until the spin-off date 24 April 2017.

The 2015 plan was effective from 1 July 2015 and vested on 30 June 2018. The number of awards increased compared to the original number 
of awards as a result of the dividend distribution of the IPC business as per the plan rules. Each original award was fair valued at the date of 
grant at SEK 91.40 using an option pricing model. Awards given to employees employed by IPC following the IPC spin-off have been pro-rated 
until the spin-off date 24 April 2017. Based on the performance conditions of the 2015 plan, the 2015 plan vested in full in 2018 with Lundin 
Petroleum’s total shareholder return (TSR) ranking well above the upper quartile level as 3rd of 16 peers. The TSR movements of peers that 
were taken over were measured by the acquiring companies post acquisition. 

The 2014 plan was effective from 1 July 2014 and vested on 30 June 2017. The number of awards increased compared to the original number 
of awards as a result of the dividend distribution of the IPC business as per the plan rules. Each original award was fair valued at the date of 
grant at SEK 81.40 using an option pricing model. Awards given to employees employed by IPC following the IPC spin-off have been pro-rated 
until the spin-off date 24 April 2017. Based on the performance conditions of the 2014 plan, the 2014 plan vested in full in 2017 with Lundin 
Petroleum’s total shareholder return (TSR) ranking well above the upper quartile level as 3rd of 16 peers. The TSR movements of peers that 
were taken over were measured by the acquiring companies post acquisition. 

The following table shows the number of units issued under the LTIPs, the amount outstanding as at 31 December 2018 and the year in which 
the awards will vest.

Performance Based Incentive Plan

Outstanding at the beginning of the period
Awarded during the period
Forfeited during the period 1
Exercised during the period
Outstanding at the end of the period

Vesting date
30 June 2019
30 June 2020
30 June 2021
Outstanding at the end of the period

2015

646,503
–
2,791
-649,294
–

–
–
–
–

2016

406,902
–
2,441
–
409,343

409,343
–
–
409,343

 Plan

2017

355,954
–
–
–
355,954

–
355,954
–
355,954

2018

–
278,917
–
–
278,917

–
–
278,917
278,917

Total

1,409,359
278,917
5,232
-649,294
1,044,214

409,343
355,954
278,917
1,044,214

1 The increase in outstanding awards reported as forfeited during the period relates to an adjustment for the reported number on this line in 2017.

The costs associated with the Performance Based Incentive Plan are as given in the following table.

Performance Based Incentive Plan
MUSD

2018

2017

2014
2015
2016
2017
2018

–
0.6
1.3
1.4
0.7
4.0

0.8
1.5
1.4
0.7
–
4.4

LTIP awards are recognised in the ﬁ nancial statements pro rata over their vesting period. The total effect on equity for the Performance Based 
Incentive Plan at 31 December 2018 amounted to MUSD 6.0 (MUSD 7.3). The effect on equity is calculated based on the fair value at date of grant.

Lundin Petroleum Annual Report 2018

87

 
FINANCIAL REPORT | Notes to the Financial Statements of the Group

Note 30  Remuneration to the Group’s Auditors

TUSD

2018

2017

PwC
Audit fees 
Out of which to PricewaterhouseCoopers AB
Audit related
Out of which to PricewaterhouseCoopers AB
Tax advisory services
Out of which to PricewaterhouseCoopers AB
Other fees
Out of which to PricewaterhouseCoopers AB
Total PwC
Out of which to PricewaterhouseCoopers AB

Remuneration to other auditors than PwC
Total audit fees excluding fees for IPC spin-off
Out of which to PricewaterhouseCoopers AB

Fees PwC for IPC spin-off
Out of which to PricewaterhouseCoopers AB
Total audit fees
Out of which to PricewaterhouseCoopers AB

448
201
33
23
45
–
69
55
595
279

65
660
279

–
–
660
279

501
242
44
20
23
–
18
7
586
269

79
665
269

471
–
1,136
269

Audit fees include the review of the 2018 half year report. Audit related costs include special assignments such as licence audits and PSC 
audits. 

Note 31  Subsequent Events

In January 2019, Lundin Petroleum entered into a sales and purchase agreement involving the acquisition of Lime Petroleum’s 30 percent 
working interest in each of PL338C and PL338E and 20 percent working interest in PL815, which contain the Rolvsnes oil discovery and 
Goddo prospect. The transaction will increase the Company’s working interest in each of PL338C and PL338E to 80 percent and in PL815 to 
60 percent. The transaction involves a cash consideration payable to Lime Petroleum of MUSD 43 and a contingent payment of an additional 
MUSD 2 which potentially becomes payable 12 months after the completion date of the transaction. The transaction is subject to customary 
government approvals.

In February 2019, the drilling of the exploration wells Gjøkåsen Shallow in PL857, Pointer/Setter in PL767 and Froskelår Main in PL869 was 
completed. For more information on the results of these wells, see pages 45–46 of the Directors’ Report.

88

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT 

Annual Accounts of the Parent Company

Parent Company
The business of the Parent Company is investment in and management of oil and gas assets. The net result for the Parent Company 
amounted to MSEK 1,657.8 (MSEK 46,648.6) for the year. The net result for the year included MSEK 1,812.4 (MSEK 238.6) ﬁ nancial 
income as a result of received dividends from a subsidiary. The net result for the comparative period also included MSEK 46,542.9 
ﬁ nancial income as a result of an internal restructuring prior to the IPC spin-off in 2017. The result excluding these ﬁ nancial income 
items amounts to MSEK -154.6 (MSEK -132.9).

The net result included general and administrative expenses of MSEK 180.9 (MSEK 146.7) and net ﬁ nance income of MSEK 5.3 
(MSEK 4.4) when excluding the ﬁ nance income items as mentioned above.

Pledged assets of MSEK 55,118.9 (MSEK 55,118.9) relate to the carrying value of the pledge of the shares in respect of the reserve-based 
credit facility entered into by its fully-owned subsidiary Lundin Petroleum Holding BV, see also Note 24 in the notes to the ﬁ nancial 
statements of the Group.

The Swedish Prosecution Authority issued a notiﬁ cation of a corporate ﬁ ne and forfeiture of economic beneﬁ ts against Lundin 
Petroleum in relation to past operations in Sudan from 1997 to 2003. The notiﬁ cation indicated that the Prosecutor might seek a 
corporate ﬁ ne of MSEK 3 and forfeiture of economic beneﬁ ts from the alleged offense in the amount of MSEK 3,282, based on the 
proﬁ t of the sale of the Block 5A asset in 2003 of MSEK 720. Any potential corporate ﬁ ne or forfeiture would only be imposed after 
the conclusion of a trial, should one occur. The investigation is in its ninth year and Lundin Petroleum remains convinced that there 
are absolutely no grounds for any allegations of wrongdoing by any Company representative and the Company will ﬁ rmly contest any 
corporate ﬁ ne or forfeiture of economic beneﬁ ts. The Company considers this to be a contingent liability and therefore no provision 
has been recognised.

Accounting Policies
The ﬁ nancial statements of the Parent Company are prepared in accordance with accounting policies generally accepted in Sweden, 
applying RFR 2 issued by the Swedish Financial Reporting Board and the Annual Accounts Act (1995: 1554). RFR 2 requires the 
Parent Company to use similar accounting policies as for the Group, i.e. IFRS to the extent allowed by RFR 2. The Parent Company’s 
accounting policies do not in any material respect deviate from the Group policies, see pages 58–63.

Lundin Petroleum Annual Report 2018

89

 
FINANCIAL REPORT 

Parent Company Income Statement
for the Financial Year Ended 31 December

Expressed in MSEK

Revenue

General and administration expenses

Operating loss

Result from ﬁ nancial investments

Finance income

Finance cost

Proﬁ t/loss before tax 

Income tax

Net result

Note

1

2

3

2018

21.0

-180.9

-159.9

1,818.1

-0,4

1,817.7

1,657.8

–

1,657.8

Parent Company Comprehensive Income Statement
for the Financial Year Ended 31 December

Expressed in MSEK

Net result

Other comprehensive income

Total comprehensive income

Attributable to:

Shareholders of the Parent Company

2018

1,657.8

–

1,657.8

1,657.8

1,657.8

2017

9.4

-146.7

-137.3

46,786.4

-0.5

46,785.9

46,648.6

–

46,648.6

2017

46,648.6

–

46,648.6

46,648.6

46,648.6

90

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT

Parent Company Balance Sheet 
for the Financial Year Ended 31 December

Expressed in MSEK

ASSETS

Non-current assets

Shares in subsidiaries

Other tangible ﬁ xed assets

Total non-current assets

Current assets

Prepaid expenses and accrued income

Other receivables

Cash and cash equivalents

Total current assets

TOTAL ASSETS

EQUITY AND LIABILITIES

Restricted equity

Share capital

Statutory reserve

Total restricted equity

Unrestricted equity

Other reserves

Retained earnings

Net result

Total unrestricted equity

Total equity

Non-current liabilities

Provisions

Total non-current liabilities

Current liabilities

Trade payables

Payables to Group companies

Accrued expenses and prepaid income

Other liabilities

Total current liabilities

Note

2018

2017

9

4

5

55,118.9

0.4

55,119.3

1.8

3.6

29.5

34.9

55,118.9

–

55,118.9

1.5

6.0

4.8

12.3

55,154.2

55,131.2

3.5

861.3

864.8

6,479.7

46,118.5

1,657.8

54,256.0

55,120.8

0.7

0,7

5.8

21.5

3.4

2.0

32.7

3.5

861.3

864.8

6,599.2

824.0

46,648.6

54,071.8

54,936.6

0.6

0.6

3.0

181.9

8.7

0.4

194.0

TOTAL EQUITY AND LIABILITIES

55,154.2

55,131.2

Lundin Petroleum Annual Report 2018

91

 
FINANCIAL REPORT 

Parent Company Statement of Cash Flow 
for the Financial Year Ended 31 December

Expressed in MSEK

Cash ﬂ ow from operations

Net result

Adjustment for 

Foreign currency exchange loss 

Internal restructuring

Other

Changes in working capital:

Changes in current assets

Changes in current liabilities

Total cash ﬂ ow from operations activities

Cash ﬂ ow from investing activities

Investments in other ﬁ xed assets

Total cash ﬂ ow from investing activities

Cash ﬂ ow from ﬁ nancing activities

Dividends paid

Purchase of own shares

Total cash ﬂ ow from ﬁ nancing activities

Change in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Currency exchange difference in cash and cash equivalents

Cash and cash equivalents at the end of the year

2018

1,657.8

-5.7

–

0.9

2.1

-162.0

1,493.1

-0.4

-0.4

-1,354.1

-119.5

-1,473.6

19.1

4.8

5.6

29.5

2017

46,648.6

-1.6

-46,606.6

–

13.2

176.0

229.6

–

–

–

-229.6

-229.6

–

3.2

1.6

4.8

Parent Company Statement of Changes in Equity 
for the Financial Year Ended 31 December

Expressed in MSEK

Balance at 1 January 2017

Total comprehensive income

Transactions with owners

Purchase of own shares

Distribution of IPC assets

Total transactions with owners

Balance at 31 December 2017

Total comprehensive income

Transactions with owners

Purchase of own shares

Cash distributions

Total transactions with owners

Balance at 31 December 2018

Restricted Equity

Unrestricted Equity

Share 
capital

Statutory 
reserve

3.5

–

–

–

–

3.5

–

–

–

–

3.5

861.3

–

–

–

–

861.3

–

–

–

–

861.3

Other 
reserves

6,828.8

–

Retained 
earnings 

4,519.3

46,648.6

-299.6

–

-299.6

6,599.2

–

-119.5

–

-119.5

6,479.7

–

-3,695.3

-3,695.3

47,472.6

1,657.8

–

-1,354.1

-1,354.1

47,776.3

Total

11,348.1

46,648.6

-299.6

-3,695.3

-3,924.9

54,071.8

1,657.8

-119.5

-1,354.1

-1,473.6

Total 
equity

12,212.9

46,648.6

-299.6

-3,695.3

-3,924.9

54,936.6

1,657.8

-119.5

-1,354.1

-1,473.6

54.256.0

55.120.8

92

Lundin Petroleum Annual Report 2018

 
FINANCIAL REPORT 

Notes to the Financial Statements 
of the Parent Company

Note 1  Finance Income 

MSEK

2018

2017

Result on internal restructuring

–

46,542.9

Dividend

Guarantee fees

Foreign exchange gain

1,812.4

238.6

–

5.7

3.3

1.6

1,818.1

46,786.4

The result on the internal restructuring in 2017 consists of 
received dividends from a subsidiary (MSEK 54,656.2), the result 
on the sale of subsidiary companies (MSEK -8,049.1) and the 
charges in relation to the IPC spin-off (MSEK 64.2).

Note 2  Finance Costs

MSEK

2018

2017

Note 6  Pledged Assets, Contingent Liabilities and 
Assets

Pledged assets relate to the carrying value of the pledge of the 
shares in respect of the reserve-based credit facility entered into 
by the wholly-owned subsidiary Lundin Petroleum Holding 
BV, see Note 24 in the notes to the ﬁ nancial statements of the 
Group.

Note 7  Remuneration to the Auditor 

MSEK

PwC

Audit fees

Audit related

Other fees

2018

2017

1.8

0.1

0.5

2.4

2.1

0.1

–

2.2

–

0.4

0.4

0.5

–

0.5

There has been no remuneration to any auditors other than 
PricewaterhouseCoopers AB.

Interest expenses Group

Other

Note 3  Income Tax 

MSEK

2018

2017

Net result before tax

1,657.8

46,648.6

Tax calculated at the corporate tax rate 
in Sweden 22% (22%)

-364.7

-10,262.7

Tax effect of received dividend

398.7

12,076.9

Tax effect of expenses non-deductible for 
tax purposes

Increase unrecorded tax losses

-3.6

-30.4

–

-1,775.7

-38.5

–

Note 4  Other Receivables 

MSEK

Due from Group companies

VAT receivable

Other

31 December 
2018

31 December 
2017

0.2

1.2

2.2

3.6

0.7

1.2

4.1

6.0

Note 5  Accrued Expenses and Prepaid Income

MSEK

Social security costs

Directors fees

Audit fees

Outside services

31 December 
2018

31 December 
2017

1.1

0.6

1.1

0.6

3.4

1.5

1.3

0.6

5.3

8.7

Note 8  Proposed Disposition of Unappropriated 
Earnings

The 2019 Annual General Meeting has an unrestricted equity at 
its disposal of MSEK 54,256.0, including the net result for the 
year of MSEK 1,657.8. 

In accordance with the updated dividend policy, the Board of 
Directors propose that the Annual General Meeting resolves 
on a dividend for 2018 of USD 1.48 per share, corresponding 
to USD 500 million (rounded off), to be paid in quarterly 
instalments of USD 0.37 per share, corresponding to USD 125 
million (rounded off). Before payment, each quarterly dividend 
of USD 0.37 per share shall be converted into a SEK amount, 
and paid out in SEK, based on the USD to SEK exchange rate 
published by Sweden’s central bank (Riksbanken) four business 
days prior to each record date (rounded off to the nearest whole 
SEK 0.01 per share). The ﬁ nal USD equivalent amount received 
by the shareholders may therefore slightly differ depending 
on what the USD to SEK exchange rate is on the date of the 
dividend payment. The SEK amount per share to be distributed 
each quarter will be announced in a press release four business 
days prior to each record date.

The ﬁ rst dividend payment is expected to be paid around 
5 April 2019, with an expected record date of 2 April 2019 and 
expected ex-dividend date of 1 April 2019. The second dividend 
payment is expected to be paid around 8 July 2019, with an 
expected record date of 3 July 2019 and expected ex-dividend 
date of 2 July 2019. The third dividend payment is expected 
to be paid around 7 October 2019, with an expected record 
date of 2 October 2019 and an expected ex-dividend date of 
1 October 2019. The fourth dividend payment is expected to be 
paid around 9 January 2020, with an expected record date of 
3 January 2020 and an expected ex-dividend date of 2 January 
2020.

Lundin Petroleum Annual Report 2018

93

FINANCIAL REPORT | Notes to the Financial Statements of the Parent Company

Note 8 continued

In order to comply with Swedish company law, a maximum total SEK amount shall be pre-determined to ensure that the dividend 
distributed does not exceed the available distributable reserves of the Company and such maximum amount for the 2018 dividend 
has been set to a cap of SEK 7.665 billion (i.e., SEK 1.916 billion per quarter). If the total dividend would exceed the cap of SEK 7.665 
billion, the dividend will be automatically adjusted downwards so that the total dividend corresponds to the cap of SEK 7.665 billion. 

Based on the above, the Board of Directors propose that the Annual General Meeting dispose of the unrestricted equity as follows:

MSEK

The Board of Directors proposes that the shareholders are paid a dividend of USD 1.48 per share 1

Brought forward

Unrestricted equity

4,666.0 

49,590.0

54,256.0

1 The amount is based on the USD to SEK exchange rate published by Sweden’s central bank (Riksbanken) as at 25 February 2019. The amount is based on 
the number of shares in circulation on 25 February 2019 and the total dividend amount may change by the record dates as a result of repurchases of own 
shares or as a result of issue of new shares. The dividend is USD denominated, ﬂ uctuations in the USD to SEK exchange rate between 25 February 2019 
and approval of the dividend proposal by the Annual General Meeting will have an impact on the total dividend amount reported in SEK. If the dividend 
proposal is approved by the Annual General Meeting, the dividend will be recorded as a liability in USD on the date of the Annual General Meeting and 
the SEK equivalent of the USD liability will ﬂ uctuate until the fourth tranche is converted from USD to SEK. 

Based on a comprehensive review of the ﬁ nancial position of the Company and the Group as a whole, as well as the proposed 
authorisation to repurchase shares, the Board of Directors is of the opinion that the proposed dividend is justiﬁ able in view of the 
requirements that the nature and scope of, and risks involved in the Company’s operations, place on the size of the Company’s 
and Group’s equity, as well as their consolidation needs, liquidity and position in other respects. The Board of Directors considered 
that there is negative equity at Group level, however such equity is based on historical accounting determinations of book value, 
depreciations and foreign exchange results, and does not take into account the fair market value of the assets held by the Group. 
The Board of Directors’ full statement in accordance with Chapter 18, Section 4 of the Swedish Companies Act is available on 
www.lundin-petroleum.com. 

Note 9  Shares in Subsidiaries

MSEK

Directly owned

Registration 
number

Registered ofﬁ ce

Total number of 
shares issued

Percentage
owned

Nominal 
value 
per share

Book 
amount 
31 Dec 2018

Lundin Petroleum Holding BV

68246226

The Hague, Netherlands

100

100

EUR 1.00

55,118.9

Indirectly owned

Lundin Norway AS

986 209 409

Lysaker, Norway

4,930,000

100

NOK 100.00

Lundin Petroleum Marketing SA

660.6.133.015-6

Lundin Petroleum SA

660.0.330.999-0

Lundin Petroleum Services BV

Lundin Russia BV

- Lundin Russia Ltd.

   - Culmore Holding Ltd

68359985

27290574

656565-4

162316

Collonge-Bellerive, 
Switzerland

Collonge-Bellerive, 
Switzerland

The Hague, Netherlands

The Hague, Netherlands

Vancouver, Canada

55,855,414

Nicosia, Cyprus

1,000

100

CHF 100.00

1,000

100

18,000

1,002

18,000

100

CHF 100.00

100

100

100

100

100

EUR 1.00

EUR 1.00

CAD 1.00

CYP 1.00

EUR 1.00

- Lundin Lagansky BV

27292984

The Hague, Netherlands

94

Lundin Petroleum Annual Report 2018

FINANCIAL REPORT 

Board Assurance 

As at 1 March 2019, the Board of Directors and the President of Lundin Petroleum AB have adopted this annual report for the 
ﬁ nancial year ended 31 December 2018.

Board Assurance
The Board of Directors and the President & CEO certify that the annual ﬁ nancial report for the Parent Company has been prepared 
in accordance with generally accepted accounting principles in Sweden and that the consolidated accounts have been prepared in 
accordance with IFRS as adopted by the EU and give a true and fair view of the ﬁ nancial position and proﬁ t of the Company and the 
Group and provides a fair review of the performance of the Group’s and Parent Company’s business, and describes the principal risks 
and uncertainties that the Company and the companies in the Group face.

Stockholm, 1 March 2019

Lundin Petroleum AB (publ) Reg. Nr. 556610-8055

Ian H. Lundin
Chairman

Alex Schneiter
President & CEO

 Peggy Bruzelius
Board Member

C. Ashley Heppenstall 
Board Member 

Lukas H. Lundin
Board Member

Torstein Sanness 
Board Member

Grace Reksten Skaugen 
Board Member

Jakob Thomasen
 Board Member

Cecilia Vieweg
Board Member

Our audit report was issued on March 4, 2019

PricewaterhouseCoopers AB

Johan Rippe
Authorised Public Accountant
Lead Partner

Johan Malmqvist
Authorised Public Accountant

Lundin Petroleum Annual Report 2018

95

 
 
 
 
 
FINANCIAL REPORT 

Auditor’s Report

To the general meeting of the shareholders of Lundin 
Petroleum AB (publ), corporate identity number 556610-8055

Report on the annual accounts and consolidated accounts

Opinions
We have audited the annual accounts and consolidated accounts of 
Lundin Petroleum AB (publ) for the year 2018. The annual accounts 
and consolidated accounts of the company are included on pages 
40–95 in this document.

In our opinion, the annual accounts have been prepared in 
accordance with the Annual Accounts Act and present fairly, in all 
material respects, the ﬁ nancial position of parent company as of 31 
December 2018 and its ﬁ nancial performance and cash ﬂ ow for the 
year then ended in accordance with the Annual Accounts Act. The 
consolidated accounts have been prepared in accordance with the 
Annual Accounts Act and present fairly, in all material respects, the 
ﬁ nancial position of the Group as of 31 December 2018 and their 
ﬁ nancial performance and cash ﬂ ow for the year then ended in 
accordance with International Financial Reporting Standards (IFRS), 
as adopted by the EU, and the Annual Accounts Act. The statutory 
administration report is consistent with the other parts of the 
annual accounts and consolidated accounts.

Therefore, we recommend that the general meeting of shareholders 
adopts the income statement and balance sheet for the parent 
company and the Group.

Our opinions in this report on the annual accounts and consolidated 
accounts are consistent with the content of the additional report 
that has been submitted to the parent company’s audit committee in 
accordance with the Audit Regulation (537/2014) Article 11.

Basis for Opinions
We conducted our audit in accordance with International Standards 
on Auditing (ISA) and generally accepted auditing standards in 
Sweden. Our responsibilities under those standards are further 
described in the Auditor’s Responsibilities section. We are 
independent of the Parent company and the Group in accordance 
with professional ethics for accountants in Sweden and have 
otherwise fulﬁ lled our ethical responsibilities in accordance with 
these requirements. This includes that, based on the best of our 
knowledge and belief, no prohibited services referred to in the Audit 
Regulation (537/2014) Article 5.1 have been provided to the audited 
company or, where applicable, its parent company or its controlled 
companies within the EU.

We believe that the audit evidence we have obtained is sufﬁ cient 
and appropriate to provide a basis for our opinions.

Our audit approach

Audit scope
Lundin Petroleum is an oil and gas company with exploration, 
development and production activities that primarily have been 
located in Norway during the ﬁ nancial year 2018. We designed our 
audit by determining materiality and assessing the risks of material 
misstatement in the consolidated ﬁ nancial statements. In particular, 
we considered where management made subjective judgements; 
for example, in respect of signiﬁ cant accounting estimates that 
involved making assumptions and considering future events that are 
inherently uncertain. As in all of our audits, we also addressed the 
risk of management override of internal controls, including among 
other matters consideration of whether there was evidence of bias 
that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufﬁ cient 
work to enable us to provide an opinion on the consolidated 
ﬁ nancial statements as a whole, taking into account the structure of 
the Group, the accounting processes and controls, and the industry 
in which the Group operates.

Our planning of the audit included an assessment of the level of 
audit work to be performed at the Group’s headquarters and at 
local ofﬁ ces. Following the Group’s organisation certain processes 
for accounting and ﬁ nancial reporting are performed outside the 
Group’s headquarter which means that we performed our audit 
work both at the Group’s headquarters and in those locations. 

In determining the level of audit work required for the purposes 
of the Group audit in each entity of the Group we considered 
the geographical location, the size of each entity and the risk 
associated with the accounts in each entity in relation to the Group’s 
consolidated accounts as a whole. This analysis also included 
the nature and extent of audit procedures in each entity where 
a combination of full audits and speciﬁ ed audit procedures were 
performed based on size and risk in the individual entity. Following 
this analysis and in dialogue with the Group’s audit committee, 
we performed, through our component audit teams, a full audit 
in Norway, as well as for the parent company and speciﬁ ed audit 
procedures in the Netherlands. For entities considered to be of 
insigniﬁ cant size to the Group we performed analytical procedures. 
At the Group’s headquarters we performed the audit of the parent 
company, the consolidation, the annual report and key judgments 
and estimates in the Group. Given the size of the Norwegian 
operations, our procedures as Group auditors have also included 
several meetings with management from Norway including physical 
visits to the Norwegian ofﬁ ce location. 

We have obtained reporting from our component auditors on two 
occasions during 2018 and we have reported the results from our 
procedures to management and the Audit Committee after the 
review of the Report for the six months period ended 30 June, 2018 
and after the year-end audit of the ﬁ nancial year 2018.

Materiality
The scope of our audit was inﬂ uenced by our application of 
materiality. An audit is designed to obtain reasonable assurance 
whether the ﬁ nancial statements are free from material 
misstatement. Misstatements may arise due to fraud or error. They 
are considered material if individually or in aggregate, they could 
reasonably be expected to inﬂ uence the economic decisions of users 
taken on the basis of the consolidated ﬁ nancial statements.

Based on our professional judgement, we determined certain 
quantitative thresholds for materiality, including the overall Group 
materiality for the consolidated ﬁ nancial statements. These, together 
with qualitative considerations, helped us to determine the scope of 
our audit and the nature, timing and extent of our audit procedures 
and to evaluate the effect of misstatements, both individually and in 
aggregate on the ﬁ nancial statements as a whole.

Key audit matters

Key audit matters of the audit are those matters that, in our 
professional judgment, were of most signiﬁ cance in our audit of the 
annual accounts and consolidated accounts of the current period. 
These matters were addressed in the context of our audit of, and in 
forming our opinion thereon, the annual accounts and consolidated 
accounts as a whole, but we do not provide a separate opinion on 
these matters. 

96

Lundin Petroleum Annual Report 2018

Key audit matter

How our audit addressed the Key audit matter

Recoverability of the carrying value of oil and gas properties and 
goodwill

The carrying value of oil and gas properties represents the majority 
of the assets in the balance sheet in the Group and amounted to 
MUSD 5,341 (MUSD 4,937) as per 31 December 2018.

During the year management follows a process to identify potential 
indicators of impairment and to the extent that indicators are 
identiﬁ ed impairment tests are prepared.

In an impairment test the carrying value of oil and gas properties is 
supported by the higher of either value in use calculations, which are 
based on discounted future cash ﬂ ow forecasts, or fair value less cost 
of disposal (recoverable amount). The assessment is performed for each 
cash generating unit separately both for producing and non-producing 
ﬁ elds. 

Each ﬁ eld or ﬁ elds with shared infrastructure in the development or 
production phase typically represents a separate cash generating unit. 
For exploration and evaluation assets, the assessment is generally 
performed on a ﬁ eld cost centre basis and by exploration well.
The assessment to identify potential impairment indicators and to 
perform impairment tests requires management to exercise signiﬁ cant 
judgement as described in the Accounting Policies “Critical accounting 
estimates and judgements” as well as in note 10 to the Annual Report 
where there is a risk that the valuation of oil and gas properties and 
any potential impairment charge or reversal of impairment may be 
incorrect.

Management’s assessment requires consideration of a number of 
factors, including but not limited to, the determination of cash 
generating units, the Group’s intention to proceed with a future work 
programme, the probability of success of future drilling, the size 
of proved and probable reserves, current and long--term oil prices, 
future capital expenditures and operating costs as well as discount and 
inﬂ ation rates.

The estimation of oil and natural gas reserves is a signiﬁ cant area of 
judgement due to the technical uncertainty in assessing the estimated 
quantities. The estimates have a direct impact on depletion charges 
and is fundamental to the impairment assessment of oil and gas 
properties, but is also an indicator of the future potential of the 
Group’s performance.

Following the analysis of impairment indicators management 
concluded that there were no impairment indicators identiﬁ ed for 
producing ﬁ elds and no impairment or reversal of impairment was 
recorded.

As part of the impairment testing process for producing ﬁ elds, 
the goodwill of MUSD 128 that originates from the Edvard Grieg 
transaction in 2016 was also tested for impairment which is in 
accordance with the requirement to test goodwill on an annual 
basis. Management has concluded that the carrying values could be 
supported as per 31 December 2018.

For non-producing ﬁ elds the company has written off MUSD 53 during 
the year as exploration costs.

Refer to pages 48–50 in the Directors’ report, page 59-60 and 63 in the 
Accounting Policies and note 10 in the ﬁ nancial statements for more 
information.

We obtained management’s impairment indicator assessment and 
impairment test as per 31 December 2018 for producing ﬁ elds and 
the technical goodwill related to the Edvard Grieg cash generating 
unit. There was signiﬁ cant headroom in the goodwill impairment test 
mainly as a result of an upward revision in reserves and improved 
price assumptions. No impairment indicators were identiﬁ ed for 
producing ﬁ eld, and consequently our procedures were limited to 
audit procedures on management’s impairment indicator assessment 
for producing ﬁ elds and assessing changes in signiﬁ cant assumptions 
in the goodwill impairment test.

As part of our internal controls work, we evaluated and challenged 
management’s assessment and controls over determining the 
impairment indicators and the process by which this was performed. 

Our internal controls testing supported management’s conclusion that 
no impairment indicators are triggering the need for impairment tests 
for the Company’s producing oil and gas assets as per 31 December 
2018. In respect of the impairment model applied by management 
for goodwill impairment testing, we considered and tested controls 
around input data to the impairment test and the review and approval 
of the impairment calculation. 

The assumptions that underpin management’s assessment of potential 
impairment indicators are inherently judgmental. Our audit work 
therefore assessed and challenged the reasonableness of management’s 
key judgements. Speciﬁ cally our work included, but was not limited 
to, the following procedures:

·  comparison of management´s short-term oil price assumptions 

against external oil price forward curves;

·  comparison of long-term oil price assumptions against views 

published by an independent research provider and broker ﬁ rms, 
which provided a range of relevant third-party data points;

·  comparison of hydrocarbon production proﬁ les, proved and probable 
reserves to updated reserve reports prepared by ERC Equipoise Ltd 
for 2018;

·  comparison of estimated future operating costs and capital 

expenditures to prior periods’ proﬁ les;

·  benchmarking of inﬂ ation and discount rates applied.

We obtained the estimation of proven and probable reserves certiﬁ ed 
by the Group’s external reserves auditor, ERC Equipoise Ltd. Our audit 
work included but was not limited to:
·  determined that the Group’s process for collecting relevant reports 

was sufﬁ ciently robust

·  assessed competence and objectivity of ERC as expert, to satisfy 

ourselves they were appropriately qualiﬁ ed to carry out the volumes 
estimation;

·  testing of management’s internal controls for assessing the validity of 

the data included in the ERC reserve report.

For non-producing oil and gas properties we obtained a listing of 
capitalized exploration expenditures by ﬁ eld area cost centre basis 
(ﬁ eld) as of 31 December 2018. We tested Management’s internal 
controls for assessing continued capitalisation of non-producing oil 
and gas properties. Furthermore, we tested the mathematical accuracy 
of this listing and reconciled the listing to the general ledger. We then 
assessed and challenged the continued capitalization of exploration 
expenditures by assessing the underlying documentation prepared by 
management for each of the ﬁ elds and discussing with management. 
On a sample basis, we also reconciled and corroborated information 
provided on expenditures incurred and wells drilled to license budgets, 
resource and value estimates, publicly available information, progress 
reporting in the joint venture, future plans and/or well commitments.

Lundin Petroleum Annual Report 2018

97

FINANCIAL REPORT | Auditor’s Report

Key audit matter

How our audit addressed the Key audit matter

Recognition and valuation of current taxes and deferred taxes

We obtained the annual tax calculation for the Norwegian entity as 
prepared by management.

The calculation of taxes under the Norwegian Petroleum Tax Act 
involves complexity and requires management judgement in the 
application of the tax regulations to the calculation of current and 
deferred taxes.

For the year ended 31 December 2018 the current and deferred income 
tax expense amounted to MUSD 1,026 (MUSD 501) of which MUSD 935 
(MUSD 502) related to a deferred tax expense.

The Group has recognised a net deferred tax liability of MUSD 2,103 
at December 31, 2018 (MUSD 1,302) that primarily relate to Lundin 
Norway AS. This net amount relates to deferred tax liabilities arising 
primarily from the tax value of oil and gas assets being lower than the 
book value resulting in a temporary difference with offsetting entries 
for deferred tax assets that are mainly related to asset retirement 
obligations and losses and uplift carried forward that are expected to 
be utilised in the future.  

Refer to pages 49–50 in the Directors’ report, pages 62–63 in the 
Accounting Policies and note 7 in the ﬁ nancial statements for more 
information.

Estimation of decommissioning and site restoration provisions 

The Group has recognised site restoration provisions in the amount of 
MUSD 490 as of December 31, 2018 (MUSD 415).
The calculation of decommissioning and site restoration provisions 
requires signiﬁ cant management judgement amongst other due to the 
inherent complexity in estimating future decommissioning costs. The 
decommissioning of offshore infrastructure is a relatively immature 
activity and consequently there is limited historical precedent 
against which to benchmark estimates of future costs. These factors 
increase the complexity involved in determining accurate accounting 
provisions that are material to the Group’s balance sheet.

Management reviews decommissioning and site restoration provisions 
on an annual basis but recognises provisions for new ﬁ elds and 
wells on an ongoing basis as installations are made offshore. This 
review incorporates the effects of any changes in local regulations, 
management’s expected approach to decommissioning, cost estimates, 
year of decommissioning, inﬂ ation and discount rates, and the effects 
of changes in exchange rates.

Refer to page 50 in the Directors’ report, pages 61 and 63 in the 
Accounting Policies and note 19 in the ﬁ nancial statements for more 
information.

The tax calculation is subject to the company’s internal controls. We 
tested management’s controls over the detailed tax calculation, the 
reconciliation of the tax assessment received against the prior year tax 
return and review of uncertain tax positions.

As part of our substantive procedures, we tested mathematical 
accuracy of the tax calculations and formulas applied. We reconciled 
book and tax positions as of Dec 31, 2018 and Dec 31, 2017 used in 
the calculation to underlying documentation. Furthermore, we tested 
the reconciliation of the effective rate to underlying documentation. 
Uncertain tax positions were examined based on the application of tax 
regulations and by reviewing any correspondence with tax authorities, 
documentation provided by the Company supporting their position 
and legal opinion by their advisors.

We critically assessed management’s annual review of site restoration 
provisions recorded. The provisions contains estimates from both 
operated assets and non-operated assets.

For operated assets we have gained an understanding of the mandatory 
or constructive obligations with respect to the decommissioning of 
each asset based on the contractual arrangements and relevant local 
regulation to validate the appropriateness of the cost estimate. We 
obtained management’s calculation of site restoration provisions 
for each ﬁ eld. We tested mathematical accuracy of the calculations 
and reconciled the calculated provision to the general ledger. As part 
of our testing we considered the competence and objectivity of the 
internal experts who produced the cost estimates and challenged 
key assumptions such as rig rates, discount rate, and year of 
decommissioning.

In addition, for non-operated assets we have assessed the competence 
of the operator performing the estimate, challenged the discount 
rate, year of decommissioning and other assumptions applied in the 
calculation and veriﬁ ed that the accounting records appropriately 
reﬂ ect the external estimates performed.

98

Lundin Petroleum Annual Report 2018

 
Other Information than the annual accounts and consolidated 
accounts
This document also contains other information than the annual 
accounts and consolidated accounts and is found on pages 1–21 and 
101–107. The Board of Directors and the Chief Executive Ofﬁ cer are 
responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does 
not cover this other information and we do not express any form of 
assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and 
consolidated accounts, our responsibility is to read the information 
identiﬁ ed above and consider whether the information is materially 
inconsistent with the annual accounts and consolidated accounts. In 
this procedure we also take into account our knowledge otherwise 
obtained in the audit and assess whether the information otherwise 
appears to be materially misstated.

If we, based on the work performed concerning this information, 
conclude that there is a material misstatement of this other 
information, we are required to report that fact. We have nothing to 
report in this regard.

Responsibilities of the Board of Director’s and the Chief 
Executive Ofﬁ cer
The Board of Directors and the Chief Executive Ofﬁ cer are 
responsible for the preparation of the annual accounts and 
consolidated accounts and that they give a fair presentation in 
accordance with the Annual Accounts Act and, concerning the 
consolidated accounts, in accordance with IFRS as adopted by the 
EU. The Board of Directors and the Chief Executive Ofﬁ cer are also 
responsible for such internal control as they determine is necessary 
to enable the preparation of annual accounts and consolidated 
accounts that are free from material misstatement, whether due to 
fraud or error.

considered material if, individually or in the aggregate, they could 
reasonably be expected to inﬂ uence the economic decisions of 
users taken on the basis of these annual accounts and consolidated 
accounts.

A further description of our responsibility for the audit of the 
annual accounts and consolidated accounts is available on 
Revisorsinspektionen’s website: www.revisorsinspektionen.se/
revisornsansvar. This description is part of the auditor´s report.

Report on other legal and regulatory requirements

Opinions
In addition to our audit of the annual accounts and consolidated 
accounts, we have also audited the administration of the Board of 
Director’s and the Chief Executive Ofﬁ cer of Lundin Petroleum AB 
(publ) for the year 2018 and the proposed appropriations of the 
company’s proﬁ t or loss.

We recommend to the general meeting of shareholders that the 
proﬁ t be appropriated in accordance with the proposal in the 
statutory administration report and that the members of the Board 
of Director’s and the Chief Executive Ofﬁ cer be discharged from 
liability for the ﬁ nancial year.

Basis for Opinions
We conducted the audit in accordance with generally accepted 
auditing standards in Sweden. Our responsibilities under those 
standards are further described in the Auditor’s Responsibilities 
section. We are independent of the parent company and the 
Group in accordance with professional ethics for accountants in 
Sweden and have otherwise fulﬁ lled our ethical responsibilities in 
accordance with these requirements.
We believe that the audit evidence we have obtained is sufﬁ cient 
and appropriate to provide a basis for our opinions.

In preparing the annual accounts and consolidated accounts, The 
Board of Directors and the Chief Executive Ofﬁ cer are responsible for 
the assessment of the company’s and the Group’s ability to continue 
as a going concern. They disclose, as applicable, matters related to 
going concern and using the going concern basis of accounting. 
The going concern basis of accounting is however not applied if the 
Board of Directors and the Chief Executive Ofﬁ cer intend to liquidate 
the company, to cease operations, or has no realistic alternative but 
to do so.

Responsibilities of the Board of Director’s and the Chief 
Executive Ofﬁ cer
The Board of Directors is responsible for the proposal for 
appropriations of the company’s proﬁ t or loss. At the proposal of 
a dividend, this includes an assessment of whether the dividend 
is justiﬁ able considering the requirements which the company’s 
and the Group’s type of operations, size and risks place on the 
size of the parent company’s and the Group’ equity, consolidation 
requirements, liquidity and position in general.

The Audit Committee shall, without prejudice to the Board of 
Director’s responsibilities and tasks in general, among other things 
oversee the company’s ﬁ nancial reporting process.

Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the 
annual accounts and consolidated accounts as a whole are free from 
material misstatement, whether due to fraud or error, and to issue 
an auditor’s report that includes our opinions. Reasonable assurance 
is a high level of assurance, but is not a guarantee that an audit 
conducted in accordance with ISAs and generally accepted auditing 
standards in Sweden will always detect a material misstatement 
when it exists. Misstatements can arise from fraud or error and are 

The Board of Directors is responsible for the company’s organization 
and the administration of the company’s affairs. This includes 
among other things continuous assessment of the company’s and 
the Group’s ﬁ nancial situation and ensuring that the company´s 
organization is designed so that the accounting, management of 
assets and the company’s ﬁ nancial affairs otherwise are controlled 
in a reassuring manner. The Chief Executive Ofﬁ cer shall manage 
the ongoing administration according to the Board of Directors’ 
guidelines and instructions and among other matters take measures 
that are necessary to fulﬁ ll the company’s accounting in accordance 
with law and handle the management of assets in a reassuring 
manner.

Lundin Petroleum Annual Report 2018

99

FINANCIAL REPORT | Auditor’s Report

Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby 
our opinion about discharge from liability, is to obtain audit evidence to 
assess with a reasonable degree of assurance whether any member of the 
Board of Directors or the Managing Director in any material respect:
·  has undertaken any action or been guilty of any omission which can 

give rise to liability to the company, or

·  in any other way has acted in contravention of the Companies Act, the 

Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of 
the company’s proﬁ t or loss, and thereby our opinion about this, is to 
assess with reasonable degree of assurance whether the proposal is in 
accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee 
that an audit conducted in accordance with generally accepted auditing 
standards in Sweden will always detect actions or omissions that can give 
rise to liability to the company, or that the proposed appropriations of the 
company’s proﬁ t or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the 
administration is available on Revisorsinspektionen’s website: www.
revisorsinspektionen.se/revisornsansvar. This description is part of the 
auditor´s report.

PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm, was 
appointed by the Annual General meeting on 4 May 2017 and has been 
the company’s auditor since the company was listed on the Stockholm 
Stock Exchange 6 September, 2001.

Stockholm, 4 March 2019

PricewaterhouseCoopers AB

Johan Rippe 
Authorised Public Accountant
Lead Partner

Johan Malmqvist
Authorised Public Accountant

100

Lundin Petroleum Annual Report 2018

ADDITIONAL INFORMATION 

Key Financial Data

Lundin Petroleum discloses alternative performance measures as part of its ﬁ nancial statements prepared in accordance with ESMA’s 
(European Securities and Markets Authority) guidelines. Lundin Petroleum believes that that the alternative performance measures 
provide useful supplement information to management, investors, security analysts and other stakeholders and are meant to provide an 
enhanced insight into the ﬁ nancial development of Lundin Petroleum’s business operations and to improve comparability between periods. 
Reconciliations of relevant alternative performance measures are provided on the following page. Deﬁ nitions of the performance measures are 
provided under the key ratio deﬁ nitions below.

Financial data from continuing operations
MUSD

Revenue and other income

EBITDA1

Net result

Operating cash ﬂ ow1

Free cash ﬂ ow

Data per share from continuing operations
USD

Shareholders’ equity per share

Operating cash ﬂ ow per share

Cash ﬂ ow from operations per share

Earnings per share

Earnings per share fully diluted

EBITDA per share 

EBITDA per share fully diluted

Dividend per share

2018

2,617.4

1,916.2

222.1

1,847.8

663,0

-1,13

5.46

5.07

0.66

0.66

5.65

5.64

0.45

2017

1,997.0

1,501.5

380.9

1,530.0

203.7

-1.03

4.50

3.82

1.13

1.13

4.41

4.40

1.21

2016

950.0

752.5

-399.3

857.9

-328.2

-0.70

2.63

2.05

-0.79

-0.79

2.31

2.30

–

2015

380.3

246.3

-679.7

558.1

-1,035.2

2014

627.2

570.9

-414.8

1,046.9

-1,205.5

-1.61

1.81

0.77

-2.18

-2.18

0.80

0.79

–

1.40

3.39

1.43

-1.33

-1.33

1.85

1.84

–

Number of shares issued at year end

340,386,445

340,386,445

340,386,445

311,070,330

311,070,330

Number of shares in circulation at year end

338,513,135

339,153,135

340,386,445

309,070,330

309,070,330

Weighted average number of shares for the year

338,592,250

340,237,772

325,808,486

309,070,330

309,170,986

Weighted average number of shares for the year 
fully diluted

339,513,634

341,380,316

326,738,233

310,019,890

309,475,038

Share price

Share price in SEK

Share price in USD 2

Key ratios from continuing operations (%)

Return on equity 3

Return on capital employed

Net debt/equity ratio 3

Net debt/EBITDA ratio 4

Equity ratio

Share of risk capital

Interest coverage ratio

Operating cash ﬂ ow/interest ratio

Yield

221.40

24.72

187.80

22.88

198.10

21.86

122.60

14.52

112.40

14.53

–

47

–

1.8

-7

29

17

21

2

–

22

–

2.6

-6

17

6

12

5

–

-9

–

5.4

-17

-3

-2

5

n/a

–

-19

–

15.4

-10

1

-8

7

n/a

-48

-8

605

4.6

9

28

-10

45

n/a 

1   Excludes the reported after tax accounting loss of MUSD 14.4 in 2017 on the divestment of a 39 percent working interest in the Brynhild ﬁ eld.
2   Share price at period end in USD is calculated based on quoted share price in SEK and applicable SEK/USD exchange rate as per period end.
3   As the equity at 31 December 2018, 31 December 2017, 31 December 2016 and 31 December 2015 is negative, these ratios have not been calculated.
4  Net debt/EBITDA ratio is calculated using the EBITDA of the last four quarters.

Lundin Petroleum Annual Report 2018

101

ADDITIONAL INFORMATION 

Relevant Reconciliations of Alternative Performance 
Measures

EBITDA
MUSD

Operating proﬁ t

Add: depletion of oil and gas properties

Add: exploration costs

Add: impairment costs of oil and gas properties

Add: loss from sale of assets

Add: depreciation of other tangible assets

2018

1,402.4

458.0

53.2

–

–

2.6

2017

812.4

568.4

73.1

30.6

14.4

2.6

EBITDA

1,916.2

1,501.5

Operating cash ﬂ ow
MUSD

Revenue and other income

Minus: production costs

Minus: purchase of crude oil from third parties

Minus: current taxes

Operating cash ﬂ ow

2,617.4

-145.4

-533.8

-90.4

1,847.8

1,997.0

-164.2

-303.3

0.5

1,530.0

2016

-244.7

386.2

101.9

506.1

–

3.0

752.5

950.0

-168.4

-2.1

78.4

857.9

2015

-588.7

159.1

146.5

526.0

–

3.4

246.3

380.3

-104.6

–

282.4

558.1

2014

-193.9

88.5

272.2

400.7

–

3.4

570.9

627.2

-11.3

–

431.0

1,046.9

Free cash ﬂ ow
MUSD

Cash ﬂ ows from operating activities

Minus: cash ﬂ ows from investing activities

Free cash ﬂ ow

1,718.3

-1,055.3

663.0

1,299.3

-1,095.6

203.7

668.7

-996.9

-328.2

238.0

-1,273.2

-1,035.2

442.1

-1,647.6

-1,205.5

Net debt
MUSD

Bank loans

Minus: cash and cash equivalents

Net debt

3,465.0

-66.8

3,398.2

3,955.0

-71.4

3,883.6

4,145.0

-69.5

4,075.5

3,858.0

-71,9

3,786.1

2,690.0

-80,5

2,609.5

102

Lundin Petroleum Annual Report 2018

ADDITIONAL INFORMATION 

Key Ratio Definitions

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation): 
Operating proﬁ t before depletion of oil and gas properties, exploration costs, impairment costs, depreciation of other tangible assets and gain 
on sale of assets.

Operating cash ﬂ ow: 
Revenue and other income less production costs less purchase of crude oil from third parties and less current taxes.

Free cash ﬂ ow:
Cash ﬂ ow from operating activities less cash ﬂ ow from investing activities in accordance with the consolidated statement of cash ﬂ ow.

Shareholders’ equity per share: 
Shareholders’ equity divided by the number of shares in circulation at year end.

Operating cash ﬂ ow per share: 
Operating cash ﬂ ow divided by the weighted average number of shares for the year.

Cash ﬂ ow from operations per share: 
Cash ﬂ ow from operations in accordance with the consolidated statement of cash ﬂ ow divided by the weighted average number of shares for 
the year.

Earnings per share: 
Net result attributable to shareholders of the Parent Company divided by the weighted average number of shares for the year.

Earnings per share fully diluted: 
Net result attributable to shareholders of the Parent Company divided by the weighted average number of shares for the year after considering 
any dilution effect.

EBITDA per share: 
EBITDA divided by the weighted average number of shares for the year.

EBITDA per share fully diluted:
EBITDA divided by the weighted average number of shares for the year after considering any dilution effect.

Weighted average number of shares for the year: 
The number of shares at the beginning of the year with changes in the number of shares weighted for the proportion of the year they are in 
issue.

Weighted average number of shares for the year fully diluted: 
The number of shares at the beginning of the year with changes in the number of shares weighted for the proportion of the year they are in 
issue after considering any dilution effect.

Return on equity: 
Net result divided by average total equity.

Return on capital employed: 
Income before tax plus interest expenses plus/less currency exchange differences on ﬁ nancial loans divided by the average capital employed 
(the average balance sheet total less non-interest bearing liabilities).

Net debt/equity ratio: 
Bank loan less cash and cash equivalents divided by shareholders’ equity.

Net debt/EBITDA ratio: 
Bank loan less cash and cash equivalents divided by EBITDA.

Equity ratio: 
Total equity divided by the balance sheet total.

Share of risk capital: 
The sum of the total equity and the deferred tax provision divided by the balance sheet total.

Interest coverage ratio: 
Result after ﬁ nancial items plus interest expenses plus/less currency exchange differences on ﬁ nancial loans divided by interest expenses.

Operating cash ﬂ ow/interest ratio: 
Revenue less production costs and less current taxes divided by the interest expense for the year.

Yield: 
Dividend per share in relation to quoted share price at the end of the ﬁ nancial year.

Lundin Petroleum Annual Report 2018

103

ADDITIONAL INFORMATION 

Five Year Financial Data

Income statement summary 1
MUSD

Revenue from own production

Revenue from third party activities

Other income

Production costs 

Depletion and decommissioning costs

Exploration costs

Impairment costs of oil and gas properties

Loss from sale of assets

Other cost of sales

Gross proﬁ t/loss

General, administration and depreciation expenses

Operating proﬁ t/loss

Net ﬁ nancial items

Share in result of associated company

Proﬁ t/loss before tax

Income tax

Net result from continuing operations

Net result from discontinued operations

Net result

Net result attributable to the shareholders 
of the Parent Company:

Net result attributable to non-controlling interest:

Net result

Balance sheet summary
MUSD

Tangible ﬁ xed assets

Other non-current assets

Current assets

Total assets

Shareholders’ equity

Non-controlling interest

Total equity

Non-current provisions

Non-current liabilities

Current liabilities

Total shareholders’equity and liabilities

2018

2,071.8

536.1

9.5

-145.4

-458.0

-53.2

–

–

-533.8

1,427.0

-24.6

1,402.4

-153.2

-1.3

1,247.9

-1,025.8

222.1

–

222.1

222.1

–

222.1

2018

5,354.7

131.2

356.6

5,842.5

-384.0

–

-384.0

2,657.0

3,262.0

307.5

5,842.5

2017

1,654.8

303.5

38.7

-164.2

-567.3

-73.1

-30.6

-14.4

-303.3

844.1

-31.7

812.4

70.1

-0.4

882.1

-501.2

380.9

46.5

427.4

431.2

-3.8

427.4

2017

4,950.3

161.3

417.2

5,528.8

-350.8

–

-350.8

1,725.9

3,880.0

273.7

5,528.8

2016

973.8

2.1

-25.9

-168.4

-386.2

-101.9

-506.1

–

-2.1

-214.7

-30.0

-244.7

-218.8

–

-463.5

64.2

-399.3

-100.0

-499.3

-356.7

-142.6

-499.3

2016

4,542.5

168.0

491.6

5,202.1

-238.6

-113.6

-352.2

1,119.1

4,082.1

353.1

5,202.1

2015

347.6

–

32.7

-104.6

-159.1

-146.5

-526.0

–

–

2014

591.1

–

36.1

-11.3

-88.5

-272.2

-400.7

–

–

-555.9

-145.5

-32.8

-588.7

-670.9

–

-1,259.6

579.9

-679.7

-186.6

-866.3

-861.7

-4.6

-866.3

2015

4,219.7

24.1

541.5

4,785.3

-498.2

24.1

-474.1

970.5

3,867.0

421.5

4,785.3

-48.4

-193.9

-480.0

–

-673.9

259.1

-414.8

-17.1

-431.9

-427.2

-4.7

-431.9

2014

4,382.9

49.9

659.2

5,092.0

431.5

34.2

465.7

1,295.2

2,683.1

648.0

5,092.0

1   The above table is based on continuing operations only (excluding the discontinued IPC operations following the spin-off in 2017 and excluding 

the discontinued Russian onshore assets following the sale in 2014). The result from discontinued operations is reported separately in the income 
statement.

104

Lundin Petroleum Annual Report 2018

ADDITIONAL INFORMATION 

Reserve Quantity Information

Proved plus probable reserves (2P)
from continuing operations

1 January 2018

Changes during the year

Revisions

Extensions and new projects 3

Production

31 December 2018

Norway
oil reserves
MMbbl

695.7

29.7

17.8

-27.4

715.8 1

Norway 
gas reserves
Bn scf 2

183.6

21.9

-12.2

-15.8

177.5

1  The year end 2018 2P oil reserves reported include 17.9 MMbbl of NGL’s.
2   The factor of 6,000 is used by the Company to convert one scf to one boe.
3  Extensions and new projects include new ﬁ elds but also new improved oil recovery (IOR) projects on existing ﬁ elds. In 2018, the Johan Sverdrup water 

alternating gas (WAG) project was promoted to reserves representing an increase in recoverable oil, but a decrease in recoverable gas.

Proved plus probable plus possible reserves (3P)
from continuing operations

1 January 2018

Changes during the year

Revisions

Extensions and new projects 3

Production

31 December 2018

Norway
oil reserves
MMbbl

856.3

10.5

23.5

-27.4

862.9 1

Norway 
gas reserves
Bn scf 2

235.6

22.3

-14.3

-15.8

227.8

1  The year end 2018 3P oil reserves reported include 22.0 MMbbl of NGL’s.
2   The factor of 6,000 is used by the Company to convert one scf to one boe.
3  Extensions and new projects include new ﬁ elds but also new improved oil recovery (IOR) projects on existing ﬁ elds. In 2018, the Johan Sverdrup water 

alternating gas (WAG) project was promoted to reserves representing an increase in recoverable oil, but a decrease in recoverable gas.

Lundin Petroleum Annual Report 2018

105

ADDITIONAL INFORMATION 

Definitions and Abbreviations

Reserves defined
Lundin Petroleum estimates reserves and resources according to 2007 Petroleum Resources Management System (PRMS) Guidelines of the Society 
of Petroleum Engineers (SPE), World Petroleum Congress (WPC), American Association of Petroleum Geologists (AAPG) and Society of Petroleum 
Evaluation Engineers (SPEE). Lundin Petroleum’s reserves are audited by ERC Equipoise Ltd. (ERCE), an independent reserves auditor. Reserves are 
deﬁ ned as those quantities of petroleum which are anticipated to be commercially recovered by application of development projects to known 
accumulations from a given date forward under deﬁ ned conditions. Estimation of reserves is inherently uncertain and to express an uncertainty 
range, reserves are subdivided into Proved, Probable and Possible categories. Unless stated otherwise, Lundin Petroleum reports its Proved plus 
Probable (2P) reserves and its Proved plus Probable plus Possible (3P) reserves.

Proved reserves

Probable reserves

Possible reserves

                      3P Reserves

   2P Reserves   

Proved reserves are those quantities of petroleum 
which, by analysis of geological and engineering 
data, can be estimated with reasonable certainty 
to be commercially recoverable, from a given 
date forward, from known reservoirs and under 
current economic conditions, operating methods 
and governmental regulations. Proved reserves 
can be categorised as developed or undeveloped. 
If deterministic methods are used, the term 
reasonable certainty is intended to express a high 
degree of conﬁ dence that the quantities will be 
recovered. If probabilistic methods are used, there 
should be at least a 90 percent probability that 
the quantities actually recovered will equal or 
exceed the estimates.

Probable reserves are those unproved 
reserves which analysis of geological and 
engineering data indicate are less likely 
to be recovered than Proved reserves but 
more certain to be recovered than Possible 
reserves. It is equally likely that actual 
remaining quantities recovered will be 
greater than or less than the sum of the 
estimated 2P reserves. In this context, when 
probabilistic methods are used, there should 
be at least a 50 percent probability that the 
actual quantities recovered will equal or 
exceed the 2P estimate. 

Possible Reserves are those additional reserves 
which analysis of geoscience and engineering 
data suggest are less likely to be recoverable 
than Probable reserves. The total quantities 
ultimately recovered from the project have 
a low probability to exceed the sum of 3P 
reserves, which is equivalent to the high 
estimate scenario. In this context, when 
probabilistic methods are used, there should be 
at least a 10 percent probability that the actual 
quantities recovered will equal or exceed the 
3P estimate.

Resources defined

Contingent resources

Contingent resources are those quantities of petroleum estimated, as of a given 
date, to be potentially recoverable from known accumulations, by application of 
development projects, but which are not currently considered to be commercially 
recoverable due to one or more contingencies. 2C is the best estimate of the 
quantity that will actually be recovered from the accumulation by the project. It is 
the most realistic assessment of recoverable quantities if only a single result were 
reported. If probabilistic methods are used, there should be at least 50 percent 
probability (P50) that the quantities actually recovered will equal or exceed the 
best estimate. Unless stated otherwise, Lundin Petroleum reports its 2C contingent 
resources.

Prospective resources

Prospective resources are those quantities of petroleum 
estimated, as of a given date, to be potentially recoverable 
from undiscovered accumulations by application of future 
development projects. Prospective resources have both an 
associated chance of discovery and chance of development. 

Oil related measurements

Currency abbreviations

Barrel (1 barrel = 159 litres)
Billion cubic feet (1 cubic foot = 0.028 m3)
Billion
Barrels of oil equivalent
Barrels of oil equivalent per day
Barrels of oil per day
Billion barrels of oil equivalent
Thousand barrels
Thousand barrels of oil equivalent

bbl  
bcf 
Bn 
boe 
boepd 
bopd  
Bn boe 
Mbbl  
Mboe  
Mboepd   Thousand barrels of oil equivalent per day
Mbopd 
Thousand barrels of oil per day
MMboe  Million barrels of oil equivalent
MMbbl   Million barrels
MMbopd   Million barrels of oil per day
Mcf 
MMscf  Million standard cubic feet
Billion standard cubic feet
Bn scf 

Thousand cubic feet 

106

Lundin Petroleum Annual Report 2018

CHF 
CAD 
EUR 
GBP 
NOK 
SEK 
USD 
TCHF 
TSEK 
TUSD 
MSEK 
MUSD 

Swiss Franc
Canadian Dollar
Euro
British Pound
Norwegian Krone
Swedish Krona
US Dollar
Thousand CHF
Thousand SEK
Thousand USD
Million SEK
Million USD

i

For further definitions of oil and gas terms and 
measurements, visit www.lundin-petroleum.com

ADDITIONAL INFORMATION 

Share Data

Share data
Since Lundin Petroleum was incorporated in May 2001 and up to 31 December 2017 the Parent Company share capital has developed 
as shown below. 

Share data

Formation of the Company 

Share split 10,000:1

New share issue

Warrants

Year

2001

2001

2001

2002

Incentive warrants

2002–2008

Valkyries Petroleum Corp. acquisition

Cancellation of shares/Bonus issue

New share issue

Total

2006

2014

2016

Quota value 
SEK

Change in number of 
shares

Total number 
of shares

Total share capital 
SEK

100.00

1,000

1,000

0.01

0.01

0.01

0.01

0.01

0.01

0.01

9,999,000

10,000,000

202,407,568

212,407,568

35,609,748

14,037,850

55,855,414

248,017,316

262,055,166

317,910,580

-6,840,250

311,070,330

29,316,115

340,386,445

340,386,445

340,386,445

100,000

100,000

2,124,076

2,480,173

2,620,552

3,179,106

3,179,106

3,478,713

3,478,713

Lundin Petroleum Annual Report 2018

107

ADDITIONAL INFORMATION 

Shareholder Information

Lundin Petroleum will publish the following interim reports:

· 2 May 2019 
· 31 July 2019 
· 31 October 2019 
· 31 January 2020 

Three month report (January–March 2019)
Six month report (January–June 2019)
Nine month report (January–September 2019)
Year end report

The reports are available on www.lundin-petroleum.com in Swedish and English directly after public announcement.

Annual General Meeting
The Annual General Meeting (AGM) is held within six months from the close of the ﬁ nancial year. All shareholders who are registered 
in the shareholders’ register and who have duly notiﬁ ed their intention to attend the AGM may do so and vote in accordance with 
their level of shareholding. Shareholders may also attend the AGM through a proxy and a shareholder shall in such a case issue a 
written and dated proxy. A proxy form is available on www.lundin-petroleum.com.

Lundin Petroleum’s AGM is to be held on Friday 29 March 2019 at 13.00 (Swedish time). Location: Vinterträdgården, Grand Hôtel, 
Södra Blasieholmshamnen 8 in Stockholm.

Attendance at the meeting
Shareholders wishing to attend the meeting shall:
·  be recorded in the share register maintained by Euroclear Sweden AB on Saturday 23 March 2019 (please note that since the record 

date is on a Saturday, shareholders must be registered in the share register on Friday 22 March 2019, at the latest); and

·  notify Lundin Petroleum of their intention to attend the meeting no later than Monday 25 March 2019 through the website www.
lundin-petroleum.com (only applicable to individuals) or by mail to Computershare AB, “Lundin Petroleum AB’s AGM”, P.O. Box 
610, SE - 182 16 Danderyd, Sweden, by telephone Int +46-8-518 01 554 or by e-mail info@computershare.se.

When registering please indicate your name, social security number/company registration number, registered shareholding, address 
and day time telephone number.

Shareholders whose shares are registered in the name of a nominee must temporarily register, through the nominee, the shares in 
their own names in order to be entitled to attend the Annual General Meeting. Since the record date is on Saturday 23 March 2019, 
such registration must be effected by Friday 22 March 2019, at the latest.

108

Lundin Petroleum Annual Report 2018

 
 
 
 
ADDITIONAL INFORMATION 

This information is information that Lundin Petroleum AB is required to make public pursuant to the Securities Markets Act. The 
information was submitted for publication at 08.00 CET on 6 March 2019.

Forward-looking statements 
Certain statements made and information contained herein constitute “forward-looking information” (within the meaning of 
applicable securities legislation). Such statements and information (together, “forward-looking statements”) relate to future events, 
including the Company’s future performance, business prospects or opportunities. Forward-looking statements include, but are not 
limited to, statements with respect to estimates of reserves and/or resources, future production levels, future capital expenditures and 
their allocation to exploration and development activities, future drilling and other exploration and development activities. Ultimate 
recovery of reserves or resources are based on forecasts of future results, estimates of amounts not yet determinable and assumptions 
of management. 

All statements other than statements of historical fact may be forward-looking statements. Statements concerning proved and 
probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reﬂ ect conclusions that 
are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or 
involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or 
performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, 
“may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) 
are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements involve known and 
unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated 
in such forward-looking statements. No assurance can be given that these expectations and assumptions will prove to be correct 
and such forward-looking statements should not be relied upon. These statements speak only as on the date of the information and 
the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required 
by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, operational 
risks (including exploration and development risks), productions costs, availability of drilling equipment, reliance on key personnel, 
reserve estimates, health, safety and environmental issues, legal risks and regulatory changes, competition, geopolitical risk, and 
ﬁ nancial risks. These risks and uncertainties are described in more detail under the heading “Risks and Risk Management” and 
elsewhere in the Company’s annual report. Readers are cautioned that the foregoing list of risk factors should not be construed 
as exhaustive. Actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-
looking statements are expressly qualiﬁ ed by this cautionary statement.

i

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Lundin Petroleum Annual Report 2018

109

Corporate Head Office
Lundin Petroleum AB (publ)
Hovslagargatan 5
SE-111 48 Stockholm, Sweden
T   +46-8-440 54 50
F   +46-8-440 54 59
W  lundin-petroleum.com

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Lundin Petroleum Annual Report 2018