Orrön Energy AB (publ) Annual Report 2019

FY2019 Annual Report · Orrön Energy AB (publ)
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From strength 
to strength 

Annual Report 2019

Lundin Petroleum is one of the leading 
independent oil and gas exploration and 
production companies in Europe. Our 
operations are focused on Norway, where 
we develop our resources efficiently and 
responsibly for a low carbon energy future.

REPORT HIGHLIGHTS

Johan Sverdrup on stream
Our success story on the Utsira High continues. 
Johan Sverdrup delivered ﬁ rst oil in October, 
well ahead of schedule and below budget.

>> page 12

Record high production
The Company delivered towards the upper end 
of the original guidance with the early start-
up of production from Johan Sverdrup and 
the continued excellent performance from the 
Edvard Grieg ﬁ eld being the main drivers.

>> page 10

A carbon neutral future
By endorsing our Decarbonisation Strategy, 
targeting carbon neutrality by 2030, we cement 
our position as one of the lowest carbon 
emitters in the industry.

Strong cash flow generation
Record high free cash ﬂ ow and net proﬁ t
generation, resulted in a proposed 2019 dividend 
of USD 1.80 per share, corresponding to 
MUSD 511.

>> page 15

>> page 4 and 56

Annual Report 2019

Strategic Report

Our business model  
Performance 2019 
Management review  
Operations 
Sustainability  

Directors’ Report

Corporate structure 
Operational and ﬁ nancial review 
Share information 
Risk management  
Corporate Governance Report 

Financial Statements and Notes

2
4
6
8
16

19
20
30
32
36

56
58
63

Financial summary 
Financial statements of the Group 
Accounting policies 
Notes to the ﬁ nancial statements of 
the Group  
69 
Financial statements of the Parent Company   92
Notes to the ﬁ nancial statements of the 
Parent Company 
Board assurance 
Auditor’s report 

96 
98
99

Additional Information

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

105

106
107
108
109
110
111
112

Sustainabilty Report 2019

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 2019

1

  
 
STRATEGIC REPORT | Our business model

Lundin Petroleum leads the way

Our vision is to be a leading successful upstream exploration and 
production company for oil and gas focused on organic growth, 
operating 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, through the application of new innovations and best 
available technology.

with a focus on organic growth
By actively pursuing new exploration opportunities in core areas and maximising recovery 
from existing fields, we aim to constantly increase our reserves and resources. 2019 was 
the sixth consecutive year we more than replaced our produced barrels. 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.

and low carbon operations 
Thanks to carbon mitigation technology, improved emissions management and commercially 
viable offset and replacement investments, Lundin Petroleum operates with one of the lowest 
carbon intensity levels in the industry – about a third of the industry world average. But we 
can, and will do more. With our Decarbonisation Strategy formalised in 2020 we are targeting 
carbon neutrality by 2030.

2

Lundin Petroleum Annual Report 2019

Lundin Petroleum Annual Report 2019

3

STRATEGIC REPORT | Performance 2019

From strength to strength 

Lundin Petroleum continues to deliver strong performance across 
the board, with industry leading low operating costs, significant 
free cash flow generation and a sustainable and growing dividend. 
These are achieved on the back of growing production rates, 
extended plateaus and responsible operations including world 
class low carbon emissions per barrel.

OPERATIONAL HIGHLIGHTS

Production

Operating cost

Reserves

93.3

Mboepd

4.03

USD/boe

693

MMboe

Contingent 
resources 

185

MMboe

FINANCIAL HIGHLIGHTS

EBITDA

1,918

MUSD

Cash flow from
 operating activities

Free 
cash flow

1,378

MUSD

1,272

MUSD

Proposed 
dividend

511

MUSD

SUSTAINABILITY HIGHLIGHTS

Safe operations

Oil spills

Carbon intensity

ESG ratings

Zero

serious injuries

Zero

recordable spills

5.4

kg CO2 /boe

Top

quartile

4

Lundin Petroleum Annual Report 2019

Lundin Petroleum Annual Report 2019

5

STRATEGIC REPORT | Management revieweview

“ The past year has been nothing

but transformational, with outstanding
operational and financial performance
and leading low carbon emissions per
produced barrel, at about one third
of the industry world average.

2019 has been one of the most 
transformational periods in Lundin 
Petroleum’s development, one in 
which we achieved first oil from 
Johan Sverdrup and doubled our 
production while keeping our
industry leading low operating cost. 

Alongside this we also formalised our ambition to produce oil 
and gas in the most sustainable and efﬁ cient manner possible 
with our Decarbonisation Strategy, targeting carbon neutrality 
by 2030.  

The early start-up of Johan Sverdrup Phase 1 in October 2019, 
was a signiﬁ cant milestone for our business and has ﬁ rmly 
laid the foundations for a period of sustainable and efﬁ cient 
production growth for years to come. The ﬁ eld has since 
ramped up quickly and ahead of expectations and at year 
end was producing about 80 percent of the Phase 1 facilities 
capacity of 440 Mbopd.

Our total production for 2019 was at the upper end of the 
original guidance for the year and our key Edvard Grieg ﬁ eld
continued to exceed expectations with operating efﬁ ciency 
ahead of guidance at 98 percent. This achievement was 
underpinned by continued reservoir outperformance and 
limited water production, which alongside the inﬁ ll drilling 
programme scheduled for 2020, enabled us to lift gross 
ultimate reserves to 300 MMboe.

Our main strategy continues to be organic growth, where 
I believe the greatest value creation exists. We pursue our 
strategy  by combining the Company’s subsurface expertise 
with  cutting edge technology to maximise recovery as well 
as identify and explore for new reservoirs and plays. As a 
result, we have already succeeded in building a business 

with over one billion barrels of net reserves and resources at a 
ﬁ nding cost of USD 0.8 per barrel. We are  still one of the most 
active explorers in Norway, investing approximately MUSD 300 
in exploration and appraisal activities in 2019, across seven 
core areas. In addition, four new development projects were 
sanctioned and a further four appraisal projects are being 
progressed towards development.

Financially we had another very strong year of free cash ﬂ ow 
generation, driven by the sale of 2.6 percent of Johan Sverdrup, 
higher production and a cost base which we continued to 
maintain at industry leading low levels of USD 4.03 per barrel. 
This coupled with the share redemption from Equinor during the 
year, drove our earnings per share and I am glad that the Board 
of Directors recommended a 22 percent increased dividend of 
USD 1.80 per share (in total MUSD 511), clearly demonstrating 
our focus on driving shareholder returns.

In 2019 the full electriﬁ cation of Edvard Grieg was sanctioned 
and will be developed together with the Johan Sverdrup Phase 
2 project. With it, we aim to produce some of the lowest carbon 
intensity barrels in the world which will result in a signiﬁ cant 
reduction in CO2 emissions from Edvard Grieg to below 1 kg per 
barrel by the end of 2022. The electriﬁ cation is a key component 
of our Decarbonisation Strategy, which was announced in 
January 2020 together with the Board of Directors’ proposal to 
change the name of the Company to Lundin Energy, this to better 
reﬂ ect our ambition and commitment to continue to play an 
important part in the future energy mix. 

I would like to thank all of my colleagues for their excellent 
performance in 2019 as well as our shareholders and the Board of
Directors for their continued support. I very much look forward 
to reporting our progress in 2020, which is set to be another 
exciting and successful year for Lundin Petroleum (soon to be 
Lundin Energy!).

Alex Schneiter
President and CEO

6

Lundin Petroleum Annual Report 2019

“ Oil and gas will continue to play 

an important role in the energy 
transition towards more renewable 
sources for decades to come.

As energy providers we are living in 
very exciting times. Humanity is going 
through an amazing transformation 
with improved living standards 
and prosperity spreading across 
the globe. Billions of people are 
being lifted out of poverty thanks 
to technological advances and the 
availability of affordable energy.  

Of course, there is a clear correlation between human 
development and energy consumption and there is a strong 
need to meet demand as prosperity rises. From the expanding 
middle classes in Asia to the urbanization of Africa, the pattern 
of energy supply is likely to change dramatically over the next 
20 years. 

The shift from coal to gas for power generation has already 
happened in the US, the UK and will be followed by the 
rest of Europe and, eventually, the rest of the world. Those 
lagging behind will be countries rich in coal resources and 
high growth in demand for electricity (such as China, India, 
Indonesia, South Africa and Turkey). Electriﬁ cation is changing 
the way we live, transport goods and people but the challenges 
we face to meet this disruption in the energy landscape, while 
limiting let alone reducing our greenhouse gas emissions, are 
signiﬁ cant.

Renewable energy’s incredible expansion will continue 
unabated as demand increase, costs drop further and new 
technologies arrive on the market. But oil and gas will also 
play an increasingly important role in the global energy 
equation as coal is phased out. As part of our social licence to 
operate, we as energy producers need to be much smarter in 
how we produce, transport and consume energy in general, 
and all of us, as consumers, must accept that we too have an 
important role to play to achieve a lower carbon future. As 
the oil and gas industry continues to meet these challenges, 
governments also have to provide the proper regulatory and 
ﬁ scal framework to encourage all sectors to decarbonise.

At Lundin Petroleum, we strive to be part of the solution while 
delivering shareholder value and continuously expanding 
our horizons. I believe the train towards a low-carbon energy 
system has left the station and Lundin Petroleum is sitting 
right up there with the train driver, being perhaps one of the 
ﬁ rst carbon neutral oil and gas producers in 2030. 

On behalf of the Board of Directors, I would like to sincerely 
thank all our loyal and dedicated employees for making 
this amazing journey possible and for turning dreams into 
reality. Finally, a big thank you to you, our shareholders and 
stakeholders, for your support. 

Ian H. Lundin
Chairman of the Board

Lundin Petroleum Annual Report 2019

7

 
STRATEGIC REPORT | Operations

Leading operational 
performance

Johan Sverdrup
on stream

1st oil

Edvard Grieg
production efficiency

98%

2P reserves
replacement ratio

150%

“ 2019 was a year of industry 

leading operational performance, 
exceeding all our key targets. 
With Johan Sverdrup start-
up ahead of schedule, plateau 
extension at Edvard Grieg and 
new project sanctions, we 
have seen a step change in our 
production levels reaching over 
150 Mboepd.

Nick Walker
Chief Operating Officer

8

Lundin Petroleum Annual Report 2019

Organic growth strategy 

Lundin Petroleum’s main strategy is organic value 

creation. We do this by combining the Company’s 

subsurface expertise with cutting-edge technology to 

maximise recovery as well as identify and explore for 

new reservoirs and plays. Through this strategy, the 

Company has succeeded in building a business with 

over one billion barrels of net reserves and resources at 

a ﬁ nding cost of USD 0.8 per barrel. Lundin Petroleum 

is one of the most active explorers in Norway, investing 

approximately MUSD 300 in exploration and appraisal 

activities in 2019, across seven core areas. In addition, 

four new development projects were sanctioned and 

a further four appraisal projects are being progressed 

towards development.

Norwegian Sea

Northern North Sea
Horda

Norway

Frosk Area

Alvheim Area

Alvheim
Edvard Grieg
Utsira High Area

Edvard Grieg Infills
Solveig
Rolvsnes

Gekko

Johan Sverdrup
Phase 2

Jorvik/Tellus East
Lille Prinsen

Sele High

Oslo

Southern Barents 
Sea Area

Alta/Gohta

Harstad

7

core areas

7

new discoveries

4

projects in
appraisal phase

4

projects
underway

Central Graben

Core Area

Production

Appraisal/development project

Lundin Petroleum Annual Report 2019

9

STRATEGIC REPORT | Operations

Step change in production

Our continued excellent facilities and 
reservoir performance has enabled us to 
meet or exceed production guidance for 
the last 18 quarters running.

Targeting
> 200 
Mboepd
with upsides

Long-term
guidance
160–170
Mboepd

145–165
Mboepd

93.3

Mboepd

2019

2020

2021 onwards

Record high production 2019

Lundin Petroleum delivered towards the top end 
of the guidance range in 2019 with an average 
production of 93.3 Mboepd, a record high for 
the Company. The accelerated start-up and quick 
ramp-up of the Johan Sverdrup ﬁ eld, along 
with continued excellent facilities and reservoir 
performance from both the Edvard Grieg ﬁ eld 
and the Alvheim Area, were the main drivers 
behind this result. 

Edvard Grieg plateau extension

The Edvard Grieg ﬁ eld has continued to deliver 
reservoir performance above expectations. 
Ultimate 2P reserves are increased to 300 
MMboe. Combined with the Solveig Phase 1 
project and the Rolvsnes extended well test 
(EWT) both  scheduled to come on stream in 
2021, the facility is now expected to remain 
at plateau levels to at least end of 2022, an 
extension of over four years compared to the 
original Plan for Development and Operation 
(PDO) proﬁ le.

Production growth continues

The outlook for continued production growth 
remains strong, with further ramp-up and 
development of the Johan Sverdrup ﬁ eld, plateau 
extension at Edvard Grieg and our plan to deliver 
further organic growth.

10

Lundin Petroleum Annual Report 2019

Strong reserves replacement

Reserves Summary

End 2018

Equity sale 2.6% Johan Sverdrup

End 2018 adjusted

2019 production

Revisions and new projects

Reserves end 2019

Reserves replacement ratio

Proved plus 
Probable
(2P reserves)

Proved plus 
Probable
plus Possible
(3P reserves)

745.4

-69.6

675.9

-34.7

+52.1

693.3

150%

900.9

-82.0

818.8

-34.7

+73.4

857.5

212%

Continuing track record of reserves replacement 
exceeding production 

In 2019, the Solveig Phase 1 project, the Rolvsnes EWT project and 
the Edvard Grieg inﬁ ll well programme were all sanctioned and 
accordingly the associated contingent resources were promoted to 
reserves. This has provided a 2P reserves replacement ratio of 150 
percent after adjustment for the sale of 2.6 percent stake in the Johan 
Sverdrup development project. This is the sixth consecutive year that 
Lundin Petroleum has more than replaced produced barrels with 
reserves.  

Oil and natural gas liquids (NGL) represent 95 percent of the 2P 
reserves and all reserve estimates are independently audited by ERC 
Equipoise Ltd. (ERCE).

Contingent resources

Lundin Petroleum’s contingent resources at year end 2019 amounted 
to 185 MMboe, which represents a decrease of 40 MMboe from year 
end 2018, primarily driven by the projects matured to reserves. 
Several small discoveries have been added to the resource base along 
with the addition of the Water Alternating Gas project on Edvard 
Grieg and acquisition of an additional 30 percent interest in the 
Rolvsnes discovery.

The resource estimate of the Alta discovery has been reduced based 
on further technical evaluation and new seismic data. A standalone 
development of the Alta and nearby Gohta discovery is no longer 
considered to be commercial and a subsea tie-back development to 
either Johan Castberg or another future host in the area is considered 
the most viable option. The Company is drilling several large 
prospects in the Loppa High Area in 2020, which if successful could 
change the dynamic of commercial options for this area.

Exploration 

Lundin Petroleum was involved in a record high 17 exploration and 
appraisal wells in 2019, making seven discoveries along with positive 
results from two appraisal wells. The high activity level will continue 
in 2020 with a balanced drilling programme involving 10 exploration 
and appraisal wells targeting over 650 MMboe of net unrisked 
resources. 

2P reserves end 2019 

693

MMboe

Edvard Grieg Area

Ivar Aasen
Alvheim Area

Johan Sverdrup 

Contingent resources 
end 2019 

Edvard Grieg Area

Alta/Gohta

185

MMboe

Johan Sverdrup

Other

Alvheim Area 

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 110.

Lundin Petroleum Annual Report 2019

11

 
STRATEGIC REPORT | Operations

Johan Sverdrup 
- in a league of its own

Production commenced at Johan Sverdrup Phase 1 
on 5 October 2019 and marked a pivotal milestone for 
Lundin Petroleum. 

It was delivered almost two months in advance of the Plan for Development and 
Operation (PDO) schedule and at approximately NOK 40 billion gross below the original 
budget. At year end 2019, the field was producing around 80 percent of facility capacity 
from eight pre-drilled production wells which were all quickly brought on stream by mid 
November. Phase 1 plateau rate of 440 Mbopd gross is expected to be achieved during 
summer 2020 when an additional two wells have been drilled. During the first months of 
operation, the Johan Sverdrup facility has performed to a very high level, a testament to 
the quality of the construction and operational excellence.

The PDO for Johan Sverdrup Phase 2 was approved in May 2019 and will involve the 
installation of an additional processing platform at the field centre, a major module on the 
existing riser platform and subsea facilities to reach the satellite areas of the field. The 
project will bring gross production capacity to 660 Mbopd, and is progressing according 
to plan with first oil scheduled during the fourth quarter of 2022.

Gross resources 
2.2–3.2
 billion boe

Costs reduced 
~50% 
since PDO
including foreign exchange savings

Phase 1 early start-up
5 October 2019

Phase 2 start-up
Q4 2022 

Production capacity
440 Mbopd

Production capacity
660 Mbopd 

Full field 
breakeven price
<20 USD/boe

Operating cost 
<2 USD/bbl 
from Phase 1 plateau

12

Lundin Petroleum Annual Report 2019

 
“ With Johan Sverdrup 

we have laid the foundation 
for sustainable and efficient 
production growth. It is truly a 
success story, creating value for 
our Company and society at large, 
for decades to come.

Kristin Færøvik
Managing Director, Lundin Norway

Lundin Petroleum Annual Report 2019

13

STRATEGIC REPORT | Operations

The history of Johan Sverdrup 
- unlocking the secrets of the Utsira High
During the past 40 years the Utsira High Area in the Norwegian North Sea 
was explored by several companies without any notable success. 

It was not until 2007 that Lundin Petroleum discovered the Edvard Grieg field and with it developed a 
deeper technical understanding and in-depth knowledge of the underlying geology. This, in combination 
with the persistency of Hans Christen Rønnevik and his exploration team, convinced us that the Utsira 
High Area still had vast potential. With the support of an entrepreneurial management team, the dots were 
connected and the Johan Sverdrup field was discovered. Our success story went from strength to strength.

Following the Johan Sverdrup oil discovery in September 2010, an extensive appraisal progamme was 
conducted to determine the extent of the field. “The field exceeded all our expectations with excellent 
reservoir quality and significantly larger resources than estimated.” Alex Schneiter, President and CEO of 
Lundin Petroleum comments. In 2015, the Norwegian authorities approved the Plan for Development and 
Operation (PDO) and only 9 years after the first discovery, first oil was achieved on 5 October 2019, ahead 
of schedule and below budget.

It took 40 years to unlock the secret of the Utsira High, a secret that has transformed Lundin Petroleum and 
the wider Norwegian oil and gas industry. Today the Johan Sverdrup field is estimated to hold gross reserves 
of between 2.2 and 3.2 Bn boe, making it one of the largest discoveries ever made on the Norwegian 
Continental Shelf. The gross production capacity of Johan Sverdrup is estimated at 440 Mbopd with Phase 
1 plateau production expected to be reached by the summer of 2020, and increasing to 660 Mbopd after 
Phase 2 commences production in the fourth quarter of 2022. At its peak, the field will account for around 
one quarter of all petroleum production in Norway. 

The production will flow through one of the world’s most advanced and efficient production platforms, which 
in addition is being operated with power from shore making it one of the most carbon efficient fields in the 
world, with CO2 emissions of below 1 kg per barrel, about one-twentieth of the world average.

Following the discoveries of Edvard Grieg, which quadrupled our production, and Johan Sverdrup, which will 
double it once again, we still believe there is potential in the Utsira High Area. 

14

Lundin Petroleum Annual Report 2019

 
Decarbonisation 
Strategy
Lundin Petroleum’s ambition is 
to achieve carbon neutrality as 
an oil and gas exploration and 
production company by 2030.

With a growing demand for oil and gas we recognise 
the challenges of climate change. By focusing our 
operations in Norway, a world leader in terms of 
industry regulations and carbon reduction efforts, 
as well as implementing best available technology 
on our production facilities, we actively seek to 
minimise our environmental footprint.

Aiming to be one of the leading companies in our 
industry in terms of low carbon emissions, Lundin 
Petroleum has formalised a Decarbonisation Strategy 
(DCS). This conﬁ rms our continued focus on our core 
oil and gas activities, while also committing to ﬁ nd 
and support innovative ways to further reduce our 
exploration and production related CO2 emissions.

Over the course of 2019, we have taken a number of 
steps in furtherance of our DCS. The Company has 
sanctioned the full electriﬁ cation of the Edvard Grieg 
ﬁ eld, which is expected to take place at the end of 
2022, when additional power capacity is available 
for the Utsira High Area. This investment will result 
in achieving record low carbon intensity levels of 
below 1 kg of CO2 per barrel of oil produced on this 
platform.

In addition, we have invested in a hydropower 
project in Norway and in a wind farm project in 
Finland (January 2020) to replace part of our net 
electricity usage from power from shore through 
renewable power generation. The projects will 
also provide a natural hedge to electricity price 
ﬂ uctuation.

On an annual basis we have also committed to 
offset our carbon emissions associated with all air 
travel, including helicopter transport, used in our 
operations with natural carbon capture.

With our DCS and carbon reduction initiatives in 
place, Lundin Petroleum continues to provide the 
world with the energy it requires for global economic 
and social prosperity, while addressing and reducing 
our environmental impact, a mission already set out 
in our ﬁ rst climate statement in 2007.

You will ﬁ nd more information on our 
Decarbonisation Strategy and the steps we have 
taken to date in our Sustainability Report 2019 and 
on our website, www.lundin-petroleum.com.

Lundin Petroleum Annual Report 2019

15

Power from shore
To further solidify Lundin Petroleum’s 
position as a world leading low carbon 
emission oil producer the plan to 
electrify the whole Utsira High Area 
was finalised in 2019. 

The power from shore system is already in place for 
Johan Sverdrup Phase 1 and will be extended with 
Phase 2 of the development to include the Edvard 
Grieg, Ivar Aasen, Gina Krog and Sleipner fields. 

The whole Utsira High Area will be supplied with 
land-based power via underwater electrical cables, 
and will be fully operational in 2022. The power grid 
is connected to the Nord Pool power market, which is 
sourced mainly from renewable energy. Our net capital 
investment in the Utsira High Area power grid amounts 
to approximately MUSD 500, of which more than half 
(MUSD 270) has already been spent by year end 2019, 
and contributes to a total capacity of 300 megawatts for 
the area.

This full electrification project will be transformational 
for Lundin Petroleum, providing our operations on the 
Utsira High Area with electricity for the next 50 years. 
This will reduce our CO2 emissions intensity to world 
leading levels of below 1 kg per barrel for this area, 
while at the same time enhancing the economic return 
from our operations. 

STRATEGIC REPORT | Sustainability

Sustainable operations 

Lundin Petroleum develops oil and gas 
resources efficiently and responsibly for a 
sustainable and low carbon energy future. 

Ethical 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, taking into consideration the interests of our Company, 
employees, shareholders, other stakeholders and society at large. 

Our sustainability work is an evolving journey, one which Lundin Petroleum 
is committed to pursue because we believe it’s the right thing to do. Since the 
Company´s inception in 2001, we have been at the forefront of addressing 
key environmental, social and governance (ESG) issues. For example, in 
2019 we elaborated a new Climate Strategy Statement and formalised our 
Decarbonisation Strategy, targeting carbon neutrality by 2030.

Since the Paris Climate Agreement in 2015, climate change has become 
central to the global agenda and to ours. Affordable, reliable energy 
is essential to economic development and prosperity, yet the world is 
confronted with the challenge of supplying sustainable energy. We 
acknowledge this, and seek to contribute to the transition towards a low 
carbon society, while also addressing the challenge of reaching an equitable 
energy balance. 

Lundin Petroleum produces oil and gas in Norway, a leading country in 
terms of ESG. We operate with one of the lowest carbon emissions intensity 
levels in the industry, at approximately a third of the world average. We 
strive for excellence and seek continuous improvements in everything we do, 
including reducing our carbon footprint. We actively push the frontiers of 
research and development, where our teams in Norway have a strong, proven 
skillset.

With the full electriﬁ cation of our operated Edvard Grieg platform by 
2022, the carbon emissions intensity level for both Edvard Grieg and Johan 
Sverdrup, in which we have a 20 percent working interest, will reach below 
1 kg CO2 per barrel of oil produced. These record low levels of CO2 emissions 
make the ﬁ elds two of the most carbon efﬁ cient offshore ﬁ elds in the world. 
On a net equity basis, our overall carbon footprint in 2019 was 5.4 kg CO2 per 
barrel of oil produced.

Over the course of 2019, we have held discussions and conducted training at 
all levels of the organisation, in order to identify opportunities for Lundin 
Petroleum to continually play a positive role in the energy transition. 

Our Decarbonisation Strategy (see page 15), approved by our Board of 
Directors, together with a joint corporate and operational management team 
workshop on climate change, were the cornerstones for moving forward on a 
sustainable energy roadmap in 2019. 

By engaging with leading rating agencies Lundin Petroleum’s ESG 
performance is continuously evaluated and is recognised as being among the 
top quartile performers. 

“ Our Decarbonisation 

Strategy sets out our 
commitment to become carbon 
neutral across our operations 
by 2030.

Zomo Fisher 
Vice President Sustainability

Our ESG journey

2019

2018

2017

Decarbonisation Strategy
Climate Strategy Statement
Corporate Responsibility E-learning

Diversity Policy

New Code of Conduct

2016

Competition Law Policy

2015

2014

2013

2012

2011

2010

2009

2008

2007

HSEQ Leadership Charter
First GRI Sustainability Report

Contractor Declaration
First Corporate Responsibility
E-learning

Biodiversity Statement
UN Call to Action

EITI Supporting Company

Stakeholder Engagement Policy
UN Guiding Principles on Business
& Human Rights

Human Rights Policy
Anti-Corruption Policy
UN Global Compact

Carbon Disclosure Project

First Climate Change Statement

2006

Whistleblowing Statement

2005

2004

Sustainable Investment Programme
Corporate Donations Policy

Community Relations Policy

HSE Management System

2003

Human Rights Primer

Environmental Policy

Health and Safety Policy

Code of Conduct

2002

2001

Initiatives / Corporate Governing Documents

16

Lundin Petroleum Annual Report 2019

Health, safety and 
environment (HSE)
We recognise the value of the people working for us 
and consider their well-being a major contributor 
to our business success. Our objective, as such, is 
to provide a safe and healthy environment for all 
our employees. Through internal health, safety and 
environmental campaigns, which we call “reﬂ exes”, 
we actively identify and assess potential risks, 
learn from past incidents and implement relevant 
mitigation measures. 

The result of our robust HSE culture is reﬂ ected 
in our 2019 performance, by zero serious injuries, 
zero recordable oil spills, world leading low carbon 
emissions of 5.4 kg CO2per boe, on a net equity 
basis, and recognition as a top quartile performer in 
ESG ratings.

Sustainability reporting
Lundin Petroleum’s Sustainability Report provides 
comprehensive information on our approach 
to managing key environmental, social and 
governance (ESG) issues within the industry. It 
outlines how we integrate this work into our 
business model to create long-term sustainable 
value for all stakeholders. 

It conforms to the 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. 

Our Sustainability Report 2019 is available to read 
at www.lundin-petroleum.com.

“ Lundin Petroleum takes 

pride in continuously and 
proactively addressing key 
environmental, social and 
governance issues.

Christine Batruch
Former Vice President Corporate 
Responsibility

Christine Batruch has been a valuable 
employee of the Company for close to 20 years 
and an appreciated Vice President Corporate 
Responsibility since 2002. On 31 December 2019, 
she stepped down from this position, but the 
Company will continue to leverage Christine’s 
competences in the ESG area through her 
Strategic Advisory role.

Lundin Petroleum Annual Report 2019

17

 
DIRECTORS’ REPORT

18

Lundin Petroleum Annual Report 2019

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 Parent Company has no foreign branches. 

Changes in the Group
In July 2019, Lundin Petroleum entered into a sales and 
purchase agreement for the sale of a 2.6 percent working 
interest in the Johan Sverdrup development project to Equinor. 
The transaction decreased the Company’s working interest in 
the Johan Sverdrup development project to 20 percent. 

In October 2019, Lundin Petroleum signed an agreement with 
Sognekraft AS to acquire a 50 percent non-operated interest in 
the Leikanger hydropower project, in mid-west Norway. The 
completion of the transaction remains subject to customary 
closing conditions, expected to occur in early 2020. 

Corporate structure as at 31 December 2019

Lundin Petroleum AB (S)

Lundin Petroleum Holding BV (N)

Lundin Energy 
Holding BV (N)

Jurisdiction

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

Netherlands
Norway
Sweden
Switzerland

Lundin Norway AS (No)

Lundin Russia BV (N)

Lundin Petroleum SA (Sw)

Lundin Lagansky BV (N) 

Lundin Petroleum 
Marketing SA (Sw)

Lundin Petroleum 
Services 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.

Lundin Petroleum Annual Report 2019

19

DIRECTORS’ REPORT | Operational and financial review

Operational review

All the reported numbers and updates in the operational review 
relate to the ﬁ nancial year ended 31 December 2019 unless 
otherwise speciﬁ ed.

Norway

Reserves and resources
Lundin Petroleum has 693 million barrels of oil equivalent 
(MMboe) of proved plus probable net reserves and 858 MMboe 
of proved plus probable plus possible net reserves as at 
31 December 2019 as certiﬁ ed by an independent third party. 
Lundin Petroleum has additional oil and gas resources which 
classify as contingent resources and the best estimate contingent 
resources net to Lundin Petroleum amounted to 185 MMboe 
as at 31 December 2019. The proved plus probable reserves 
replacement ratio for 2019 was 150 percent.

Production
Production was 93.3 thousand barrels of oil equivalent per day 
(Mboepd) (compared to 81.1 Mboepd for 2018) which was above 
the mid-point of the updated guidance for the year of between 
90 and 95 Mboepd, and 10 percent above the mid-point of the 
original production guidance of between 75 and 95 Mboepd. 
This result is due to early start-up and quick ramp-up at the 
Johan Sverdrup ﬁ eld as well as continued strong performance 
at both the Edvard Grieg ﬁ eld and the Alvheim Area. As a result 
of the quick ramp-up of Johan Sverdrup, production at year end 
2019 was over 150 Mboepd.

Operating cost, including netting off tariff income, was USD 4.03 
per boe, which is 5 percent below guidance of USD 4.25 per boe. 
This result is due to higher production volumes.

Production in Mboepd

2019

2018

Norway
Crude oil
Gas
Total production

83.5
9.8
93.3

71.9
9.2
81.1

Production in 
Mboepd

Johan Sverdrup
Edvard Grieg
Ivar Aasen
Alvheim
Volund

Bøyla

Gaupe

WI1

20%
65%
1.385%
15%
35%

15%

40%

Quantity in Mboepd

1 Lundin Petroleum’s working interest (WI)

2019

2018

14.0
63.7
0.8
9.1
4.8

0.9

–

93.3

–
63.6
0.9
9.3
6.5

0.7

0.1

81.1

Production from Johan Sverdrup Phase 1 commenced on 
5 October 2019, which was at the front of the guidance range 
for ﬁ rst oil. Production has since ramped up quickly and 
ahead of expectations from the eight pre-drilled production 
wells and as at year end 2019 the ﬁ eld was producing around 
350 thousand barrels of oil per day (Mbopd) gross, which is 
about 80 percent of the Phase 1 facilities capacity of 440 Mbopd. 
Initial reservoir performance is excellent and well productivities 
are above expectations. It will require the drilling of two new 
production wells to achieve Phase 1 plateau, the ﬁ rst of these 
commenced in January 2020 with the second expected on 
stream by the summer of 2020. The twelve pre-drilled water 
injection wells have been commissioned and water injection 
levels are more than supporting production offtake from the 
reservoir. The facilities have performed to a high standard, 
providing a production efﬁ ciency during the ramp-up phase 
above expectations at 94 percent. Operating costs for the Johan 
Sverdrup ﬁ eld were USD 2.40 per boe.

Production from the Edvard Grieg ﬁ eld was slightly ahead of 
forecast, supported by production efﬁ ciency ahead of guidance 
at 98 percent. Reservoir performance continues to exceed 
expectations; with limited water production and total well 
potential signiﬁ cantly higher than available facilities capacity. 
A three-well inﬁ ll drilling programme planned to commence 
in 2020 has been sanctioned, providing increased reserves of 
18 MMboe gross and taking the gross ﬁ eld ultimate proved 
plus probable reserves to 300 MMboe including historical 

20

Lundin Petroleum Annual Report 2019

production. The Rowan Viking jack-up rig, used to drill all the 
existing development wells has been contracted for the inﬁ ll 
programme. Based on the ﬁ eld performance and the addition of 
the Solveig and Rolvsnes tie-back projects, the forecast plateau 
production period through the Edvard Grieg facilities has been 
extended to at least the end of 2022. During the second quarter 
2019, a dual-branch exploration well made oil discoveries at 
Jorvik and Tellus East on the eastern edge of the Edvard Grieg 
ﬁ eld. Both areas can be accessed with wells drilled from the 
platform, with Jorvik the target of one of the planned wells in 
the ﬁ rst inﬁ ll campaign. Operating costs for the Edvard Grieg 
ﬁ eld, including netting off tariff income, were USD 4.18 per boe. 

The plan to fully electrify the Edvard Grieg platform has been 
ﬁ nalised in conjunction with the Utsira High Area power grid 
that is being developed together with the Johan Sverdrup Phase 
2 project. The Edvard Grieg electriﬁ cation project, which will 
become operational in 2022, involves the retirement of the 
existing gas turbine power generation system on the platform, 
installation of electric boilers to provide process heat and 
installation of a power cable from Johan Sverdrup to Edvard 
Grieg. The project will result in a signiﬁ cant reduction in CO2 
emissions from Edvard Grieg of approximately 3.6 million 
tonnes from 2022 to end of ﬁ eld life, taking CO2 emissions for 
the area to below 1 kg per boe, about one-twentieth of the world 
average. Additionally, the project will reduce operating costs, 
reduce carbon taxes and increase operating efﬁ ciency, which is 
partially offset by electricity power purchases from the grid.

Production from the Ivar Aasen ﬁ eld was in line with forecast. 
Two inﬁ ll wells have been drilled during 2019, which are both 
producing in line with expectations.

Production from the Alvheim Area, consisting of the Alvheim, 
Volund and Bøyla ﬁ elds, was slightly ahead of forecast. 
Production efﬁ ciency for the Alvheim FPSO was ahead of 
expectations at 97 percent. Two production wells came on 
stream during 2019, a sidetrack inﬁ ll well at the Volund ﬁ eld 
and the two-branch Frosk test producer (which is produced 
through the Bøyla facilities). Both wells are producing in line 
with expectations. The Frosk well also included the drilling of 
two pilot holes, one of which tested the Froskelår North East 
prospect making a small oil discovery. In the third quarter 
2019, a three-branch pilot well aimed at de-risking inﬁ ll well 
opportunities in the Alvheim ﬁ eld was drilled, overall results 
were above expectations and will lead to an inﬁ ll well to be 
drilled in 2020. Operating costs for the Alvheim Area were 
USD 5.79 per boe. 

Development
Johan Sverdrup 
The Johan Sverdrup Phase 1 project has been developed as a ﬁ eld 
centre of four platforms - drilling, processing, living quarters 
and riser platform. Phase 1 of the project has been delivered 
below the original capital budget, with a current estimate of 
gross NOK 83 billion (nominal), representing a saving to date 
of approximately NOK 40 billion compared to the Phase 1 PDO 
estimate of gross NOK 123 billion (nominal). Less than ten 
percent of the current Phase 1 capital estimate remains to be 
spent on ﬁ nal completion of the production facilities and on 
ﬁ fteen new Phase 1 platform development wells, to be drilled 
over the period from the ﬁ rst quarter of 2020 to 2023. 

The Phase 2 PDO was submitted to the Norwegian Ministry of 
Petroleum and Energy in August 2018 and was approved in 
May 2019. Phase 2 involves a second processing platform bridge 
linked to the Phase 1 ﬁ eld centre, subsea facilities to allow for 
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 wells are planned to be drilled in connection 
with the Phase 2 development. Phase 2 ﬁ rst oil is scheduled in 
the fourth quarter of 2022, which will take the gross plateau 
production capacity to 660 Mbopd. Full ﬁ eld breakeven oil price, 
including past investments, is estimated at below USD 20 per 
boe.

The Phase 2 capital expenditure is estimated at gross 
NOK 41 billion (nominal), which is unchanged from the Phase 
2 PDO estimate and over a 50 percent saving from the original 
estimate in the Phase 1 PDO. The major topsides, jacket and 
Subsea Production System contracts, have been awarded. 
Construction has commenced on the second processing platform 
topsides and as well as the new modules to be installed on the 
existing Riser Platform. Phase 2 of the project is progressing to 
plan and is over 25 percent complete.

The ﬁ eld is being operated with power supplied from shore and 
will be one of the lowest CO2 emitting ﬁ elds in the world, with 
CO2 emissions of below 1 kg per boe, about one-twentieth of 
the world average. Post Phase 1 plateau, operating costs will be 
below USD 2 per boe.

Greater Edvard Grieg Area tie-back projects
The PDO for the Solveig Phase 1 project was approved by the 
Norwegian Ministry of Petroleum and Energy in June 2019. 
Solveig is the ﬁ rst Edvard Grieg subsea tie-back development and 
will contribute to keeping the Edvard Grieg platform ﬁ lled to 
capacity for an extended time period. Phase 1 will be developed 

Development

Field

Johan Sverdrup
Solveig Phase 1
Rolvsnes EWT

WI

20%
65%
80%

Operator

Equinor
Lundin Norway
Lundin Norway

Estimated 
gross reserves

2.2–3.2 Bn boe
57 MMboe
–

Production start 
expected

Expected gross 
plateau production

October 2019
Q1 2021
Q2 2021

660 Mbopd
30 Mboepd
 3 Mboepd

Lundin Petroleum Annual Report 2019

21

 
DIRECTORS’ REPORT | Operational and financial review

with three oil production wells and two water injection wells 
and will achieve gross peak production of 30 Mboepd, with ﬁ rst 
oil scheduled in the ﬁ rst quarter of 2021. 

Solveig Phase 1 gross proved plus probable reserves are 
estimated at 57 MMboe. The capital cost of the development 
is estimated at MUSD 810 gross, with a breakeven oil price 
of below USD 30 per boe. The potential for further phases 
of development, which will capture the upside potential in 
the discovered resources, will be de-risked by production 
performance from Phase 1.

results were below expectations, leading to a reduction in 
the resource estimate and a commercial development of the 
discovery is not considered viable. The data collected from the 
well will be used in the assessment of further prospectivity in 
the area. 

Exploration
Fifteen exploration wells were completed in 2019 yielding seven 
oil and gas discoveries and adding net resources of between 10 
and 50 MMboe. Exploration and appraisal expenditure in 2019 
was MUSD 298.

The production application for the Rolvsnes Extended Well Test 
(EWT) was approved by the Norwegian Ministry of Petroleum 
and Energy in July 2019. The Rolvsnes EWT project will be 
conducted through a 3 km subsea tie-back of the existing 
Rolvsnes horizontal well to the Edvard Grieg platform. The 
project is being implemented together with the Solveig project 
to take advantage of contracting and implementation synergies, 
with ﬁ rst oil scheduled in the second quarter 2021.

In February 2019, the Gjøkåsen Shallow prospect in PL857 and 
the Pointer/Setter dual target prospect in PL767, both located in 
the southern Barents Sea, were drilled and both wells were dry.

In March 2019, the Froskelår Main prospect in PL869 in the 
Alvheim Area proved an oil and gas discovery. Froskelår Main 
will be evaluated as part of a potential joint development with 
the Frosk discovery.

Both Edvard Grieg Area tie-back projects are progressing 
according to plan, with the Solveig Phase 1 project now over 
20 percent complete and the Rolvsnes EWT project over 35 
percent complete. All of the key contracts have been awarded 
and modiﬁ cations at the Edvard Grieg platform commenced in 
May 2019.

Appraisal
In July 2019, an appraisal well was completed on the Lille 
Prinsen oil discovery made in 2018 in PL167 located in the 
Utsira High Area of the North Sea. The appraisal well was drilled 
1 km west of the discovery well in the downdip Outer Wedge 
area, making an oil discovery. Other segments of Lille Prinsen 
are being evaluated for further delineation.

Following the extended well test on the Alta discovery in 2018 
and the acquisition of a new 3D seismic (Topseis), the contingent 
resource estimate for the Alta discovery has been adjusted 
downwards. A standalone development of the Alta and nearby 
Gohta discoveries is no longer considered to be commercial, 
and a subsea tie-back development to either Johan Castberg or 
another future host development in the area is considered the 
most viable option. Lundin Petroleum is drilling several large 
prospects in the Loppa High Area in 2020, which if successful 
could change the dynamic of commercial options for this area.

In February 2020, an appraisal well was completed on the 
Balderbrå gas discovery in PL894 in the Norwegian Sea. The 

In April 2019, the Gjøkåsen Deep prospect in PL857 in the 
southeastern Barents Sea, the Vinstra/Otta prospect in PL539 
located in the Mandal High Area of the North Sea and the JK 
prospect in PL916 located in the north of the Utsira High Area of 
the North Sea, were all drilled and all three wells were dry.

In June 2019, the Korpfjell Deep prospect in PL859 in the 
southeastern Barents Sea was drilled and was dry.

In June 2019, the Jorvik and Tellus East prospects on the 
eastern edge of the Edvard Grieg ﬁ eld in PL338 proved two oil 
discoveries. At Jorvik, the well encountered oil in 30 metres 
of conglomerate reservoir of Triassic age with a thin, high 
quality sandstone above. This combination of conglomerate 
and sandstone reservoir types are also found on the southern 
and eastern part of Edvard Grieg. At Tellus East, the well 
encountered a gross oil column of 60 metres in porous, 
weathered basement reservoir. The combined gross resources 
of Jorvik and Tellus East are estimated to be between 4 and 
37 MMboe and both can be developed with wells from the 
Edvard Grieg platform.

In June 2019, the Froskelår North East prospect was drilled as 
part of the Frosk test producer and proved an oil discovery. The 
discovery is estimated by the operator to contain gross resources 
of between 2 and 10 MMboe and is potentially commercial as 
part of a Frosk/Froskelår development.

2019 appraisal well programme 

Licence

Operator

PL167

PL203

Equinor

AkerBP

PL894 1

Wintershall DEA

 WI

20%

15%

10%

Well

Lille Prinsen 

Spud Date

May 2019

Status

Completed July 2019

Alvheim Inﬁ ll Pilots

August 2019

Completed September 2019

Balderbrå

January 2020

Completed February 2020

1 subject to closing of deal with Wintershall DEA

22

Lundin Petroleum Annual Report 2019

 
2019 exploration well programme 

Licence

Operator

PL857
PL767
PL869
PL857
PL338
PL869
PL539
PL916
PL859
PL758
PL869
PL815
PL921
PL896
PL917
PL820S
PL917

Equinor
Lundin Norway
AkerBP
Equinor
Lundin Norway
AkerBP
MOL
AkerBP
Equinor
Capricorn
AkerBP
Lundin Norway
Equinor
Wintershall DEA
ConocoPhillips
MOL
ConocoPhillips

WI

20%
50%
20%
20%
65%
20%
20%
20%
15%
20%
20%
60%
15%
30%
20%
40%
20%

Well

Spud Date

Result

December 2018
Gjøkåsen Shallow
January 2019
Pointer/Setter
January 2019
Froskelår Main
February 2019
Gjøkåsen Deep
Jorvik/Tellus East
March 2019
Froskelår North East March 2019
Vinstra/Otta
JK
Korpfjell Deep
Lynghaug
Rumpetroll
Goddo
Gladsheim
Toutatis
Enniberg
Evra/Iving
Hasselbaink

April 2019
April 2019
June 2019 
June 2019
June 2019 
July 2019
September 2019
November 2019
November 2019
November 2019
January 2020

Dry
Dry
Oil & Gas Discovery
Dry
Two Oil Discoveries
Oil Discovery
Dry 
Dry 
Dry
Dry
Dry
Oil Discovery
Dry
Oil Discovery
Oil & Gas Discovery
Ongoing
Dry

In July 2019, the Lynghaug prospect in PL758 in the Norwegian 
Sea, and the Rumpetroll prospect in PL869 in the Alvheim Area, 
were drilled and both wells were dry.

In August 2019, the Goddo prospect in PL815 located on the 
Utsira High was drilled and proved an oil discovery. The main 
objective of the well was to prove oil in porous basement 
similar to what is found in the Rolvsnes discovery located to 
the northwest. The Goddo well encountered weathered and 
fractured basement with an estimated gross oil column of 
20 metres, with reservoir of similar characteristics as found 
in Rolvsnes, but the two discoveries are not connected. 
Gross resources at Goddo are estimated to be between 1 and 
10 MMboe, with further upside potential in the larger Goddo 
area and surrounding prospective basement. The results from 
the Rolvsnes EWT will provide important reservoir performance 
data in relation to the commercialisation of the wider basement 
opportunity on the Utsira High.

In October 2019, the Gladsheim prospect in PL921 in the 
Northern North Sea was drilled and was dry. 

In November 2019, the Toutatis prospect in PL896 in the 
Norwegian Sea was drilled and made a minor non-commercial 
oil and gas discovery.

In November 2019, drilling started on the Evra/Iving prospects 
in PL820S, located east of Alvheim in the North Sea. The dual 
target well is testing the injectite sandstone reservoir of the Evra 
prospect and further below, the Jurassic/Triassic reservoirs of the 
Iving prospect.

In January 2020, the Enniberg prospect in PL917 east of the 
Alvheim Area in the North Sea was drilled and made a minor 
non-commercial oil and gas discovery. Following which the 
Hasselbaink prospect in the same licence was drilled and was 
dry.

Research and Development
The Group invested MUSD 12.7 in research and development 
(R&D) in 2019. 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. About one-third of the R&D investments 
have been used to focus on external environment, energy 
efﬁ ciency and CO2 emissions reduction. 

Decarbonisation Strategy
In January 2020, Lundin Petroleum announced its 
Decarbonisation Strategy with the target to become carbon 
neutral in its exploration and production activities by 2030. 
The Company currently has industry leading low carbon 
emissions with average net carbon intensity for all assets of 
5.4 kg CO2 per boe for 2019. This performance is set to improve 
further as Johan Sverdrup is already fully electriﬁ ed from 
shore and Edvard Grieg is being fully electriﬁ ed as part of the 
recently announced Utsira High Area power solution. This will 
reduce the average net carbon intensity from the Company’s 
producing assets to below 2 kg CO2 per boe from 2023, which is 
approximately one-tenth the world average. Additionally, from 
2018 the Company has offset the emissions associated with all 
air travel, including helicopter transport, used in its operations 
with natural carbon capture.

With the electriﬁ cation of the Utsira High Area, Lundin 
Petroleum will be using around 500 GWh per annum net of 
electricity from 2022 from Nord Pool, the Nordic countries’ 
electricity transmission system, the majority of which is 
generated from renewable energy sources (estimated at about 
two thirds of the total electricity usage). In order to replace 
the Company’s net electricity usage at Johan Sverdrup and 
subsequently Edvard Grieg, direct and proﬁ table investment in 
renewable energy will be undertaken.

Lundin Petroleum Annual Report 2019

23

 
DIRECTORS’ REPORT | Operational and financial review

In October 2019, Lundin Petroleum signed an agreement with 
Sognekraft AS to acquire a 50 percent non-operated interest 
in the Leikanger hydropower project, in mid-west Norway. 
Leikanger will produce around 208 GWh per annum gross, once 
it is fully operational in 2021, from a river run off hydropower 
generation scheme. The investment to Lundin Petroleum, 
including the acquisition cost, is approximately MUSD 60 over 
the three year period 2019 to 2021 and the project will be free 
cash ﬂ ow positive from 2022. The completion of the transaction 
remains subject to customary closing conditions, expected to 
occur in early 2020.

In January 2020, Lundin Petroleum concluded a transaction 
with OX2 AB (OX2) to acquire a 100 percent interest in the 
Metsälamminkangas (MLK) wind farm project, in mid Finland. 
MLK will produce around 400 GWh per annum gross, once it 
is fully operational in 2022, from 24 onshore wind turbines. 
The MLK operations will be managed by OX2. The investment, 
including the acquisition cost, is approximately MUSD 200 gross 
over 2020 to 2021 and the project will be free cash ﬂ ow positive 
from 2022. It is Lundin Petroleum’s intention to farm-down 
50 percent of the 100 percent acquired MLK interest. 

The Leikanger and MLK renewable power projects together, 
(after the intended farm-down) will replace around 60 percent 
of the Company’s net electricity usage from 2023 with low 
carbon sources. It is Lundin Petroleum’s strategy to fully replace 
all net electricity usage for power from shore with further 
direct investments in renewable energy power generation. The 
projects will also provide a natural hedge to the electricity price 
ﬂ uctuation; the electricity usage of Johan Sverdrup represents 
approximately 15 percent of the total ﬁ eld operating costs and 
for Edvard Grieg, it will be approximately 10 percent.

Decommissioning
Preparation of the decommissioning plan for the Brynhild ﬁ eld 
is ongoing with operations anticipated to be conducted during 
2020/2021. The Rowan Viking jack-up drilling rig has been 
secured to plug and abandon the four Brynhild wells.

In June 2019, Lundin Petroleum entered into a sales and 
purchase agreement involving the acquisition of a 10 percent 
working interest in each of PL896 and PL820S from Wintershall 
DEA. The transaction increased the Company’s working interest 
to 40 percent in PL820S and to 30 percent in PL896. 

In July 2019, as part of transaction to redeem 16 percent of 
the outstanding Lundin Petroleum shares held by Equinor, the 
Company further entered into an asset transfer agreement to 
sell 2.6 percentage points of the Johan Sverdrup development 
project to Equinor for a cash consideration of MUSD 962 with 
an effective date of 1 January 2019, which includes a MUSD 52 
contingent payment on future reserve attainment. The asset 
transaction was completed on 30 August 2019.

In December 2019, Lundin Petroleum entered into a sales 
and purchase agreement with Wintershall DEA involving the 
acquisition of a 10 percent working interest in PL894, which 
includes the Balderbrå gas discovery and a 5 percent working 
interest in PL533 and PL533B. The transaction also includes 
options to acquire working interests in several other exploration 
licences in the Vøring Basin where PL894 is located. The 
transaction is subject to customary government approvals and is 
expected to complete in the ﬁ rst quarter of 2020.

In December 2019, Lundin Petroleum entered into a sales and 
purchase agreement with Neptune Energy Norge AS involving 
the acquisition of a 20 percent working interest in PL886 and 
PL886B. The transaction increased the Company’s working 
interest to 60 percent in PL886 and PL886B. The transaction is 
subject to customary government approvals and is expected to 
complete in the ﬁ rst quarter of 2020.

In January 2020, the Company was awarded 12 licences in the 
2019 APA licensing round, of which seven are as operator.

Currently the Company holds 88 licences in Norway, which is 
an increase of approximately 30percent from the beginning of 
2019. 

The Gaupe ﬁ eld ceased production during the fourth quarter of 
2018 and preparation of the decommissioning plan for the ﬁ eld 
is also ongoing.

Licence awards and transactions
In January 2019, Lundin Petroleum was awarded 15 licences in 
the 2018 APA licensing round, of which nine are as operator.

Russia
Lundin Petroleum has previously written down the entire 
contingent resources and book value for the Morskaya oil 
discovery in Russia, as it was deemed unlikely that the discovery 
could commercially be developed in the foreseeable future. 
Consequently the Morskaya licence has been relinquished and 
the local operating company, PetroResurs, has been liquidated. 

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 and Goddo oil discoveries. The transaction 
increased the Company’s working interest in each of PL338C 
and PL338E to 80 percent and in PL815 to 60 percent. The 
transaction involved a cash consideration payable to Lime 
Petroleum and was completed in May 2019, with economic 
effect from 1 January 2019.

Health, safety and environment
During the reporting period, no lost time incidents and one 
medical treatment incident occurred, resulting in a Lost Time 
Incident Rate of 0.0 per million hours worked and a Total 
Recordable Incident Rate of 0.6 per million hours worked. There 
were no material safety or environmental incidents.

24

Lundin Petroleum Annual Report 2019

Financial review 

Result
The operating proﬁ t for the ﬁ nancial year amounted to 
MUSD 1,970.7 (MUSD 1,418.7) and included a MUSD 756.7 after 
tax accounting gain on the sale of 2.6 percent of Johan Sverdrup. 
The operating proﬁ t for the year excluding this accounting gain 
amounted to MUSD 1,214.0 with the decrease compared to the 
comparative period mainly driven by lower oil prices and higher 
expensed exploration costs and impairment charges somewhat 
offset by higher production volumes during the ﬁ nancial year.

The net result for the year amounted to MUSD 824.9 (MUSD 
225.7) representing earnings per share of USD 2.61 (USD 0.67). 
Net result was impacted by a MUSD 756.7 after tax accounting 
gain on the sale of 2.6 percent of Johan Sverdrup during the 
ﬁ nancial year, impairment charges of MUSD 128.3, a foreign 
currency exchange loss of MUSD 131.7 (MUSD 164.9) and an 
accounting gain of MUSD 183.7 pre tax in the comparative 
period as a result of the re-negotiated improved borrowing 
terms for the reserve-based lending facility. Adjusted net 
result separates out the effects of accounting gains/losses 
from asset sales, loan modiﬁ cation gains, foreign currency 
exchange results, impairment charges and the tax impacts 
from these items and better reﬂ ects the net result generated 
by the Company’s operational performance for the ﬁ nancial 
year. Adjusted net result for the year amounted to MUSD 252.7 
(MUSD 295.3) representing adjusted earnings per share of 
USD 0.80 (USD 0.87). The decrease compared to the comparative 
period was mainly driven by the lower adjusted operating proﬁ t.

Earnings before interest, tax, depletion and amortisation 
(EBITDA) for the year amounted to MUSD 1,918.4 (MUSD 1,932.5) 
representing EBITDA per share of USD 6.07 (USD 5.71) with 
the increase on a per share basis compared to the comparative 
period mainly caused by the redemption of 16 percent of the 
outstanding shares in August 2019. Operating cash ﬂ ow for the 
year amounted to MUSD 1,537.1 (MUSD 1,864.1) representing 
operating cash ﬂ ow per share of USD 4.87 (USD 5.51) with the 
decrease compared to the comparative period impacted by 
a higher current tax charge as Special Petroleum Tax losses 
were fully utilised during the fourth quarter of 2019. Free cash 
ﬂ ow for the year amounted to MUSD 1,271.7 (MUSD 663.0) 
representing free cash ﬂ ow per share of USD 4.03 (USD 1.96) 
with the increase compared to the comparative period impacted 
by the cash inﬂ ow from the sale of 2.6 percent of Johan 
Sverdrup of MUSD 959.0 which includes received interest 
and pro and contra funding settlement from effective date 
to completion date as well as working capital balances and 
incurred expenses. Organic free cash ﬂ ow for the year which 
excludes the cash inﬂ ow from the sale of 2.6 percent of Johan 
Sverdrup amounted to MUSD 312.7 and was also impacted by 
higher paid taxes and increased trade receivables as a result of 
Johan Sverdrup coming on stream in October 2019.

Changes in the Group
In January 2019, Lundin Petroleum entered into a sales and 
purchase agreement for 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 
increased the Company’s working interest in each of PL338C 
and PL338E to 80 percent and in PL815 to 60 percent. The 
transaction involved a cash consideration payable to Lime 
Petroleum of MUSD 43.0 and was completed in May 2019, with 
economic effect from 1 January 2019.

In July 2019, Lundin Petroleum entered into a sales and 
purchase agreement for the sale of a 2.6 percent working 
interest in the Johan Sverdrup development project to Equinor. 
The transaction decreased the Company’s working interest in 
the Johan Sverdrup development project to 20 percent. The 
transaction involved a cash consideration payable by Equinor of 
MUSD 962.0, which includes a nominal MUSD 52.0 contingent 
payment on future reserve reclassiﬁ cations. The transaction was 
completed in August 2019, with economic effect from 1 January 
2019. The transaction was accounted for at closing resulting in 
a net after tax accounting gain of MUSD 756.7 arising from the 
difference between the consideration received and the book 
value of the associated assets being divested. The accounting 
gain is reported as gain from sale of assets as detailed in the 
following table. The gain from the sale is presented on an after 
tax basis as the consideration is determined net after tax based 
on the Norwegian Petroleum Tax regulations.

Expressed in MUSD

Assets
Oil and gas properties
Total assets divested

Liabilities
Site restoration provision
Deferred tax liabilities
Working capital
Total liabilities divested

Net assets divested

Consideration1
Incurred expenses
Net after tax accounting gain

2019

343.7
343.7

16.2
108.9
4.0
129.1

214.6

974.0
-2.7
756.7

1 Includes fair value of the contingent consideration on future reserve 

reclassiﬁ cations, received interest and pro and contra funding 
settlement from effective date to completion date as well as working 
capital balances.

In October 2019, Lundin Petroleum signed an agreement with 
Sognekraft AS to acquire a 50 percent non-operated interest 
in the Leikanger hydropower project, in mid-west Norway. 
Leikanger will produce around 208 GWh per annum gross, once 
it is fully operational in 2021, from a river run off hydropower 
generation scheme. The investment to Lundin Petroleum, 
including the acquisition cost, is approximately MUSD 60 over 
the three year period 2019 to 2021 and the project will be free 
cash ﬂ ow positive from 2022. The completion of the transaction 
remains subject to customary closing conditions, expected to 
occur in early 2020.

Lundin Petroleum Annual Report 2019

25

DIRECTORS’ REPORT | Operational and financial review

Revenue and other income
Revenue and other income for the year amounted to 
MUSD 2,948.7 (MUSD 2,640.7) and was comprised of net sales of 
oil and gas, gain from sale of 2.6 percent of Johan Sverdrup and 
other revenue as detailed in Note 1.

Net sales of oil and gas for the year amounted to MUSD 2,158.6 
(MUSD 2,607.9). The average price achieved by Lundin 
Petroleum for a barrel of oil equivalent from own production 
amounted to USD 61.00 (USD 67.89) and is detailed in the 
following table. The average Dated Brent price for the year 
amounted to USD 64.21 (USD 71.31) 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

2019

2018

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

29,769.7
65.16

26,834.7
69.97

4,235.7
31.77

3,682.0
52.74

34,005.4
61.00

30,516.7
67.89

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 84.3 (MUSD 536.1) and consisted of Grane 
Blend crude oil purchased from outside the Group by Lundin 
Petroleum Marketing SA and sold to the market. Revenue from 
sale of oil and gas are recognised when control of the products is 
transferred to the customer.

Gain from sale of assets amounted to MUSD 756.7 (MUSD –) 
and related to the sale of 2.6 percent of Johan Sverdrup as 
speciﬁ ed in Note 8.

Other income for the year amounted to MUSD 33.4 (MUSD 32.8) 
and mainly included tariff income of MUSD 27.2 (MUSD 29.4) 
which is due to net income from Ivar Aasen tariffs paid to 
Edvard Grieg.

Production costs
Production costs including under/over lift movements and 
inventory movements for the year amounted to MUSD 164.8 
(MUSD 152.4) and are detailed in Note 2. The total production 
cost per barrel of oil equivalent produced is detailed in the table 
below:

Production costs 

2019

2018

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 under/over lift position
 – In MUSD
 – In USD per boe
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

118.1
3.47

46.3
1.36

164.4
4.83

-0.9
-0.03

-2.8
-0.08

4.1
0.12

102.5
3.46

35.2
1.19

137.7
4.65

7.0
0.24

0.6
0.02

7.1
0.24

164.8
4.84

152.4
5.15

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 4.83 (USD 4.65) per 
barrel is reduced to USD 4.03 (USD 3.66) when tariff income is netted 
off. The operating cost for the fourth quarter of USD 4.16 (USD 5.02) per 
barrel is reduced to USD 3.54 (USD 4.14) when tariff income is netted 
off.

26

Lundin Petroleum Annual Report 2019

The total cost of operations for the year amounted to 
MUSD 118.1 (MUSD 102.5) and the total cost of operations 
excluding operational projects amounted to MUSD 108.6 
(MUSD 93.0). The increase compared to the comparative period 
related to the start up of production from the Johan Sverdrup 
ﬁ eld in October 2019 in combination with the reversal in the 
comparative period of an accrual as a result of the termination 
of production from the Brynhild ﬁ eld of MUSD 5.5. 

The cost of operations per barrel for the year amounted 
to USD 3.47 (USD 3.46) including operational projects and 
USD 3.19 (USD 3.14) excluding operational projects. The cost 
of operations per barrel for the fourth quarter amounted 
to USD 2.91 (USD 3.78) with the reduction compared to the 
comparative period caused by the start up of production from 
the Johan Sverdrup ﬁ eld in October 2019.

Tariff and transportation expenses for the year amounted to 
MUSD 46.3 (MUSD 35.2) or USD 1.36 (USD 1.19) per barrel. The 
increase compared to the comparative period is driven by the 
start up of production from the Johan Sverdrup ﬁ eld, higher 
pipeline tariff rates and freight costs for crude oil sales in 
relation to some cargoes being sold on a CFR basis during the 
year.

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 is valued at production 
cost including depletion cost, and amounted to MUSD -0.9 
(MUSD 7.0) in the year due to the timing of the cargo liftings 
compared to production. Sales quantities and production 
quantities are detailed in the table below:

Change in over/underlift position
in Mboepd

2019

2018

Production volumes
Johan Sverdrup inventory movements
Production volumes excluding inventory 
movements
Sales volumes from own production
Change in overlift position

93.3
-0.7

92.6
93.2
-0.6

81.1
–

81.1
83.6
-2.5

Other costs for the year amounted to MUSD 4.1 (MUSD 7.1) and 
related to the business interruption insurance. 

Depletion and decommissioning costs
Depletion and decommissioning costs for the year amounted 
to MUSD 443.8 (MUSD 458.0) at an average rate of USD 13.03 
(USD 15.46) per barrel and are detailed in Note 9. The lower 
depletion costs for the year compared to the comparative period 
is due to the start up of production from the Johan Sverdrup 
ﬁ eld in October 2019 at a lower depletion rate per barrel, 
what resulted in lower depletion costs for the year although 
production volumes increased. The depletion costs are further 
positively impacted by a lower depletion rate per barrel in USD 
terms as the depletion rate per barrel is calculated in Norwegian 
Kroner with the Norwegian Kroner having weakened against the 
USD compared to prior year. 

Exploration costs
Exploration costs expensed in the income statement for the 
year amounted to MUSD 125.6 (MUSD 53.2) and are detailed 
in Note 9. Exploration and appraisal costs are capitalised as 
they are incurred. When exploration and appraisal drilling is 
unsuccessful, the capitalised costs are expensed. All capitalised 
exploration costs are reviewed on a regular basis and are 
expensed when facts and circumstances suggest that the 
carrying value of an exploration and evaluation asset may 
exceed its recoverable amount.

Impairment costs of oil and gas properties
Impairment costs charged to the income statement for the year 
amounted to MUSD 128.3 (MUSD –) and are detailed in Note 9. 
Impairment costs related to certain licences in the Barents Sea 
of which future economic development is considered uncertain. 
A non-cash pre-tax impairment charge of MUSD 128.3 was 
recognised with an offsetting MUSD 101.3 deferred tax credit 
recognised in the income statement, yielding a net after tax 
charge of MUSD 27.0.

Purchase of crude oil from third parties
Purchase of crude oil from third parties for the year amounted 
to MUSD 84.3 (MUSD 533.8) and related to Grane Blend crude oil 
purchased from outside the Group.

General, administrative and depreciation expenses
The general administrative and depreciation expenses for the 
year amounted to MUSD 31.2 (MUSD 24.6) which included 
a charge of MUSD 4.6 (MUSD 3.9) in relation to the Group’s 
long-term incentive plans (LTIP), see also Note 28. Fixed asset 
depreciation expenses for the year amounted to MUSD 6.7 
(MUSD 2.6) with the increase compared to the comparative 
period mainly caused by the implementation of IFRS 16 with 
effective date 1 January 2019 based on which depreciation 
expenses relating to right of use assets are included in the 
ﬁ nancial year.

Finance income
Finance income for the year amounted to MUSD 27.5 
(MUSD 192.2) and is detailed in Note 4.

The reserve-based lending facility was successfully re-negotiated 
during the comparative period, 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 resulted in an accounting gain 
of MUSD 183.7 in the comparative period in accordance 
with IFRS 9 that unwinds to the income statement over the 
remaining period of the facility.

The result on interest rate hedge settlements amounted to a gain 
of MUSD 25.7 (MUSD 3.5).

Finance costs
Finance costs for the year amounted to MUSD 322.5 
(MUSD 345.4) and are detailed in Note 5.

The net foreign currency exchange loss for the year amounted 
to MUSD 131.7 (MUSD 164.9). Foreign exchange movements 
occur on the settlement of transactions denominated in foreign 
currencies and the revaluation of working capital and loan 

Lundin Petroleum Annual Report 2019

27

DIRECTORS’ REPORT | Operational and financial review

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 is exposed to exchange rate 
ﬂ uctuations relating to the relationship between US Dollar and 
other currencies. Lundin Petroleum has entered into derivative 
ﬁ nancial instruments to address this exposure for exchange rate 
ﬂ uctuations for capital expenditure amounts, Corporate and 
Special Petroleum Tax amounts and funding requirements for 
the share redemption. For the year, the net realised exchange 
loss on these settled foreign exchange instruments amounted to 
MUSD 60.9 (gain of MUSD 5.2).

The US Dollar strengthened with 2 percent 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 strengthened with less than 1 percent 
against the Euro in the year, generating a net foreign currency 
exchange gain on an intercompany loan balance denominated 
in Norwegian Krone.

Interest expenses for the year amounted to MUSD 93.4 
(MUSD 88.7) and represented the portion of interest charged 
to the income statement. An additional amount of interest 
of MUSD 85.7 (MUSD 87.6) associated with the funding of the 
Norwegian development projects was capitalised in the year. The 
total interest expense for the year increased slightly compared to 
the comparative period.

The amortisation of the deferred ﬁ nancing fees for the year 
amounted to MUSD 19.7 (MUSD 17.8) and related to the fees 
incurred in establishing the reserve-based lending facility and 
the fees incurred in establishing the short-term MUSD 500 
bridge facility that was temporarily in place from late July 2019 
to the end of August 2019 to partly fund the share redemption 
transaction. The bridge facility was fully repaid at the end of 
August 2019 when the sale of 2.6 percent of Johan Sverdrup 
completed. The fees in relation to the reserve-based lending 
facility are being expensed over the expected life of that facility. 

Loan facility commitment fees for the year amounted to 
MUSD 10.9 (MUSD 13.0) and related mainly to the lower margin 
for commitment fees as agreed through the amendment of 
the facility effective as of 1 June 2018 in combination with a 
higher outstanding loan under the reserve-based lending facility 
following the share redemption in August 2019 what resulted in 
lower commitment fees.

As a result of the successful re-negotiated reserve-based lending 
facility during the comparative period, loan modiﬁ cation fees 
amounting to MUSD 17.3 were incurred in the comparative 
period. 

The unwinding of the loan modiﬁ cation gain for the year 
amounted to MUSD 41.5 (MUSD 26.1) and related to the 
expensing of the accounting gain from the re-negotiated 
improved borrowing terms for the reserve-based lending facility 
over the period of usage of the facility.

MUSD -1.8 (MUSD -1.3) and related to the share in the result of 
the investment in Mintley Caspian Ltd. and are detailed in Note 6. 

Tax
The overall tax charge for the year amounted to MUSD 849.0 
(MUSD 1,038.5) and is detailed in Note 7.

The current tax charge for the year amounted to MUSD 405.8 
(MUSD 90.4) and mainly related to Norway. The current tax 
charge for Norway related to both Corporate Tax and Special 
Petroleum Tax (SPT). The SPT tax losses were fully utilised 
during the fourth quarter of 2019 which resulted in increased 
current tax charges. The paid tax installments in Norway during 
the year amounted to MUSD 131.7 which has in combination 
with the current tax charge for the year resulted in an increase 
in current tax liabilities compared to the comparative period.

The deferred tax charge for the year amounted to MUSD 443.2 
(MUSD 948.1) and related to Norway. A deferred tax amount 
arises primarily where there is a difference in depletion for tax 
and accounting purposes.

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 21.4 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.

Balance sheet
Non-current assets
Oil and gas properties amounted to MUSD 5,473.2 
(MUSD 5,341.1) and are detailed in Note 9.

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

Development expenditure 
in MUSD

Norway

Development expenditures

2019

672.3

672.3

2018

701.9

701.9

Development expenditure of MUSD 672.3 (MUSD 701.9) 
was incurred in Norway during the year, primarily on the 
Johan Sverdrup ﬁ eld. In addition an amount of MUSD 85.7 
(MUSD 87.6) of interest was capitalised.

Exploration and appraisal expenditure 
in MUSD

Norway

Exploration and appraisal expenditure

2019

298.4

298.4

2018

310.6

310.6

Exploration and appraisal expenditure of MUSD 298.4 
(MUSD 310.6) was incurred in Norway during the year, primarily 
for the exploration and appraisal wells as summarised on page 23. 

Share in result of associated company
Share in result of associated company for the year amounted to 

Other tangible ﬁ xed assets amounted to MUSD 49.4 (MUSD 13.6) 
and are detailed in Note 10. Following the implementation 

28

Lundin Petroleum Annual Report 2019

of IFRS 16 with effective date 1 January 2019, the Company 
recognised right of use assets that amounted to MUSD 35.9 
(MUSD –).

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 11.

Financial assets amounted to MUSD 14.3 (MUSD 0.4) and 
are detailed in Note 12. The sale of 2.6 percent of Johan 
Sverdrup included a contingent consideration based on future 
reserve reclassiﬁ cations and is due in 2026. This contingent 
consideration was fair valued by the Company and amounted to 
MUSD 12.4 (MUSD –).

Derivative instruments amounted to MUSD 2.7 (MUSD 2.7) 
and related to the marked-to-market gain on the outstanding 
currency hedge contracts due to be settled after twelve months 
and are detailed in Note 20.

Current assets
Inventories amounted to MUSD 40.7 (MUSD 36.5) and included 
both well supplies and hydrocarbon inventories and are detailed 
in Note 13.

Trade and other receivables amounted to MUSD 349.5 
(MUSD 216.6) and are detailed in Note 14. Trade receivables, 
which are all current, amounted to MUSD 305.1 (MUSD 153.7) 
with the increase caused by the start up of production from 
Johan Sverdrup. Underlift amounted to MUSD 2.0 (MUSD 1.9) 
and was attributable to an underlift position on the producing 
ﬁ elds, mainly relating to oil from the Johan Sverdrup ﬁ eld. Joint 
operations debtors relating to various joint venture receivables 
amounted to MUSD 11.4 (MUSD 17.0). Prepaid expenses 
and accrued income amounted to MUSD 23.9 (MUSD 26.9) 
and represented mainly prepaid operational and insurance 
expenditure. Other current assets amounted to MUSD 7.1 
(MUSD 17.1) with the reduction mainly caused by the receipt 
during the year of the short-term receivable from IPC relating to 
certain working capital balances following the IPC spin-off.

Derivative instruments amounted to MUSD 11.3 (MUSD 34.0) 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 20.

Cash and cash equivalents amounted to MUSD 85.3 (MUSD 66.8). 
Cash balances are mainly held to meet ongoing operational 
funding requirements, see also Note 15.

Non-current liabilities
Financial liabilities amounted to MUSD 3,888.4 (MUSD 3,262.0) 
and are detailed in Note 17. Bank loans amounted to 
MUSD 4,000.0 (MUSD 3,465.0) and related to the long-term 
portion of the outstanding loan under the reserve-based 
lending facility with the short-term portion classiﬁ ed as current 
liabilities. Capitalised ﬁ nancing fees relating to the establishment 
of the facility amounted to MUSD 37.1 (MUSD 54.1) and are being 
amortised over the expected life of the facility. The capitalised 
loan modiﬁ cation gain relating to the re-negotiated improved 
borrowing terms for the lending facility during 2018 amounted 
to MUSD 105.6 (MUSD 148.9) and are being amortised over the 

expected life of the facility. The lease commitments amounted 
to MUSD 31.1 (MUSD –) and related to the long-term portion of 
the lease commitments following the implementation of IFRS 16 
with effective date 1 January 2019. The short-term portion of the 
lease commitments was classiﬁ ed as current liabilities.

Provisions amounted to MUSD 528.1 (MUSD 489.1) and are 
detailed in Note 18. The provision for site restoration amounted 
to MUSD 522.2 (MUSD 483.9) and related to the long-term 
portion of the future decommissioning obligations. The short-
term portion of the future decommissioning obligations was 
classiﬁ ed as current liabilities and amounted to MUSD 49.2 
(MUSD 6.6). The total increase in site restoration reﬂ ects the 
additional liability for the Johan Sverdrup ﬁ eld partly offset by 
the sale of 2.6 percent of Johan Sverdrup, and expected increases 
in site restoration costs for the other ﬁ elds.

 Deferred tax liabilities amounted to MUSD 2,412.7 
(MUSD 2,103.8) 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 110.8 (MUSD 64.9) 
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 20.

Current liabilities
Current ﬁ nancial liabilities amounted to MUSD 97.5 (MUSD –) 
and are detailed in Note 17. Current ﬁ nancial liabilities related 
to the short-term portion of the outstanding bank loans and 
lease commitments.

Dividends amounted to MUSD 106.0 (MUSD –) and related to the 
cash dividend approved by the AGM held on 29 March 2019 in 
Stockholm, which is paid in quarterly installments.

Trade and other payables amounted to MUSD 177.4 
(MUSD 200.9) and are detailed in Note 19. Overlift amounted 
to MUSD 0.9 (MUSD 1.7) and was attributable to an overlift 
position in relation to condensate from the Edvard Grieg ﬁ eld. 
Joint operations creditors and accrued expenses amounted to 
MUSD 133.6 (MUSD 147.4) and related to activity in Norway. 
Other accrued expenses amounted to MUSD 16.6 (MUSD 17.6) 
and other current liabilities amounted to MUSD 8.5 (MUSD 7.6).

Derivative instruments amounted to MUSD 33.2 (MUSD 20.0) 
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 20.

Current tax liabilities amounted to MUSD 343.3 (MUSD 70.4) and 
related mainly to Norway as detailed in Note 7.

Current provisions amounted to MUSD 55.9 (MUSD 12.5) 
and are detailed in Note 18. The short-term portion of the 
future decommissioning obligations amounted to MUSD 49.2 
(MUSD 6.6) mainly relating to the Brynhild ﬁ eld. The short-term 
portion of the provision for Lundin Petroleum’s Unit Bonus Plan 
amounted to MUSD 6.7 (MUSD 5.9).

Lundin Petroleum Annual Report 2019

29

DIRECTORS’ REPORT | Share information

Share information

For the number of shares outstanding and the repurchases of 
own shares, see Note 16.1. 

For the AGM resolution on the authorisation to issue new shares, 
see page 39, Corporate Governance Report.

Dividend
In accordance with the dividend policy, the Board of Directors 
propose that the Annual General Meeting resolves on a 
dividend for 2019 of USD 1.80 per share, corresponding 
to USD 511 million (rounded off), to be paid in quarterly 
instalments of USD 0.45 per share, corresponding to USD 
128 million (rounded off). Before payment, each quarterly 
dividend of USD 0.45 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 
7 April 2020, with an expected record date of 2 April 2020 and 
expected ex-dividend date of 1 April 2020. The second dividend 
payment is expected to be paid around 8 July 2020, with an 
expected record date of 3 July 2020 and expected ex-dividend 
date of 2 July 2020. The third dividend payment is expected 
to be paid around 7 October 2020, with an expected record 
date of 2 October 2020 and an expected ex-dividend date of 
1 October 2020. The fourth dividend payment is expected 
to be paid around 8 January 2021, with an expected record 
date of 4 January 2021 and an expected ex-dividend date of 
30 December 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 
2019 dividend has been set to a cap of SEK 9.203 billion (i.e., 
SEK 2.301 billion per quarter). If the total dividend would exceed 
the cap of SEK 9.203 billion, the dividend will be automatically 
adjusted downwards so that the total dividend corresponds to 
the cap of SEK 9.203 billion. 

For details of the dividend policy, see page 39.

Proposed disposition of unappropriated earnings
The 2020 Annual General Meeting has an unrestricted equity at 
its disposal of MSEK 54,378.0, including the net result for the 
year of MSEK 18,885.5.

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 1.80 per 
share 1
Brought forward

Unrestricted equity

4,969.1 

49,408.9

54,378.0

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

by Sweden’s central bank (Riksbanken) as at 26 February 2020. The 
amount is based on the number of shares in circulation on 26 February 
2020 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 26 February 2020 and approval of the divi-
dend 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. 

30

Lundin Petroleum Annual Report 2019

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. 

Changes in Board of Directors
At the 2020 AGM, all the current members of the Board of 
Directors will be proposed for re-election by the Nomination 
Committee. 

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 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 on pages 58–91. 

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 92–97.

Subsequent events
Subsequent events are detailed in Note 30. 

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.

Lundin Petroleum Annual Report 2019

31

DIRECTORS’ REPORT | Risk management

Risk management

Lundin Petroleum uses a standardised risk 
management methodology to perform risk 
assessments. This enables the Company to 
make informed decisions and to prioritise 
control activities and resources to deal 
effectively with any potential opportunities 
and threats. 

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.

32

Lundin Petroleum Annual Report 2019

Risk areas
Lundin Petroleum’s primary risks 
fall into three areas, which also 
include external risks that could 
influence the Company’s business 
operations or reputation
- Operational risks
- Financial risks
- Strategic risks

Operational risks

Concentration of operations

Organic growth 

Risk 
All of our production comes from a few assets on the Norwegian 
Continental Shelf. This concentration of operations increases 
the vulnerability for long-term production shutdowns due to 
unexpected events.

Response 
Highly skilled and experienced operational teams are employed 
throughout the organisation, the facilities are built and 
maintained to a high standard and critical spares are held in 
inventory. Insurance partially covering the cash ﬂ ow impact 
on the Company from a loss of production is subscribed for our 
main producing assets, reducing the ﬁ nancial impact of any 
unexpected long-term shutdowns. 

 Delay of development projects

Risk 
Oil and gas projects may be curtailed, or delayed because of many 
reasons such as safety incidents, changes in installation schedules 
or missed targets. This includes the risk of cost overruns and a 
delay in production that could affect liquidity.

Response
Lundin Petroleum has a robust project management system in 
place and highly competent project management teams that 
have a proven track record of safely and successfully delivering 
development projects. The large partner operated Johan Sverdrup 
Phase 1 project commenced production in October 2019 ahead of 
target start-up and below budget. The Solveig tie-back to Edvard 
Grieg and Rolvsnes extended well test projects are also progressing 
according to plan.

Health, Safety, Environment and Quality

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

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

Risk 
Long-term inability to target and mature unrisked resources 
and replace reserves through exploration success, affecting 
stakeholder value creation. The Company may not achieve its 
strategic objectives of successfully replacing reserves as they are 
produced.

Response 
Lundin Petroleum cultivates business opportunities in our 
existing markets. With a focus on Norway, there is excellent 
resource potential supporting our organic growth strategy. The 
combination of technical expertise, latest and new subsurface 
technology and an entrepreneurial culture allows for the 
creation and continued portfolio of attractive exploration 
prospects. The Company has good dialogue with Norwegian 
authorities to obtain access to acreage. 

Resources and reserves

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

Response 
Resource and reserves 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. 

Security / Cyber security 

Risk
Security risks are of serious concern in the oil and gas industry 
and range from risks to personnel security to potential 
cyber intrusion leading to information data loss and system 
irregularities.

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 built and monitored to prevent and remedy any 
external cyber attacks and the Company focuses on preventive 
action including continuous training on cyber security.

Lundin Petroleum Annual Report 2019

33

 
 
DIRECTORS’ REPORT | Risk management

Liquidity and funding

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

Response
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. Lundin Petroleum also strives to 
maintain a good asset management strategy to ensure continued 
asset performance levels to maximise cash ﬂ ow and borrowing 
capacity.

Market conditions

Risk 
Shareholder value is affected by our inability to meet stakeholder 
expectations and create value, either through current business 
strategies or due to market conditions. The price of oil has 
ﬂ uctuated signiﬁ cantly over the last few years and fundamental 
market forces beyond our control will continue to impact oil 
prices in the future. Prolonged low oil and gas prices could 
erode the proﬁ tability of some of the Company’s development 
activities; affect ﬁ nancial earnings, cash ﬂ ow generation and the 
overall investment and liquidity position.

Response 
Lundin Petroleum mitigates the impact of ﬂ uctuating oil prices 
on our ﬁ nancial performance by having robust processes in 
place such as the Asset Business Plan (long-term liquidity tests) 
and continuously assessing the assets’ debt borrowing capacity 
against the banks’ oil price assumption, enabling management 
to forecast ahead of time a potential liquidity shortage. Through 
regular updates of the Asset Business Plan, the Company stress 
tests the business for a prolonged period of lower oil prices. 

Financial risks

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 a negative ﬁ nancial impact, with an increased liability 
from removal 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. 

Financial reporting

Risk 
Delayed or inaccurate ﬁ nancial reporting impacting external 
reporting requirements. The Company may face the risk of 
regulatory action, ﬁ scal uncertainty, shareholder lawsuits and 
loss of investor conﬁ dence.

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. The 
Company has attractive ﬁ scal terms for a full cycle strategy.

Interest and currency

Risk
As a result of the Company carrying debt, a rise in interest 
rates carries a risk of affecting 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 according to the Company’s Hedging Procedure, which is 
also subject to robust internal controls.

34

Lundin Petroleum Annual Report 2019

Strategic risks

Climate change

Risk 
The impact on the oil and gas industry due to the effect of 
climate change, coupled with the world wide focus on reducing 
carbon emissions leads to a focus on energy transition. In 
response to negative public opinion of oil and gas companies 
banks and investors are increasingly focusing investment on 
companies that actively address the impact of climate change. 
In addition, stricter climate regulations and emissions policies 
could impact the Company, whether directly through costs 
to operations and projects, or indirectly through technology 
developments.

Response
The Company’s carbon emissions and energy efﬁ ciency are 
reviewed on an ongoing basis. The Company is investing 
signiﬁ cantly in power from shore for a majority of its operations, 
which will signiﬁ cantly reduce the Company’s carbon intensity 
per barrel produced to industry leading levels. In combination 
with this and as part of our Decarbonisation Strategy, the 
Company will replace its net electricity usage from power from 
shore, through investments in renewable power generation. 
Norway, where all the Company’s operations are based, has 
world leading environmental legislation and governance. The 
CDP (previously named Carbon Disclosure Project) and our 
Sustainability reporting show transparency of the Company’s 
performance in relation to climate change commitment.

Ethical business conduct

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 license to operate. 

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
Changes to applicable laws and regulations, or complexity 
of legislation, could negatively affect the Company, 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.

Legal process in Sweden

Risk 
Investigations in Sweden into past operations in Sudan (1997–
2003), and allegations of interference of judicial proceedings, are 
a direct risk to the CEO and Chairman and cause reputational 
risks for the Company through potential indictment and trial, 
ﬁ nancial penalties, negative investor perception leading to 
divestments and critical media coverage of the Company and its 
directors.

Response 
The Company actively defends its interests through the 
Swedish legal process and in the public domain, and maintains 
transparent and effective engagement with various key 
stakeholders to ensure open and informed dialog. More 
information on the Swedish legal process can be found on 
page 50.

Lundin Petroleum Annual Report 2019

35

DIRECTORS’ REPORT | Corporate Governance Report 

Corporate Governance ReportGuiding 

principles  22
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 

36
38
39
40
41
44
47
49
55

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 2019 in respect of 
the Nomination Committee as further described on 
page 40. 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.

2020 Annual General Meeting 

The 2020 Annual General Meeting (AGM) 
will be held on 31 March 2020 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 25 March 2020 and must notify the 
Company of their intention to attend the AGM no 
later than 25 March 2020.

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.

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. 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.

36

Lundin Petroleum Annual Report 2019

“ Our corporate governance 

structure ensures safe, responsible 
and efficient operations throughout 
the organisation and is fundamental 
to achieving our ambition of being 
one of the most sustainable oil and 
gas companies in the world and 
being part of the solution towards a 
lower carbon society.

Ian H. Lundin
Chairman of the Board

Lundin Petroleum – governance structure

External 
audit 

Shareholders’ meeting

Nomination
Committee

Board of Directors

Audit 
Committee

Compensation
Committee

ESG/H&S
Committee

Internal
audit 

CEO and Group management

Independent 
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 Corporate Governance Code 

· 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 2019

Commissioning and start-
up of the Johan Sverdrup 
development project 
safely, ahead of time and 
below budget.

The 2019 AGM resolved 
to declare an increased 
cash dividend of USD 
1.48 per share to be paid 
in quarterly instalments.

EGM approval of transactions 
with Equinor resulting in the 
redemption of 16 percent 
of the outstanding shares 
of Lundin Petroleum and a 
sale of a 2.6 percent stake in 
the Johan Sverdrup unit for 
a cash consideration, both 
transactions completed in 
August 2019.

Development of a Decarbonisation 
Strategy targeting carbon 
neutrality in our operations 
by 2030, including acquiring 
a stake in the Leikanger 
hydropower project and 
discussing an investment in the 
Metsälamminkangas windfarm to 
replace part of Lundin Petroleum’s 
net electricity usage.

Lundin Petroleum Annual Report 2019

37

DIRECTORS’ REPORT | Corporate Governance Report 

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. A revised version 
of the Corporate Governance Code applies as of 1 January 2020. 

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, sustainability and 
corporate responsibility (CR) is regularly reported to the Board. 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 and Quality (HSEQ), Anti-
Corruption, Human Rights, Stakeholder Relations, Legal, 
Information Systems, Insurance & Risk Management, Human 
Resources, Inside Information and Corporate Communications. 
All policies, procedures and guidelines are continuously 
reviewed and updated as and when required and have been 
integrated into local management systems. During 2019, an 
updated Corporate Authorisation Policy and Corporate Dawn 
Raid Procedure were approved, as well as a new Corporate 
Security Policy and Corporate Hedging Procedure. 

Lundin Petroleum’s Corporate HSEQ Leadership Charter, 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 HSEQ 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 has been reduced from 340,386,445 
to 285,924,614 as a result of the redemption of 16 percent of 
the outstanding shares of the Company. The share redemption 
was part of transactions agreed with Equinor, including also a 
sale of a 2.6 percent interest in the Johan Sverdrup unit, that 
were approved by the Extraordinary General Meeting (EGM) held 
on 31 July 2019. The share redemption and sale of the Johan 
Sverdrup unit interest were both completed in August 2019. 

Each share has a quota value of SEK 0.01 (rounded-off) and 
the registered share capital of the Company is SEK 3,478,713 
(rounded-off). 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 2019, 
the Company did not purchase any own shares and held as per 
31 December 2019 1,873,310 own shares in total.

Lundin Petroleum had at the end of 2019 a total of 33,113 
shareholders listed with Euroclear Sweden, which represents an 
increase of 4,312 compared to the end of 2018, i.e. an increase 
of approximately 15 percent. Shares in free ﬂ oat amounted to 
approximately 67 percent and exclude shares held by an entity 
associated with the Lundin family.

The 10 largest shareholders 
as at 31 December 2019

Number 
of shares

Percent 
(rounded) 

Nemesia1

Equinor

Vanguard 

BlackRock

Miura

USS Investment Management 

JP Morgan Asset Management

Norges Bank 

State Street Global Advisors

Nordea Funds

Other shareholders

Total 

95,478,606

13,955,845

6,252,395

5,231,599

4,575,000

4,550,000

4,283,142

3,810,979

3,679,146

3,506,103

33.39

4.88

2.19

1.83

1.60

1.59

1.50

1.33

1.29

1.23

140,601,799

 285,924,614

49.17

100.00

1  An investment company wholly owned by Lundin family trusts.
Source: Q4 Inc. 

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 

38

Lundin Petroleum Annual Report 2019

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. 

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 prior to the AGM and all proceedings 
are simultaneously translated from Swedish to English and from 
English to Swedish. 

2019 AGM
The 2019 AGM was held on 29 March 2019 at Grand Hôtel 
in Stockholm. The AGM was attended by 481 shareholders, 
personally or by proxy, representing 76.16 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 2019 AGM. The members of the Nomination 
Committee for the 2019 AGM were Hans Ek (SEB Investment 
Management AB), Filippa Gerstädt (Nordea Funds), and Ian H. 
Lundin (Nemesia S.à.r.l., as well as non-executive Chairman of 
the Board of Lundin Petroleum).2 

The resolutions passed by the 2019 AGM include:
·  Election of advokat Klaes Edhall as Chairman of the AGM.
·  Adoption of the Company’s income statement and balance 
sheet and the consolidated income statement and balance 
sheet for 2018 and resolving to declare a dividend of USD 1.48 
per share to be paid out in four quarterly instalments with 
record dates of 2 April 2019, 3 July 2019, 2 October 2019 and 
3 January 2020. Before payment, each quarterly dividend of 
USD 0.37 per share were to be converted into a SEK amount 
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).

·  Discharge of the Board and the CEO from liability for the 

administration of the Company’s business for 2018.
·  Approval of the remuneration of SEK 1,150,000 to the 
Chairman of the Board and SEK 550,000 to other Board 
members, except for the CEO, and SEK 180,000 to each 
Committee Chair and SEK 130,000 to other Committee 
members with the total fees for Committee work, including 
fees for the Committee Chairs not to exceed SEK 1,710,000.

2  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. 

·  Re-election of Peggy Bruzelius, C. Ashley Heppenstall, Ian H. 
Lundin, Lukas H. Lundin, Grace Reksten Skaugen, Torstein 
Sanness, Alex Schneiter, Jakob Thomasen and Cecilia Vieweg 
as Board members. 

·  Re-election of Ian H. Lundin as Chairman of the Board.
·  Approval of the remuneration of the statutory auditor.
·  Re-election of the registered accounting ﬁ rm 

PricewaterhouseCoopers AB as the Company’s statutory 
auditor until the 2020 AGM, authorised public accountant 
Johan Rippe being the designated auditor in charge.

·  Approval of the Company’s 2019 Policy on Remuneration for 

Group management.

·  Approval of a long-term incentive plan (LTIP) 2019 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.
·  Rejection of four shareholder proposals, which were put to the 

meeting by a minority shareholder. 

An electronic system with voting devices was used and the 
minutes of the 2019 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.

2019 EGM 
An Extraordinary General Meeting (EGM) was held on 31 July 
2019 in Stockholm in respect of proposals to, among other 
things, redeem 16 percent of the outstanding shares of Lundin 
Petroleum and to sell a 2.6 percent stake in the Johan Sverdrup 
unit for a cash consideration. The EGM was attended by 807 
shareholders, personally or by proxy, representing 66.85 percent 
of the share capital. The EGM resolved, in accordance with the 
proposals: 
·  To approve the agreement entered into between Lundin 

Petroleum and SpareBank 1 Markets AS regarding a share 
swap transaction in relation to 54,461,831 shares in Lundin 
Petroleum.

·  To reduce the share capital by not more than SEK 556,594.14. 

The reduction of the share capital was to be effected with 
the retirement of not more than 54,461,831 shares held by 
SpareBank 1 Markets AS on the date of the implementation of 
the resolution.

·  To increase the share capital by SEK 556,594.14 through a 
transfer from unrestricted equity (a so-called bonus issue) 
without issuing any new shares.

·  To approve the sale by Lundin Norway AS of 2.6 percent of the 

Johan Sverdrup unit to Equinor Energy AS.

The Chairman of the Board and the CEO attended the EGM and 
a quorum of Board members was present. An electronic system 
with voting devices was used and the minutes of the 2019 EGM 
and all EGM materials, in Swedish and English, are available on 
the Company’s website.

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 

Lundin Petroleum Annual Report 2019

39

DIRECTORS’ REPORT | Corporate Governance Report 

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.

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 
29 on page 91 and Note 7 on page 96. 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 2020 AGM

Nomination Committee for the 2020 AGM
The members of the Nomination Committee for the 2020 
AGM were announced and posted on the Company’s website 
on 16 October 2019. Announcing the Nomination Committee 
on 16 October 2019 constitutes a deviation from rule 2.5 of 
the Corporate Governance Code as the date of announcement 
was less than six months before the 2020 AGM. The deviation 
was considered justiﬁ ed as one of the prospective members of 
the Nomination Committee withdrew from the Nomination 
Committee at a very late stage. As a result, the Company 
had to postpone the announcement and constitution of the 
Nomination Committee until a Nomination Committee with at 
least three members could be formed. 

The Nomination Committee has held four meetings during 
its mandate so far. At the ﬁ rst meeting, Aksel Azrac was 
unanimously elected as Chairman of the Nomination 
Committee. 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, 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 2020 AGM.

·  Considering Board and statutory auditor remuneration issues 

and proposals to the 2020 AGM.

·  Considering a proposal to appoint an external independent 

Chairman for the 2020 AGM.

·  Considering amendments to the Nomination Committee 

Process.

·  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 met and had 

discussions with current Board members C. Ashley Heppenstall, 
Grace Reksten Skaugen, Alex Schneiter, Jakob Thomasen and 
Cecilia Vieweg to discuss the work and functioning of the Board.

The full Nomination Committee report, including the ﬁ nal 
proposals to the 2020 AGM, is available on the Company’s website.

Member

Representing

Aksel Azrac

Nemesia S.à.r.l

Filippa Gerstädt Nordea Funds

Ian H. Lundin

Chairman of the Board 
of Lundin Petroleum

Meeting
attendance 

Shares 
represented 
as at 1 Aug 2019

Shares 
represented as 
at 31 Dec 2019

Independent of the 
Company and Group 
management

Independent of the 
Company’s major 
shareholders

4/4

4/4

4/4

28.1%

0.7%

N/a2

33.4%

1.2%

N/a2

Yes

Yes

Yes

No1

Yes

No2 

1 Nemesia S.à.r.l holds 33.4 percent of the shares in Lundin Petroleum.
2 For details, see schedule on pages 42–43.

Total 28.7% 
(rounded)

Total 34.6% 

40

Lundin Petroleum Annual Report 2019

 
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 sustainable 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 2019 AGM considered that 
a Board size of nine members would be appropriate and that 
the Board size should not be increased 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 2019 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/HSEQ 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 below 
the recommendation, the Nomination Committee considered that 
the experience of the Board members outweighed such shortfall. 
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. The Nomination 
Committee reviewed the fee levels for the Board and noted that 
the Company’s Board fees were below the median in Sweden and 
therefore considered that it was reasonable to propose to increase 
the Board fees to align them closer to market practice. 

Board meetings and work in 2019 
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, generally 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 2019, an executive session with Group management 
was held in connection with the Board meeting, and Group 
management also attended Board meetings during the year to 
present and report on speciﬁ c questions. A monthly operational 
report was further circulated to the Board, as well as a quarterly 
CR/HSEQ report.

Principal tasks of the Board of Directors

·  Establishing the overall goals and strategy of the 

Company.

·  Making decisions regarding the supply of capital.
·  Identifying how the Company’s risks and business 

opportunities are affected by sustainability. 

·  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 2019

41

DIRECTORS’ REPORT | Corporate Governance Report 

Board of Directors:

Ian H. Lundin

Alex Schneiter

Peggy Bruzelius

C. Ashley Heppenstall

Chairman (since 2002)
Elected 2001
Born 1960
Compensation Committee 
member

President & Chief Executive 
Officer, Director
Elected 2016
Born 1962

Director
Elected 2013
Born 1949
Audit Committee chair

Director
Elected 2001
Born 1962
Audit Committee member

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

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

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

B.Sc. Mathematics from the 
University of Durham.

Function

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.

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 Josemaria Resources 
Inc. and member of the 
board of Lundin Gold Inc., 
Filo Mining Corp. and 
International Petroleum 
Corp.

Chair of the board of
Lancelot Asset 
Management
AB and member of the 
board of Skandia Liv.

8,000

12/13

6/6

–

–

Nil4

13/13

6/6

–

–

SEK 716,667

SEK 665,000

Nil

Yes

Yes

Nil

No4

No4

Other board duties

Member of the board of 
Etrion Corporation and 
member of the advisory 
board of Adolf H. Lundin 
Charity Foundation 
(AHLCF).  

Shares as at 
31 December 2019

Attendance

Board

Audit Committee

Compensation Committee

ESG/H&S Committee

Remuneration1

Board and Committee 
work 

Special assignments 
outside the directorship 

Independent of the 
Company and Group 
management 

Independent of major 
shareholders 

Nil2

12/13

–

4/4

–

SEK 1,256,667

SEK 1,000,000

Yes

No2

–

335,690

11/13

–

–

–

Nil

Nil

No3

Yes

1  See also Note 27 on pages 87–88.
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 family trusts, 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.

42

Lundin Petroleum Annual Report 2019Board of Directors:

Ian H. Lundin

Alex Schneiter

Peggy Bruzelius

C. Ashley Heppenstall

Lukas H. Lundin

Grace Reksten Skaugen

Torstein Sanness

Jakob Thomasen

Cecilia Vieweg

Function

Chairman (since 2002)

President & Chief Executive 

Director

Officer, Director

Elected 2016

Elected 2013

Born 1949

Director

Elected 2001

Born 1962

Compensation Committee 

Born 1962

Audit Committee chair

Audit Committee member

Elected 2001

Born 1960

member

Education

B.Sc. Petroleum 

Engineering from the 

University of Tulsa.

M.Sc. Geophysics and 

M.Sc. Economics and 

B.Sc. Mathematics from the 

degree in Geology from the 

Business from the 

University of Durham.

University of Geneva.

Stockholm School of 

Economics.

Experience

CEO of International 

Various positions within 

Managing Director of ABB 

Various positions within 

Petroleum Corp. 1989–

Lundin related companies 

Financial Services AB 

Lundin related companies 

1998.

since 1993. 

1991–1997. 

since 1993. 

CEO of Lundin Oil AB 

COO of Lundin Petroleum 

Head of the asset 

CFO of Lundin Oil AB 

1998–2001. 

2001–2015. 

management division of 

1998–2001. 

CEO of Lundin Petroleum 

CEO of Lundin Petroleum 

Skandinaviska Enskilda 

CFO of Lundin Petroleum 

2001–2002.

since 2015.

Banken AB 1997–1998.

2001–2002. 

Other board duties

Member of the board of 

Etrion Corporation and 

member of the advisory 

board of Adolf H. Lundin 

Charity Foundation 

(AHLCF).  

Shares as at 

31 December 2019

Attendance

Board

Audit Committee

Compensation Committee

ESG/H&S Committee

Remuneration1

Board and Committee 

work 

Special assignments 

outside the directorship 

Independent of the 

Company and Group 

management 

Independent of major 

shareholders 

Nil2

12/13

–

4/4

–

Yes

No2

SEK 1,256,667

SEK 1,000,000

–

335,690

11/13

–

–

–

Nil

Nil

No3

Yes

CEO of Lundin Petroleum 

2002–2015.

Chair of the board of

Lancelot Asset 

Management

Chairman of the board 

of Africa Energy Corp. 

and Josemaria Resources 

AB and member of the 

Inc. and member of the 

board of Skandia Liv.

board of Lundin Gold Inc., 

Filo Mining Corp. and 

International Petroleum 

Corp.

8,000

12/13

6/6

–

–

Nil

Yes

Yes

Nil4

13/13

6/6

–

–

Nil

No4

No4

Director
Elected 2001
Born 1958

Graduate (engineering) 
from the New Mexico 
Institute of Mining and 
Technology.

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

Director
Elected 2015
Born 1953 
ESG/H&S Committee chair
Compensation Committee
member

MBA from the BI Norwegian 
School of Management, 
Ph.D. Laser Physics and 
B.Sc. Honours 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., 
Lundin Gold Inc., Filo 
Mining Corp., International 
Petroleum Corp, Lundin 
Foundation and Bukowski 
Auktioner AB and member 
of the board of Josemaria 
Resources Inc.

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 trustee and 
council member of the 
International Institute for 
Strategic Studies in London.

Director 
Elected 2018
Born 1947
ESG/H&S Committee 
member

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

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

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

Director
Elected 2017
Born 1962
Audit Committee member
ESG/H&S Committee 
member

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.

Chairman of the DHI 
Group, ESVAGT, RelyOn 
Nutec (Global) and 
Hovedstadens Letbane.

425,0005

11/13

–

–

–

5,000

12/13

–

4/4

2/2

93,310

13/13

–

–

2/2

8,820

13/13

6/6

–

2/2

Director
Elected 2013
Born 1955
Compensation Committee
chair

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

General Counsel and 
member of the Executive 
Management of AB 
Electrolux 1999–2017. 
Senior positions in AB 
Volvo Group 1990–1998. 
Lawyer in private practice.
Member of the Swedish 
Securities Council 
2006–2016. 

–

5,000

13/13

–

4/4

–

SEK 716,667

SEK 665,000

SEK 541,667

SEK 840,000

SEK 665,000

SEK 788,333

SEK 716,667

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 family trusts, Nemesia S.à.r.l., which holds 95,478,606 shares in the Company.

6  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.

43

Lundin Petroleum Annual Report 2019DIRECTORS’ REPORT | Corporate Governance Report 

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 an ESG/H&S 
Committee. 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. 
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 47–54.

Compensation Committee work during 2019:
·  Ongoing review of the Performance Management Process 

through various work sessions across the year.

·  Discussions and recommendations to the Board in 

remuneration matters.

·  Reviewed the changes in Swedish legislation as a result of the 

European Union Shareholder Rights Directive II and how these 
changes will impact the Swedish Corporate Governance Code. 
In considering the impacts of the changed requirements, the 
Committee has overseen the development of an updated Policy 
on Remuneration and continue to work on a Remuneration 
Report.

·  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 2018.

·  Continuous monitoring and evaluation of remuneration 

structures, levels, programmes and the Policy on 
Remuneration.

·  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 2019 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 issues as presented by Group management.

·  Review of the Group management succession plan.

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 2019:
·  Assessment of the 2018 year end report and the 2019 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 

·  Preparing a proposal for the 2019 Policy on Remuneration for 

2019 on behalf of the Board.

Board and AGM approval.

·  Evaluation of accounting issues in relation to the assessment 

·  Consultation and meetings with Company stakeholders, 

of the ﬁ nancial reports.

including institutional investors, regarding the proposed long-
term incentive plan (LTIP) 2019.

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

and risk management of the Group.

·  Preparing a proposal for LTIP 2019 for Board and AGM 

·  Three meetings with the statutory auditor to discuss the 

approval through various work sessions and preparation 
discussions.

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

·  Review of fulﬁ lment of LTIP 2016 performance conditions and 

and impartiality of the statutory auditor.

conﬁ rmation of vesting.

·  Preparing a proposal for remuneration and other terms of 

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

employment for the CEO for Board approval. 

statutory auditor for election at the 2020 AGM.

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

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

44

Lundin Petroleum Annual Report 2019

Board’s yearly work cycle 

Q3 / Q4 Activities
·  Executive session with Group management
·  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
·  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

Q1 / Q2 Activities
·  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
·  Statutory meeting following the AGM to conﬁrm 
  Board fees, Committee compensation, signatory 
  powers, appointment of corporate secretary
·  Audit Committee report regarding the ﬁrst 
  quarter report
·  Annual ESG/H&S 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 

Board of Directors work 2019

13 board meetings were held in 2019 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 and approving Lundin Petroleum’s new dividend policy. 
·  Discussing in detail the Company’s performance in 2018 and 2019 and resolving to propose to the 2019 AGM that an increased cash 

dividend of USD 1.48 per share shall be paid to the shareholders. 

·  Discussing in detail and recommending to the 2019 EGM to resolve on the redemption of 16 percent of the outstanding shares of the 

Company and the sale of a 2.6 percent stake in the Johan Sverdrup unit to Equinor. 

·  Reviewing and approving a short-term bridge facility in relation to the transactions with Equinor.
·  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, liquidity position and hedging strategy, including approving foreign exchange rate and interest rate hedges. 

·  Discussions regarding the Company’s risk management. 
·  Discussions regarding investor relations matters. 
·  Considering the Company’s production performance, forecasts and future outlook.
·  Considering and discussing in detail the Johan Sverdrup development project and remaining project risks, time schedule, ﬁ rst oil and 

production, 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. 
·  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, as well as the preliminary investigation into alleged instigation of interference in a 
judicial matter. 

·  Considering and discussing sustainability matters, including operations in the Barents Sea, climate change and the Company’s efforts to 
reduce its carbon footprint and environmental impact, the Company’s partnership with the Lundin Foundation and sustainability trends 
and initiatives.

·  Discussing and adopting the new Decarbonisation Strategy with the ambition that the Company shall be one of the most sustainable oil 

and gas companies in the world, and approving a transaction to acquire a 50 percent non-operated in the Leikanger hydropower project in 
Norway and discussing an investment in Metsälamminkangas windfarm in Finland. 

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

Charter.

·  Considering the proposal for a performance based long-term incentive plan (LTIP) 2019, following similar principles as the previous 

LTIPs approved by the 2014–2018 AGMs, including continued stakeholder engagement discussions, revising the applicable peer group, 
approving participants, allocating individual awards and approving the detailed plan rules, subject to 2019 AGM approval.

i

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

Lundin Petroleum Annual Report 2019

45

DIRECTORS’ REPORT | Corporate Governance Report 

ESG/H&S Committee
The Environmental Social Governance/Health and Safety 
Committee (ESG/H&S Committee, renamed from CR/HSE 
Committee) assists the Board to monitor the performance and 
key risks that the Company faces in relation to environmental, 
social, governance and health and safety matters. The ESG/H&S 
Committee’s responsibility is to oversee the Company’s 
conduct and performance on ESG/H&S matters, to inform 
the Board and make recommendations to the Board it deems 
appropriate on any area within its remit where action or 
improvement is needed. The ESG/H&S Committee’s tasks 
further include reviewing and monitoring ESG/H&S policies 
and the effectiveness of compliance, as well as considering 
ESG/H&S issues, risks, strategies and responses to climate change 
issues. The ESG/H&S Committee reviews Group management’s 
proposals on ESG/H&S targets and goals, monitors the 
appropriateness of ESG/H&S 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 
ESG/H&S activities can be found in the Sustainability section on 
pages 16–17 and in the Sustainability Report available on the 
Company’s website.

ESG/H&S Committee work during 2019:
·  Review of ESG/H&S Committee terms of reference.
·  Review of policies and conduct of the Company in respect of 

ESG/H&S matters. 

·  Review of major ESG/H&S issues or risks of public concern and 

the Company strategy to address them.

·  Assessing current status of international climate initiatives and 

stakeholder expectations on Board oversight.

·  Review of the Company’s strategy and response to climate 
change issues and the Company’s Decarbonisation Strategy.
·  Review of ESG/H&S performance and monitoring of potential 

and/or large reputational risk for the Company with particular 
focus on corrective actions.

·  Monitoring the appropriateness of ESG/H&S audit strategies 

and plans, and the execution and results of such plans.

·  Review of the cyber security risks and awareness programme. 
·  Review of the 2020 ESG/H&S plan.
·  Discuss third party ESG rating assessments of Lundin 

Petroleum.

·  Discuss the change of name of the Committee to the ESG/H&S 

Committee

46

Lundin Petroleum Annual Report 2019

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 42–43 and in the notes to the ﬁ nancial statements, see 
Note 27 on pages 87–88.

Evaluation of the Board’s work 
A formal review of the work of the Board was conducted 
in October 2019 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 and focuses 
on activities that will help the Company maximise shareholder 
value in a sustainable manner. The composition of the Board 
is considered appropriate and the Board members collectively 
exhibit diversity and breadth in respect of their qualiﬁ cations, 
experience and background. 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 the maximum amount 
of Board members was being approached. 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 but that 
materials sometimes could be shared earlier and that even 
more time could be scheduled for the meetings. The results 
of the Board evaluation were presented to the Nomination 
Committee.

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 cer (COO), Nick Walker, who 
is responsible for Lundin Petroleum’s exploration, development 
and production operations and HSEQ, 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. 

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

·  The Vice President Legal, Henrika Frykman, who is responsible 

for all legal and tax matters within the Group, the Vice 
President Corporate Affairs, Alex Budden, who is responsible 
for corporate affairs and strategic communications within the 
Group, the Vice President Investor Relations Edward Westropp, 
who is responsible for investor relations and ﬁ nancial 
communications 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 Sustainability, Zomo Fisher who is responsible 
for the Group’s corporate sustainability strategy. Zomo Fisher 
replaced the Company’s previous Vice President Corporate 
Responsibility, Christine Batruch, who stepped down from her 
position on 31 December 2019, a position she had held since 
2002. 

·  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/HSEQ, 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 in order to systematically 
evaluate and propose improvements for more effective 
governance, internal control and risk management processes. 
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 within the Group. 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 governance, internal control and 
risk management processes which have been identiﬁ ed through 
the internal 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. For additional 
information on internal control, see page 55. 

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.

Lundin Petroleum Annual Report 2019

47

DIRECTORS’ REPORT | Corporate Governance Report 

Group management

Alex Schneiter

Nick Walker

Teitur Poulsen

Henrika Frykman

President and Chief 
Executive Officer

Chief Operating Officer

Chief Financial Officer

Vice President Legal

Alex Budden

Sean Reddy

Edward Westropp

Zomo Fisher

Vice President Corporate 
Affairs

Vice President Human 
Resources and Shared 
Services

Vice President  
Investor Relations

Vice President  
Sustainability

Major topics addressed by Group management in 2019

·  Negotiation and implementation of the transactions concluded with Equinor in relation to the redemption of 16 percent of the shares in issue 

and the divestment of a 2.6 percent stake in the Johan Sverdrup unit, including negotiating a USD 500 million bridge facility agreement. 

·  Overseeing the Johan Sverdrup commissioning and start-up.
·  Discussing and managing the electrification of the Utsira High Area.
·  Discussing and negotiating the agreement to acquire a 50 percent non-operated interest in the Leikanger hydropower project in Norway.
· Discussing and negotiating the agreement to acquire 30 percent of the Rolvsnes discovery and 20 percent of the Goddo prospect from Lime 

Petroleum AS. 

·  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, sustainability measures and maximising operational efficiency and performance.
·  Consideration of organisational changes and improvements as well as considering new ventures and opportunities.
·  Developing the Company’s Decarbonisation Strategy, as well as 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 Office’s on-going preliminary investigation into alleged complicity in violations of international 

humanitarian law in Sudan during 1997–2003 as well as the preliminary investigation into alleged instigation of interference in a judicial 
matter.

·  Negotiating the terms for the acquisition of 100 percent interest in the Metsälamminkangas wind farm project in Finland.

The Group’s compensation packages consist of four elements, 
being (i) base salary; (ii) annual variable remuneration; (iii) 
long-term incentive plan (LTIP); and (iv) other benefits. 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, annual 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.

48

Lundin Petroleum Annual Report 2019Policy 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. The proposed 2020 Policy on Remuneration for 
Group management has been revised compared to previous 
years’ policy in order to comply with changes in Swedish law 
and the revised 2020 Corporate Governance Code. 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 of oil and gas, reserves and resource 
replacement, ﬁ nancial, health and safety, ESG, carbon dioxide 
gas emissions 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 2019 Policy on Remuneration, the Board of 
Directors could approve annual variable remuneration in 
excess of 12 months’ base salary in circumstances or in respect 
of performance which it considered to be exceptional. To 
have had this discretion was important to accommodate the 
uncertainties and cyclical nature of the oil and gas industry. 
The Board has made two such decisions that are reported in 
Note 27 on page 87. The Board of Directors determined that it 
was reasonable to recognise the exceptional performance in 
relation to the transactions with Equinor and the signiﬁ cant 
value creation for shareholders of those transactions.

Long-term incentive plan 2019 
The 2019 AGM resolved to approve a performance based 
LTIP 2019, that follows similar principles as the previously 
approved LTIPs 2014–2018, 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 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 
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 2019 and the 
total LTIP award made in respect of 2019 was 316,855.

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 
2019, 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 2019 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 2019, 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 
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 2020 AGM
The Board’s proposal for remuneration to Group management 
to the 2020 AGM is the result of a review to comply with 
the revised Swedish legislation resulting from the European 
Union Shareholder Rights Directive II and to comply with 
the revised 2020 Corporate Governance Code. Few material 
changes are proposed for how the Company manages executive 
remuneration matters, however, the new legislation, together 
with discussions with shareholders’ representatives, have led to 
some changes to the proposal that is submitted to shareholders 
for approval at the 2020 AGM. For information regarding the 
Board’s proposal for remuneration to Group management to 
the 2020 AGM, including a new LTIP, see pages 51–54.

Lundin Petroleum Annual Report 2019

49

DIRECTORS’ REPORT | Corporate Governance Report 

POLICY ON REMUNERATION FOR GROUP 
MANAGEMENT AS APPROVED BY THE 2019 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 eight executives 
in 2019. 

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 Company, and to encourage and 
appropriately reward performance that enhances shareholder 
value. Accordingly, the Company 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 
Company’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 remuneration; 
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. 

Sudan 

In June 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. 
We remain convinced that Lundin was a force for good for the development in Sudan. Ian H. Lundin and Alex Schneiter have 
been interviewed by the Swedish Prosecution Authority and have, together with the Company, been notiﬁ ed of the relevant 
suspicions and have received ﬁ nal notice of the investigation, which is being reviewed by the defence. No new ﬁ nal notice 
deadline has yet been set by the Swedish Prosecution Authority. 

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 information, 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 form the basis for the investigation.

Neither investigation mean that charges have been, or will be, brought against any individuals or the Company. Lundin 
Petroleum knows 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.lundinsudanlegalcase.com.

50

Lundin Petroleum Annual Report 2019

 
 
 
 
Annual Variable Remuneration
The Company considers that annual variable remuneration 
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 annual variable remuneration 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 
annual variable remuneration for 2019 is estimated to range 
between no payout at minimum level and SEK 26.3 million 
or approximately USD 2.8 million (excluding social security 
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 annual 
variable remuneration 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 of Directors 
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 2019 
LTIP for Group Management, which follows similar principles 
as the LTIPs approved by the 2014–2018 Annual General 
Meetings, is available as part of the documentation for the 
Annual General Meeting at www.lundin-petroleum.com.

The cost at grant of the proposed 2019 LTIP is estimated to range 
between no cost at minimum level and approximately SEK 90.1 
million or approximately USD 9.7 million (excluding social 
security costs) at a share price of SEK 298 at maximum level, 
based on the current composition of Group Management.

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 based on 
remuneration up to the limit prescribed by law. 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 of Directors. 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 of Directors’ fees resolved by the Annual 
General Meeting, remuneration as per prevailing market 
conditions may be paid to members of the Board of Directors 
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 long-term 
incentive programs and include 242,057 shares for awards 
under LTIP 2016, 258,619 shares for awards under the LTIP 
2017, 195,658 shares for awards under the LTIP 2018, 2,323 
unit bonus awards under the 2016 Unit Bonus Plan and 2,746 
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 2018.

POLICY ON REMUNERATION FOR GROUP 
MANAGEMENT TO BE PROPOSED TO THE 2020 
AGM 

The intention of the Board of Directors is to propose to the 
2020 AGM the adoption of a Policy on Remuneration for 
2020 that follows in essence the same principles as applied 
in 2019 and that contains similar elements of remuneration 
for Group management as the 2019 Policy on Remuneration. 
The proposed 2020 Policy on Remuneration is the result of a 
review to comply with revised Swedish legislation resulting 
from the European Union Shareholder Rights Directive II and 
the revised 2020 Swedish Corporate Governance Code. 

The details of the Board of Directors proposal in respect 
of the 2020 Long-term Incentive Plan (LTIP) for Group 
management and a number of key employees, which follows 
similar principles as the LTIPs approved by the 2014–2019 
AGMs, are available on www.lundin-petroleum.com. The 
total maximum number of performance shares that may 
be allotted under LTIP 2020 is 560,000, corresponding to 
approximately 0.2 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 HSEQ performance.

Lundin Petroleum Annual Report 2019

51

DIRECTORS’ REPORT | Corporate Governance Report 

Proposed 2020 Policy on Remuneration for Group 
Management

Application of the Policy 
This Policy on Remuneration (the “Policy”) applies to the 
remuneration of “Group Management” at Lundin Petroleum 
AB (“Lundin Petroleum” or the “Company”), which includes (i) 
the President and Chief Executive Ofﬁ cer (the “CEO”), (ii) the 
Deputy CEO, who from time to time will be designated from one 
of the other members of Group Management, and (iii) the Chief 
Operating Ofﬁ cer, Chief Financial Ofﬁ cer and Vice President 
level employees. The Policy also applies to members of the Board 
of Directors (the “Board”) of the Company where remuneration is 
paid for work performed outside the directorship.

Background to the proposed changes to the Policy
The Policy to be approved by the 2020 Annual General Meeting 
(“AGM”) is the result of a review to comply with revised Swedish 
legislation resulting from the European Union Shareholder 
Rights Directive II and the 2020 revised Swedish Corporate 
Governance Code. Few material changes are proposed for 
how the Company manages executive remuneration matters, 
however the new legislation, together with discussions with 
shareholders’ representatives, have led to some changes to the 
Policy that is submitted to the shareholders for approval. The 
revised Policy is different to the Policy approved by the 2019 
AGM with regard to the following:
·  the Policy is more explicit on the links to strategy, long-
term performance and sustainability and requires that 
the Compensation Committee (the “Committee”) takes 
shareholders’ opinions into account, as well as remuneration 
across the broader employee population, when making its 
decisions and recommendations to the Board.

·  The Board continues to award annual variable remuneration 
worth up to 12 months’ base salary but now provides more 
clarity by imposing a cap of 18 months’ base salary for 
occasions when individuals have delivered outstanding 
performance.  

·  The Policy now describes the design and governance of 

different elements of remuneration in more detail, as well as 
their relative proportions of total remuneration.

·  There is more information on terms and decision making 

processes and considerations, including how the Company can 
deviate from the Policy.

This Policy is, together with previous years’ Policies, available on 
the Company’s website www.lundin-petroleum.com and it will 
remain available for ten years.

Key remuneration principles at Lundin Petroleum
Lundin Petroleum’s remuneration principles and policies are 
designed to ensure responsible and sustainable remuneration 
decisions that support the Company’s strategy, shareholders’ 
long-term interests and sustainable business practices. It is the 
aim of Lundin Petroleum to recruit, motivate and retain high 
calibre executives capable of achieving the objectives of the 
Company and to encourage and appropriately and fairly reward 
executives for their contributions to Lundin Petroleum’s success.

Remuneration to members of the Board
In addition to Board 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. 

Compensation Committee
The Board has established the Committee to support it on 
matters of remuneration relating to the CEO, the Deputy 
CEO, other members of Group Management and other key 
employees of the Company. The objective of the Committee is 
to structure and implement remuneration principles to achieve 
the Company’s strategy, the principal matters for consideration 
being:
·  the review and implementation of the Company’s 

remuneration principles for Group Management, including 
this Policy which requires approval by the General Meeting of 
Shareholders;

·  the remuneration of the CEO and the Deputy CEO, as well as 
other members of Group Management, and any other speciﬁ c 
remuneration issues arising;

·  the design of long-term incentive plans that require approval 

by the General Meeting of Shareholders; and

·  compliance with relevant rules and regulatory provisions, such 

as this Policy, the Swedish Companies Act and the Swedish 
Corporate Governance Code.

When the Committee makes decisions, including determining, 
reviewing and implementing the Policy, it follows a process 
where:
·  the Board sets and reviews the terms of reference of the 

Committee;

·  the Chair of the Committee approves the Committee’s agenda;
·  the Committee considers reports, data and presentations and 

debates any proposal. In its considerations the Committee will 
give due regard to the Company’s situation, the general and 
industry speciﬁ c remuneration environment, the remuneration 
and terms of employment of the broader employee population, 
feedback from different stakeholders, relevant codes, 
regulations and guidelines published from time to time;
·  the Committee may request the advice and assistance of 

management representatives, other internal expertise and of 
external advisors. However, it shall ensure that there is no 
conﬂ ict of interest regarding other assignments that any such 
advisors may have for the Company and Group Management; 
·  the Committee ensures through a requirement to notify and 

recuse oneself that no individual with a conﬂ ict of interest will 
take part in a remuneration decision that may compromise 
such a decision;

·  once the Committee is satisﬁ ed that it has been properly and 
sufﬁ ciently informed, it will make its decisions and, where 
required, formulate proposals for approval by the Board; and

·  the Board will consider any items for approval or proposals 

from the Committee and, following its own discussions, make 
decisions, proposals for a General Meeting of Shareholders and/
or further requests for the Committee to deliberate on.

52

Lundin Petroleum Annual Report 2019

 
 
Elements of remuneration for Group Management
There are four key elements to the remuneration of Group Management:

a) Base salary

b) Annual variable 
remuneration

c) Long-term incentive plan

Description, purpose and link to 
strategy and sustainability

·  Fixed cash remuneration paid 
monthly. Provides predictable 
remuneration to aid attraction and 
retention of key talent.

Process and governance

Relative share of 
estimated/maximum 
total reward 1

·  The Committee reviews salaries 

30% / 20%

every year as part of the review of 
total remuneration (see below for 
a description of the benchmarking 
process).

·  Annual bonus is paid for performance 

·  The annual review of total 

20% / 25%

over the ﬁ nancial year. 

·  Awards are capped at 18 months’ 

base salary, paying up to 12 months’ 
base salary for ranges of stretching 
performance requirements. Any value 
over 12 months’ base salary is paid for 
delivering outstanding performance.
·  Signals and rewards the strategic and 
operational results and behaviours 
expected for the year that contribute 
to the long-term, sustainable value 
creation of the Company. 

remuneration also considers annual 
bonus awards, outcomes, target 
structure, weightings of targets and 
speciﬁ c target levels of performance. 

·  Measurable ﬁ nancial and non-

ﬁ nancial performance requirements 
are identiﬁ ed according to position 
and responsibilities and include 
delivery against production of oil 
and gas, reserves and resource 
replacement, ﬁ nancial, health and 
safety, ESG, carbon dioxide gas 
emissions and strategic targets. 
·  The Committee reviews the design 
of annual variable remuneration 
separately.

40% / 50%

·  Performance share plan that aligns the 
interests of participants with those of 
shareholders through awards in shares 
worth up to 36 months’ base salary on 
award, vesting after 3 years subject to 
performance.

·  Relative Total Shareholder Return 

(“TSR”) summarises the complex set 
of variables for long-term sustainable 
success in oil and gas exploration and 
production into a single performance 
test relative to peers that the Company 
competes with for capital.

·  Annual review of total remuneration 
considers long-term incentive awards, 
outcomes, TSR peer group and 
targets. 

·  Participants are required to build a 
signiﬁ cant personal shareholding 
of up to 200% of base salary over 
time by retaining shares until 
a predetermined limit has been 
achieved.

·  The Committee reviews the design of 

long-term incentives separately.

d) Beneﬁ ts

·  Predictable beneﬁ ts to help facilitate 
the discharge of each executive’s 
duties, aiding the attraction and 
retention of key talent.

10% / 5%

·  The Committee reviews beneﬁ ts and 
contractual terms regularly to ensure 
that the Company does not fall 
behind the market.

·  Beneﬁ ts are set with reference to 

external market practices, internal 
practices, position and relevant 
reference remuneration.

Total

100% / 100%

1  Estimated reward shows the percentage of total reward where proportions are estimated assuming 50 percent of maximum annual bonus and 50 

percent of the long-term incentive without any share price or dividend effect. Proportions of maximum reward assume full vesting of both annual 
variable remuneration and the long-term incentive but without any share price or dividend effect. Different actual awards and the variable nature of 
incentives means that the actual proportions for an individual may be different. 

Lundin Petroleum Annual Report 2019

53

DIRECTORS’ REPORT | Corporate Governance Report 

The Board 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 12 months’ base salary; no other beneﬁ ts shall 
be included. 

In all circumstances, severance payments in aggregate (i.e. for 
notice periods and severance arrangements) shall be limited to a 
maximum of 24 months’ base salary.

Authorisation for the Board
In accordance with Chapter 8, Section 53 of the Swedish 
Companies Act, the Board shall be authorised to approve 
temporary deviations from the Policy on any element of 
remuneration described in this Policy, except from the 
maximum award of annual variable remuneration, which shall 
at all times be limited to 18 months’ base salary . Deviations 
shall be considered by the Committee and shall be presented to 
the Board for approval. Deviations may only be made in speciﬁ c 
cases if there are special reasons outside of normal business that 
make it necessary to increase reward in order to help secure 
the Company’s long-term interests, ﬁ nancial viability and/or 
sustainability by recognising exceptional contributions. The 
reasons for any deviation shall be explained in the remuneration 
report to be submitted to the AGM.

Outstanding remunerations 
Remunerations outstanding to Group Management comprise 
awards granted under the Company’s previous long-term 
incentive programs and include 258,619 shares for awards under 
the LTIP 2017, 195,658 shares for awards under the LTIP 2018, 
222,148 shares for awards under LTIP 2019 and 2,746 unit bonus 
awards under the 2017 Unit Bonus Plan. Further information 
about these plans is available in Note 28 of the Company’s 
Annual Report 2019.

Review and benchmarking
Every year the Committee undertakes a review of the Company’s 
remuneration policies and practices considering the total 
remuneration of each executive as well as the individual 
components. Levels are set considering: 
·  the total remuneration opportunity;
·  the external pay market; 
·  the scope and responsibilities of the position; 
·  the skills, experience and performance of the individual;
·  the Company’s performance, affordability of reward and 

general market conditions; and

·  levels and increases in remuneration, as well as other terms of 

employment, for other positions within the Company.

External benchmarks for total remuneration are found from one 
or more sets of companies that compete with Lundin Petroleum 
for talent, taking into consideration factors like size, complexity, 
geography and business proﬁ le when determining such peer 
groups. 

Variable remuneration
The Company considers that variable remuneration forms 
important parts of executives’ remuneration packages, where 
associated performance targets reﬂ ect the key drivers for 
pursuing the Company’s strategy, and to achieve sustainable 
value creation and growth in long-term shareholder value. The 
Committee ensures that performance and design align with 
the strategic direction and risk appetite of the Company before 
incentives are approved by the Board. 

There is no deferral of incentive payments, however, the Board 
can recover annual bonuses paid in the unlikely event of 
outcomes based on information which is subsequently proven 
to have been manifestly misstated. The Board can also in 
exceptional circumstances reduce long-term incentive awards, 
including reducing them to zero, should it consider the vesting 
outcome to incorrectly reﬂ ect the true performance of the 
Company. 

Benefits
Beneﬁ ts provided shall be based on market terms and shall 
facilitate the discharge of each executive’s duties. The pension 
provision is the main beneﬁ t and follows the local practice of the 
geography where the individual is based. The pension beneﬁ ts 
consist of a basic deﬁ ned contribution pension plan, where the 
employer provides 60 percent and the employee 40 percent 
of an annual contribution of up to 18 percent of the capped 
pensionable salary and a supplemental deﬁ ned contribution 
pension plan where the employer provides 60 percent and the 
employee 40 percent of a contribution up to 14 percent of the 
capped pensionable salary.

Severance arrangements
Executives have rolling contracts where mutual notice periods 
of between three and twelve months apply between the 
Company and the executive, 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 in the event of termination of 
employment due to a change of control of the Company. Such 
compensation, together with applicable notice periods, shall not 
exceed 24 months’ base salary.  

54

Lundin Petroleum Annual Report 2019

Internal control over 
financial reporting 

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

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 to meet the requirements for a listed 
company. 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 Communications- and Investor Relations 
policies ensure that the public is provided with accurate, 
reliable, and relevant information concerning the Group and 
its ﬁ nancial position at the right time. 

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. In the area of control activities Lundin 
Petroleum has documented all critical, ﬁ nancial processes and 
controls in the Group. 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.

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. Controls that have failed 
the testing must be remediated which means establishing 
and implementing actions to correct weaknesses. 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.

Lundin Petroleum Annual Report 2019

55

 
“ Lundin Petroleum’s industry 

leading low unit operating costs 
coupled with high quality oil 
demanding a premium to Brent 
has resulted in excellent cash 
generation with a CFFO of USD 
1.4bn, EBITDA of USD 1.9bn and 
FCF of USD 1.3bn.

Teitur Poulsen
Chief Financial Officer

FINANCIAL STATEMENTS AND NOTES

Financial summary

2019 has been a transformational year for Lundin 
Petroleum with the start-up of the giant Johan 
Sverdrup field being the highlight of the year 
coupled with the continued outperformance of 
our operated Edvard Grieg field. This has resulted 
in another strong financial performance for 2019 
despite the weaker macro environment compared 
to 2018. The Company generated record free cash 
flow of MUSD 1,272 pre dividend payments, of 
which MUSD 313 related to organic free cash flow 
driven by an excellent production performance 
from all our production hubs, lower than expected 
capital investment and good demand for all three 
crude oil grades which resulted in a realised oil 
price above Brent. 

During the summer 2019 the Company completed 
a share redemption arrangement, which resulted 
in the Company’s share count reducing by 
16 percent leading to an accretive per share 
financial performance going forward. The 2019 
financial performance has provided a solid 
financial platform for the Company to continue 
its expansive dividend policy with the board 
proposing a 22 percent dividend increase for 2019 

to 1.80 USD/share.

Financial summary 

Production in Mboepd

Revenue and other income in MUSD

CFFO in MUSD 
Per share in USD

EBITDA in MUSD 1
Per share in USD 1

Free cash f low in MUSD
Per share in USD

Net result in MUSD
Per share in USD

Adjusted net result in MUSD

Per share in USD

Net debt

2019

93.3

2,948.7

1,378.2
4.36

1,918.4
6.07

1,271.7
4.03

824.9
2.61

252.7

0.80

2018

81.1

2,640.7

1,718.3
5.07

1,932.5
5.71

663.0
1.96

225.7
0.67

295.3

0.87

4,006.7

3,398.2

1  Excludes the reported after tax accounting gain of MUSD 756.7 on the  
divestment of a 2.6 percent working interest in the Johan Sverdrup 
project.

56

Lundin Petroleum Annual Report 2019

Financial statements and notes 

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 and other income 
 - 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 taxes 
 - Note 8 – Gain from sale of assets 
 - Note 9 – Oil and gas properties 
 - Note 10 – Other tangible assets 
 - Note 11 – Goodwill 
 - Note 12 – Financial assets 
 - Note 12.1 – Other shares and participations 
 - Note 13 – Inventories 
 - Note 14 – Trade and other receivables 
 - Note 15 – Cash and cash equivalents 
 - Note 16 – Equity 
 - Note 16.1 – Share capital and share premium 
 - Note 16.2 – Other reserves 
 - Note 16.3 –Retained earnings 
 - Note 16.4 –Earnings per share 
 - Note 16.5 –Adjusted earnings per share 
 - Note 17 – Financial liabilities 
 - Note 18 – Provisions 
 - Note 19 – Trade and other payables 
 - Note 20 – Financial assets and liabilities 

58

59

60

61

62

63

69
69
69
69
71
71
71
71
73
73
74
75
75
75
75
75
76
76
76
76
77
77
77
78
78
79
79

 - Note 21 – Changes in liabilities with cash ﬂ ow 
   movements from ﬁ nancing activities 
 - Note 22 – Financial risks, sensitivity analysis and 
   derivative instruments 
 - Note 23 – Pledged assets 
 - Note 24 – Contingent liabilities and assets 
 - Note 25 – Related party transactions 
 - Note 26 – Average number of employees 
 - Note 27 – Remuneration to the Board of Directors, 
   Group management and other employees 
 - Note 28 – Long-term incentive plans 
 - Note 29 – Remuneration to the Group’s auditors 
 - Note 30 – 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 

81

82
85
85
86
86

87
89
91
91

92

93

93

94

95

95

Notes to the ﬁ nancial statements of the Parent Company  96
96
 - Note 1 – Finance income 
96
 - Note 2 – Finance costs 
96
 - Note 3 – Income taxes 
96
 - Note 4 – Other receivables 
 - Note 5 – Accrued expenses and prepaid income 
96
 - Note 6 – Pledged assets, contingent liabilities and assets  96
 - Note 7 – Remuneration to the auditor 
96
 - Note 8 – Proposed disposition of unappropriated 
   earnings 
 - Note 9 – Shares in subsidiaries 

96
97

Board assurance 

Auditor’s report 

98

99

Lundin Petroleum Annual Report 2019

57

FINANCIAL STATEMENTS AND NOTES 

Consolidated Income Statement 
for the Financial Year Ended 31 December

Expressed in MUSD

Revenue and other income

Revenue

Gain from sale of assets

Other income

Cost of sales

Production costs

Depletion and decommissioning costs

Exploration costs

Impairment costs of oil and gas properties

Purchase of crude oil from third parties

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

Earnings per share – USD

Earnings per share – fully diluted – USD

Adjusted earnings per share – USD

Adjusted earnings per share fully diluted – USD

Note

2019

8

1

2

9

9

9

3

4

5

6

7

16.4

16.4

16.5

16.5

2,158.6

756.7

33.4

2,948.7

-164.8

-443.8

-125.6

-128.3

-84.3

2,001.9

-31.2

1,970.7

27.5

-322.5

-295.0

-1,8

1,673.9

-849.0

824.9

2.61

2.61

0.80

0.80

2018

2,607.9

–

32.8

2,640.7

-152.4

-458.0

-53.2

–

-533.8

1,443.3

-24.6

1,418.7

192.2

-345.4

-153.2

-1.3

1,264.2

-1,038.5

225.7

0.67

0.66

0.87

0.87

58

Lundin Petroleum Annual Report 2019

 
FINANCIAL STATEMENTS AND NOTES 

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

Other comprehensive income

Total comprehensive income

Attributable to:

Shareholders of the Parent Company

Non-controlling interest

2019

824.9

29.0

-82.5

-53.5

771.4

771.4

–

771.4

2018

225.7

1.5

-74.1

-72.6

153.1

153.1

–

153.1

Lundin Petroleum Annual Report 2019

59

FINANCIAL STATEMENTS AND NOTES 

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

Financial liabilities

Dividends

Trade and other payables

Derivative instruments

Current tax liabilities

Provisions 

Total current liabilities

Total liabilities

TOTAL EQUITY AND LIABILITIES

60

Lundin Petroleum Annual Report 2019

Note

2019

2018

9

10

11

12

20

13

14

20

15

16.1

16.1

16.2

16.3

16.3

17

18

7

20

17

19

20

7

18

5,473.2

49.4

128.1

14.3

2.7

5,667.7

40.7

349.5

11.3

85.3

486.8

5,341.1

13.6

128.1

0.4

2.7

5,485.9

36.5

216.6

34.0

66.8

353.9

6,154.5

5,839.8

0.5

326.0

-571.8

-2,178.4

824.9

-1,598.8

3,888.4

528.1

2,412.7

110,8

6,940.0

97.5

106.0

177.4

33.2

343.3

55.9

813.3

7,753.3

6,154.5

0.5

339.7

-518.3

-431.4

225.7

-383.8

3,262.0

489.1

2,103.8

64.9

5,919.8

–

–

200.9

20.0

70.4

12.5

303.8

6,223.6

5,839.8

FINANCIAL STATEMENTS AND NOTES 

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:

Gain from sale of assets

Exploration costs

Depletion, depreciation and amortisation

Impairment of oil and gas properties

Current tax

Deferred tax

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

Amortisation of deferred ﬁ nancing fees

Other 

Interest received

Interest paid

Income taxes paid

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 ﬁ nancial assets
Disposal of ﬁ xed assets1

Decommissioning costs paid
Total cash ﬂ ows from investing activities

Cash ﬂ ows from ﬁ nancing activities

Changes in long-term bank loans
Changes in lease commitments2

Financing fees paid

Dividends paid

Share redemption

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 at the end of the year

21

21

2019

824.9

-756.7

125.6
450.5

128.3

405.8

443.2

14.7

70.8

93.4

–

–

41.5

19.7

17.8

1.8

-177.4

-132.7

-4.2

-0.1
-140.3

-0.8

-47.6
1,378.2

-1,057.8

-2.5

-1,5

959.0

-3.7
-106.5

627.0

-3.4

-3.3

-355.6

-1,517.2

–
-1,252.5

19.2
66.8
-0.7
85.3

2018

225.7

–

53.2
460.6

–

90.4

948.1

14.6

162.5

88.7

-183.7

17.3

26.1

17.8

12.8

1.1

-176.0

-15.8

-2.8

1.1
57.4

–

-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

1  Cash received on the divestment of a 2.6 percent working interest in the Johan Sverdrup ﬁ eld on closing including interest and pro and contra funding 

settlement from effective date to completion date as well as working capital balances and incurred expenses

2  Change in lease commitments subsequent to initial recognition of lease commitments based on IFRS16

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.

Lundin Petroleum Annual Report 2019

61

FINANCIAL STATEMENTS AND NOTES 

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

Expressed in MUSD

Balance at 1 January 2018

Change in accounting principle3

Restated equity at 1 January 2018

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 payments4

Value of employee services5

Total transactions with owners

Balance at 31 December 2018

Comprehensive income

Net result

Currency translation difference

Cash ﬂ ow hedges

Total comprehensive income

Transactions with owners

Cash distributions

Share redemption

Bonus issue (sw. fondemission)

Share based payments4

Value of employee services5

Total transactions with owners

Balance at 31 December 2019

Attributable to owners of the Parent Company

Share 
capital1

Additional 
paid-in-
capital

Other 
reserves2

Retained 
earnings

Total equity

0.5

–

0.5

–

–

–

–

–

–

–

–

–

0.5

–

–

–

–

–

-0.1

0.1

–

–

–

0.5

527.9

–

527.9

–

–

–

–

-153.1

-14.3

-20.8

–

-188.2

339.7

–

–

–

–

–

–

–

-13.7

–

-13.7

326.0

-350.8

-3.4

-354.2

225.7

1.5

-74.1

153.1

-153.1

-14.3

-20.8

5.5

-182.7

-383.8

824.9

29.0

-82.5

771.4

-445.7

–

-445.7

–

1.5

-74.1

-72.6

–

–

–

–

–

-433.5

-3.4

-436.9

225.7

–

–

225.7

–

–

–

5.5

5.5

-518.3

-205.7

–

29.0

-82.5

-53.5

–

–

–

–

–

–

-571.8

824.9

–

–

824.9

-501.0

-501.0

-1,476.9

-1,477.0

-0.1

–

5.3

-1,972.7

-1,353.5

–

-13.7

5.3

-1,986.4

-1,598.8

1 Lundin Petroleum AB’s issued share capital described in detail in Note 16.1.

2 Other reserves are described in detail in Note 16.2.

3 Relates to change in accounting principle for revenue recognition relating to under/overlift balances as mentioned on page 63.

4 Represents the cost to hedge the equity-settled share-based long-term incentive plan as described in Note 28.

5 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 28.

62

Lundin Petroleum Annual Report 2019

FINANCIAL STATEMENTS AND NOTES 

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 92.

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 2019, Lundin Petroleum has applied the 
following new accounting standards: 

IFRS 16 Leases, the 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 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.

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. The Company accounted 
for right of use assets and lease commitments amounting to 
MUSD 36.6 per effective date 1 January 2019.

Lundin Petroleum has changed its accounting principle for 
revenue recognition relating to under/overlift balances due 
to developments in IFRIC discussion. The Group previously 
recognized income based on its produced volumes (entitlement 
method) for the period. Lundin Petroleum has decided to change 
the accounting treatment of such under/overlift so that income 
will reﬂ ect sold volumes (sales method). This means that changes 
in under/overlift balances are no longer reported as other 
income valued at market price, but will instead be reported as an 
adjustment to cost valued at production cost including depletion. 
Comparative ﬁ gures have been restated in line with IAS 8 as per 
the following table:

MUSD

Reported net result previous year

Changes due to change in accounting principle

Adjustment in other income

Adjustment in production costs

Adjustment in deferred tax

Impact of change in accounting principle

Restated net result previous year

2018

222.1

23.3

-7.0

-12.7

3.6

225.7

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.

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.

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 
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/

Lundin Petroleum Annual Report 2019

63

FINANCIAL STATEMENTS AND NOTES | Accounting Policies

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 2019

31 December 2018

Average Period end

Average Period end

1 USD equals NOK

8.8003

8,7803

8.1329

1 USD equals EUR

0.8932

0.8902

0,8464

1 USD equals SEK

9.4581

9.2993

8.6921

8.6885

0,8734

8.9562

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 
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. 

64

Lundin Petroleum Annual Report 2019

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.

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.

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.

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 

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.

Lundin Petroleum Annual Report 2019

65

FINANCIAL STATEMENTS AND NOTES | Accounting Policies

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 20.

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 and 
under or overlift positions of hydrocarbons are stated at 
the lower of cost and net realisable value. An underlift of 
production from a ﬁ eld is included in the current receivables

and an overlift of production from a ﬁ eld is included in the 
current liabilities. See also section Accounting standards, 
amendments and interpretations on page 63 for change in 
accounting principles relating to under/overlift balances.  

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.

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 

66

Lundin Petroleum Annual Report 2019

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.

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 
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.

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

Lundin Petroleum Annual Report 2019

67

FINANCIAL STATEMENTS AND NOTES | Accounting Policies

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 9.

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 18.

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 30.

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 9.

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 109 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 9.

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 
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.

68

Lundin Petroleum Annual Report 2019

FINANCIAL STATEMENTS AND NOTES  

Notes to the Financial Statements 
of the Group

Note 1  Revenue and Other Income

MUSD

Revenue

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

Gain from sale of assets
Other income

Revenue and other income

2019

2018

1,939.8
84.3
41.4
93.1
2,158.6

756.7
33.4

2,948.7

1,877.6
536.1
41.8
152.4
2,607.9

–
32.8

2,640.7

2018

102.5
35.2
7.0
0.6
7.1

152.4

For further information on revenue, see the Directors Report on page 26.

Note 2  Production Costs

MUSD

Cost of operations
Tariff and transportation expenses
Change in under/over lift position
Change in inventory position
Other production costs

Production costs

2019

118.1
46.3
-0.9
-2.8
4.1

164.8

For further information on production costs, see the Directors Report on pages 26–27.

Note 3  Segment Information 

The Group operates within several geographical areas with a focus on Norway. 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 9.

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 35 
percent of the total revenue is contracted with one customer. The Parent Company is included in Other in the following table.

Lundin Petroleum Annual Report 2019

69

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 3 continued

MUSD

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

Gain from sale of assets

Other income
Revenue and other income
Production costs
Depletion and decommissioning costs
Exploration costs
Impairment costs of oil and gas properties

Gross proﬁ t

Other
Crude oil from third party activities
Revenue
Purchase of crude oil from third parties
Gross proﬁ t

2019

2018

1,939.8
41.4
93.1
2,074.3

756.7

33.4
2,864.4
-164.8
-443.8
-125,6
-128.3

2,001.9

84.3
84.3
-84.3
0.0

1,877.6
41.8
152.4
2,071.8

–

32.8
2,104.6
-152.4
-458.0
-53.2
–

1,441.0

536.1
536.1
-533.8
2.3

MUSD

2019

2018

Total
Crude oil from own production
Crude oil from third party activities
Condensate
Gas
Net sales of oil and gas
Gain from sale of assets
Other income
Revenue and other income
Production costs
Depletion and decommissioning costs
Exploration costs
Impairment costs of oil and gas properties
Purchase of crude oil from third parties
Gross proﬁ t

MUSD

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

Shareholders’ equity
Total equity for the Group

1,939.8
84.3
41.4
93.1
2,158.6
756.7
33,4
2,948.7
-164.8
-443.8
-125.6
-128.3
-84.3
2,001.9

2019

6,114.2
122.5
296.0
2,399.7
-2,777.9
6,154.5

N/A
N/A

1,877.6
536.1
41.8
152.4
2,607.9
–
32.8
2,640.7
-152.4
-458.0
-53.2
–
-533.8
1,443.3

Assets

Equity and Liabilities

2018

2019

5,760.0
3.9
104.8
2,596.8
-2,625.7
5,839.8

N/A
N/A

5,774.0
109.2
299.6
4,348.4
-2,777.9
7,753.3

-1,598.8
-1,598.8

2018

5,203.3
3.7
104.2
3,538.1
-2,625.7
6,223.6

-383.8
-383.8

5,839.8

Total consolidated

6,154.5

5,839.8

6,154.5

For detailed information of the oil and gas properties per country, see also Note 9.

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 26–27.

70

Lundin Petroleum Annual Report 2019

 
 
 
Note 4  Finance Income

MUSD

Loan modiﬁ cation gain
Interest income
Gain on interest rate hedge settlement
Fair value change of other shares
Finance income 

2019

–
1.8
25.7
–
27.5

For further information on ﬁ nance income, see the Directors Report on page 27.

Note 5  Finance Costs

MUSD

Foreign currency exchange loss, net
Interest expense
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
Other 
Finance costs

2019

131.7
93.4
17.9
19.7
10.9
–
41.5
7.4
322.5

2018

183.7
1.7
3.5
3.3
192.2

2018

164.9
88.7
16.4
17.8
13.0
17.3
26.1
1.2
345.4

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 pages 27–28.

For further information on ﬁ nance costs, see the Directors Report on pages 27–28. 

Note 6  Share in Result of Associated Company

MUSD

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

2019

1.8
1.8

2018

1.3
1.3

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. 

Note 7  Income Taxes

Tax charge 
MUSD

Current tax
Norway
Switzerland
Current tax 

Deferred tax
Norway
Deferred tax 

Total tax

2019

405.2
0.6
405.8

443.2
443.2

849.0

2018

89.0
1.4
90.4

948.1
948.1

1,038.5

For further information on income taxes, see the Directors Report on page 28.

Lundin Petroleum Annual Report 2019

71

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

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 21.4% (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 

2019

1,673.9
-358.2

-1,091.6
-85.1
83.1
615.4
0.6
-6.1
-7.1
-849.0

2018

1,264.2
-278.1

-824.3
-63.6
103.1
31.2
–
-5.7
-1.1
-1,038.5

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 and interest charges. 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 presentation of the gain from 
the sale of 2.6 percent of Johan Sverdrup on an after tax basis, see also Note 8.

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

Corporation tax liability - current and deferred
MUSD

Norway
Switzerland
Total

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

2019

342.7
0.6
343.3

2019

–
44.0
44.0

2,456.2
0.5
2,456.7

Current

Deferred

2018

69.5
0.9
70.4

2019

2,412.7
–
2,412.7

2018

2,103.8
–
2,103.8

2018

184.9
13.6
198.5

2,301.6
0.7
2,302.3

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 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 36 (MUSD 34). The tax losses can be carried forward and utilised for up to 
nine 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 106 (MUSD 83). 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.

72

Lundin Petroleum Annual Report 2019

Note 8  Gain from Sale of Assets 

In July 2019, Lundin Petroleum entered into a sales and purchase agreement for the sale of a 2.6 percent working interest in the Johan 
Sverdrup development project to Equinor. The transaction decreased the Company’s working interest in the Johan Sverdrup development 
project to 20 percent. The transaction involved a cash consideration payable by Equinor of MUSD 962.0, which includes a nominal MUSD 52.0 
contingent payment on future reserve reclassiﬁ cations. The transaction was completed in August 2019, with economic effect from 1 January 
2019. The transaction was accounted for at closing resulting in a net after tax accounting gain of MUSD 756.7 arising from the difference 
between the consideration received and the book value of the associated assets being divested. The accounting gain is reported as gain from 
sale of assets as detailed in the following table. The gain from the sale is presented on an after tax basis as the consideration is determined net 
after tax based on the Norwegian Petroleum Tax regulations. There are no gains or losses from sale of assets in 2018.

MUSD

Assets

Oil and gas properties

Total assets divested

Liabilities
Site restoration provision
Deferred tax liabilities
Working capital
Total liabilities divested

Net assets divested

Consideration received1
Incurred expenses
Net after tax accounting gain

2019

343.7
343.7

16.2
108.9
4.0
129.1

214.6

974.0
-2.7
756.7

1  Includes fair value of the contingent consideration on future reserve reclassiﬁ cations, received interest and pro and contra funding settlement from 

effective date to completion date as well as working capital balances.

Note 9  Oil and Gas Properties 

MUSD

Production cost pools

Non-production cost pools

Production cost pools
MUSD

Cost
1 January
Additions
Reclassiﬁ cation from non-production cost pools
Change in estimates
Currency translation difference
31 December

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

Net book value 

31 December 
2019

31 December
2018

4,065.3

1,407.9

5,473.2

Norway
2019

4,751.3
95.5
2,687.9
2.3
-85.5
7,451.5

-2,992.0
-424.4
30.2
-3,386.2

4,065.3

1,759.3

3,581.8

5,341.1

Norway
2018

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

Depletion amounted to MUSD 424.4 (MUSD 451.7) and is included within the depletion and decommissioning costs line in the income 
statement.

Lundin Petroleum Annual Report 2019

73

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 9 continued

Non-production cost pools
MUSD

1 January

Additions
Reclassiﬁ cation to production cost pools
Disposals
Expensed exploration costs
Impairment costs of oil and gas properties
Change in estimates
Currency translation difference
31 December 

Norway
2019

3,581.8
1,115.4
-2,687.9
-343.7
-125.6
-128.3
1.4
-5.2
1,407.9

Norway
2018

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

Impairment
Lundin Petroleum carried out its impairment testing at 31 December 2019 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 2019 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 128.3 (MUSD –) with the 
impairment costs relating to certain licences in the Barents Sea of which future economic development is considered uncertain.

Capitalised borrowing costs
During 2019, MUSD 85.7 (MUSD 87.6) 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 between 
2.0% to 2.5%.

Development expenditure commitments
The Group is contractually committed to development projects with a remaining commitment as at 31 December 2019 of approximately 
USD 2.0 billion (USD 1.9 billion), mainly relating to the Johan Sverdrup Phase 2 project and excluding the renewable power project.

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 2019 are estimated to be MUSD 107.0 (MUSD 118.1) of which third parties who are joint operations partners will contribute 
approximately MUSD 71.5 (MUSD 82.2) resulting in a net commitment of approximately MUSD 35.5 (MUSD 35.9).

Contracted drilling rigs commitments
The Group has entered into lease contracts for drilling rigs during 2019. As the leases have not commenced yet as at 31 December 2019, no 
lease commitment is recognised in the balance sheet for these contracts as at 31 December 2019. The commitments under these contracts are 
estimated to be MUSD 290.7 (MUSD –) of which third parties who are joint operations partners will contribute approximately MUSD 109.8 
(MUSD –). The net lease commitment of approximately MUSD 180.9 is already included in the above mentioned development and exploration 
and appraisal expenditure commitments and in the site restoration provision as at 31 December 2019.

Note 10  Other Tangible Assets 

MUSD

Cost
1 January
Additions
Currency translation difference
31 December

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

Net book value

2019

2018

Real 
estate

Other

Total

Real 
estate

Other

Total

10.6
41.0
-0.4
51.2

-1.2
-4.3
–
-5.5

45.7

32.0
2.0
-0.3
33.7

-27.8
-2.4
0.2
-30.0

3.7

42.6
43.0
-0.7
84.9

-29.0
-6.7
0.2
-35.5

49.4

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

4.2

41.0
3.2
-1.6
42.6

-27.8
-2.6
1.4
-29.0

13.6

74

Lundin Petroleum Annual Report 2019

Note 10 continued

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 is included within 
the general, administration and depreciation line in the income statement. Real estate additions during the year mainly relate to ofﬁ ce 
premises that fall under IFRS16 which is depreciated based on the remaining contractual life of the ofﬁ ce lease.

Note 11  Goodwill 

MUSD

1 January

Change

31 December

2019

128.1

–

128.1

2018

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 2019 and will be tested for impairment annually as part of the annual impairment testing of 
oil and gas properties. 

Note 12  Financial Assets 

MUSD

Contingent consideration

Associated companies

Other 

31 December 
2019

31 December 
2018

12.4

0.3

1.6

14.3

–

–

0.4

0.4

The sale of 2.6 percent of Johan Sverdrup during the year included a contingent consideration based on future reserve reclassiﬁ cations and is 
due in 2026, This contingent consideration was fair valued by the Company and amounted to MUSD 12.4. 

Note 12.1  Associated companies 

Johan Sverdrup Eiendom DA

Note 13  Inventories 

MUSD

Hydrocarbon stocks

Drilling equipment and consumable materials

Note 14  Trade and Other Receivables 

MUSD

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

31 December 2019

Number of shares

N/A

Share %

20.0

Book amount
MUSD

31 December 2018
Book amount
MUSD

0.3
0.3

–
–

31 December 
2019

31 December 
2018

6.1

34.6

40.7

3.3

33.2

36.5

31 December 
2019

31 December 
2018

305.1
2.0
11.4
23.9
–
7.1
349.5

153.7
1.9
17.0
26.9
14.0
3.1
216.6

Lundin Petroleum Annual Report 2019

75

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 14 continued

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 related to a residual receivable from IPC for working capital balances following the IPC spin-off which was received 
during 2019.

Note 15  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 2019.

Note 16  Equity 

Note 16.1  Share Capital and Share Premium

MUSD

1 January 2018

Distributions
Purchase of own shares
Share based payments
Movements

31 December 2018

Share redemption
Bonus issue (sw. fondemission)
Share based payments
Movements

31 December 2019

Share capital

Number 
of shares

Par value 
MSEK

Par value
 MUSD

340,386,445

–
–
–
–

340,386,445

-54,461,831
–
–
–

285,924,614

3.5

–
–
–
–

3.5

-0.6
0.6
–
–

3.5

0.5

–
–
–
–

0.5

-0.1
0.1
–
–

0.5

Additional paid 
in capital

MUSD

527.9

-153.1
-14.3
-20.8
-188.2

339.7

–
–
-13.7
-13.7

326.0

Included in the number of shares issued at 31 December 2019 are 1,873,310 shares (1,873,310 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 and at the end of the prior year.

The EGM of Lundin Petroleum held on 31 July 2019 in Stockholm approved the redemption of 54,461,831 shares previously held by Equinor, 
amounting to 16 percent of the outstanding shares at a price of SEK 266.40 per share. The total number of shares in issue decreased because 
of the share redemption from 340,386,445 shares to 285,924,614 shares. The issued share capital includes a bonus issue (sw. fondemission) to 
restore the share capital of Lundin Petroleum to the same amount as immediately prior to the share redemption.

Note 16.2  Other Reserves 

MUSD

1 January 2018

Total comprehensive income

31 December 2018

Total comprehensive income

31 December 2019

76

Lundin Petroleum Annual Report 2019

Hedge reserve

Currency translation 
reserve

-0.3

-74.1

-74.4

-82.5

-445.4

1.5

Total

-445.7

-72.6

-443.9

-518.3

29.0

-53.5

-156.9

-414.9

-571.8

Note 16.3  Retained Earnings 

MUSD

1 January

Net result for the year
Distributions
Share redemption
Bonus issue (sw. fondemission)
Value of employee services

31 December

2019

-205.7

824.9
-501.0
-1,476.9
-0.1
5.3

-1,353.5

2018

-436.9

225.7
–
–
–
5.5

-205.7

The AGM of Lundin Petroleum held on 29 March 2019 in Stockholm approved a cash dividend distribution for the year 2018 of USD 1.48 per 
share, to be paid in quarterly installments of USD 0.37 per share. Based on the number of shares outstanding, excluding own shares held by 
the Company, the dividend distribution amounted to MSEK 4,638.7, equaling MUSD 501.0 based on the exchange rate on the date of AGM 
approval. The actual paid out dividend subsequently reduced to MUSD 460.7 following the redemption of 54,461,831 shares in August 2019. 
The ﬁ rst dividend payment was made on 5 April 2019, the second dividend payment was made on 8 July 2019, the third dividend payment was 
made on 7 October 2019 and the fourth dividend payment was made on 9 January 2020.

The EGM of Lundin Petroleum held on 31 July 2019 in Stockholm approved the redemption of 54,461,831 shares previously held by Equinor, 
amounting to 16 percent of the outstanding shares at a price of SEK 266.40 per share. The share redemption adjusted for outstanding dividends 
amounted to MSEK 14,124.2, equaling MUSD 1,476.9 based on the exchange rate on the date of EGM approval.

Note 16.4  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, MUSD

2019

824.9

2018

225.7

Weighted average number of shares for the year

315,833,140

338,592,250

Earnings per share, USD

2.61

0.67

Weighted average diluted number of shares for the year

316,551,300

339,513,634

Earnings per share fully diluted, USD

2.61

0.66

Note 16.5  Adjusted earnings Per Share 

Adjusted earnings per share are calculated by dividing the adjusted net result attributable to shareholders of the Parent Company by the 
weighted average number of shares for the year. For the calculation of adjusted net result, reference is made to page 106.

Adjusted net result attributable to shareholders of the Parent Company, MUSD

2019

252.7

2018

295.3

Weighted average number of shares for the year

315,833,140

338,592,250

Adjusted earnings per share, USD

0.80

0.87

Weighted average diluted number of shares for the year

316,551,300

339,513,634

Adjusted earnings per share fully diluted, USD

0.80

0.87

Lundin Petroleum Annual Report 2019

77

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 17  Financial Liabilities 

MUSD

Non-current:

Bank loans

Capitalised ﬁ nancing fees

Capitalised loan modiﬁ cation gain

Lease commitments

Current:

Bank loans

Lease commitments

31 December 
2019

31 December 
2018

4,000.0

-37,1

-105,6

31.1

3,888.4

92.0

5.5

97.5

3,465.0

-54.1

-148.9

–

3,262.0

–

–

–

3,985.9

3,262.0

The short-term portion of the bank loans which is due within 1 year is classiﬁ ed as current liabilities.

Capitalised ﬁ nancing fees amounted to MUSD 37.1 (MUSD 54.1) 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 105.6 (MUSD 148.9) 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.

Lease commitments relates to leased ofﬁ ce premises and is accounted for following the implementation of IFRS16. The short-term portion of 
the lease commitments is classiﬁ ed as current liabilities.

For further information, see Note 20.

Note 18  Provisions 

MUSD

1 January 2019
Additions
Changes in estimates
Disposals
Payments
Unwinding of discount
Currency translation difference
31 December 2019

Non-current
Current
Total

Site 
Restoration

490.5
65.6
23.0
-16.2
-3.7
17.9
-5.7
571.4

522.2
49.2
571.4

LTIP

8.3
8.9
–
–
-7.7
–
-0.1
9.4

2.7
6.7
9.4

Pension 
provision

Other

1.2
0.1
–
–
-0.1
–
–
1.2

1.2
–
1.2

1.6
1.1
–
–
-0.6
–
-0.1
2.0

2.0
–
2.0

Total

501.6
75.7
23.0
-16.2
-12.1
17.9
-5.9
584.0

528.1
55.9
584.0

78

Lundin Petroleum Annual Report 2019

Note 18 continued

MUSD

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

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

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

Total

428.3
112.0
-15.9
-13.7
16.4
-25.5
501.6

489.1
12.5
501.6

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 2019 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 2019, approximately 81 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 28. 

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).

Note 19  Trade and Other Payables 

MUSD

Trade payables

Overlift

Joint operations creditors and accrued expenses

Other accrued expenses

Other 

31 December 
2019

31 December 
2018

17.8

0.9

133.6

16.6

8.5

177.4

26.6

1.7

147.4

17.6

7.6

200.9

Note 20  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 2019
MUSD

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

Total

12.4
0.3
1.6
14.0
11.4
312.2
85.3
437.2

Loan receivables and 
other receivables at 
amortised cost

Financial assets 
at amortised cost

Fair value 
recognised in 
proﬁ t/loss

Derivatives used 
for hedging

–
–
–
–
11.4
312.2
85.3
408.9

–
–
1.6
–
–
–
–
1.6

12.4
0.3
–
–
–
–
–
12.7

–
–
–
14.0
–
–
–
14.0

Lundin Petroleum Annual Report 2019

79

 
FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 20 continued

31 December 2019
MUSD

Financial liabilities
Derivative instruments
Joint operations creditors
Other current liabilities

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

Total

3,985.9
144.0
133.6
369.6
4,633.1

Total

0.4
36.7
17.0
170.8
66.8
291.7

Total

3,262.0
84.9
147.4
104.6
3,598.9

Other liabilities at 
amortised cost

Financial liabilities at 
amortised cost

Derivatives used 
for hedging

–
–
133.6
369.6
503,2

3,985.9
–
–
–
3,985.9

–
144.0
–
–
144.0

Loan receivables 
and other receivables 
at amortised cost

Financial assets at 
amortised cost

Derivatives used for 
hedging

–
–
17.0
170.8
66.8
254.6

0.4
–
–
–
–
0.4

–
36.7
–
–
–
36.7

Other liabilities 
at amortised cost

Financial liabilities 
at amortised cost

Derivatives used 
for hedging

–
–
147.4
104.6
252.0

3,262.0
–
–
–
3,262.0

–
84.9
–
–
84.9

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

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 2019
MUSD

Assets
Contingent consideration
Associated companies
Derivative instruments – non-current
Derivative instruments – current 

Liabilities
Derivative instruments – non-current
Derivative instruments – current

Level 1

Level 2

Level 3

–
–
–
–
–

–
–
–

–
–
2.7
11.3
14.0

110.8
33.2
144.0

12.4
0.3
–
–
12.7

–
–
–

80

Lundin Petroleum Annual Report 2019

Note 20 continued

31 December 2018
MUSD

Assets
Derivative instruments – non-current
Derivative instruments – current

Liabilities
Derivative instruments - non-current
Derivative instruments - current

Level 1

Level 2

Level 3

–
–
–

–
–
–

2.7
34.0
36.7

64.9
20.0
84.9

–
–
–

–
–
–

The outstanding derivative instruments can be speciﬁ ed as follows:

Fair value of outstanding derivative instruments in 
the balance sheet 
MUSD

31 December 2019

31 December 2018

Assets

Liabilities

Assets

Liabilities

Interest rate swap
Foreign currency contracts
Total

Non-current
Current
Total

0.2
13.8
14.0

2.7
11.3
14.0

66.7
77.3
144.0

110.8
33.2
144.0

36.7
–
36.7

2.7
34.0
36.7

8.1
76.8
84.9

64.9
20.0
84.9

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 2019 amounted to a net payable of MUSD 66.5 (receivable of 
MUSD 28.6).

The fair value of the foreign currency contracts is calculated using the forward exchange rate curve applied to the outstanding foreign 
currency contracts. The effective portion of the foreign currency contracts as at 31 December 2019 amounted to a net payable of MUSD 63.5 
(MUSD 76.8).

Note 21  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 
2019

Cash ﬂ ows

Amortisation 
of deferred 
ﬁ nancing fees

Non-cash changes

Unwinding 
of loan 
modiﬁ cation 
gain

Initial 
recognition 
lease under 
IFRS16

Foreign 
exchange 
movement

At 31 
December 
2019

Financial liabilities

3,262.0

623.6

19.7

41.5

40.5

-1.4

3,985.9

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

Lundin Petroleum Annual Report 2019

81

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 22  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 55 and Risk Management on pages 32–35.

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.

Apart from the updated dividend policy, no signiﬁ cant changes were made to the objectives, policies or processes during 2019.

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 2019

31 December 2018

Bank loans
Cash and cash equivalents
Net debt

4,092.0
-85.3
4,006.7

3,465.0
-66.8
3,398.2

The increase in net debt compared to 2018 is mainly due to the redemption of 16 percent of the outstanding shares during the year partly 
offset by the positive free cash ﬂ ow generated during 2019.

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% to 2.5% per annum. 
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 2019 amounted to MUSD 179.1 which included MUSD 85.7 of capitalised interest related to borrowings for the 
Group’s development activities. A 100 basis point increase in the interest rate would have resulted in a change in the total interest expense for 
the year of MUSD 8.1, taking into account the Group’s interest rate hedges for 2019.

The Group has entered into interest rate hedging as follows:

Borrowings 
MUSD

Fixing of ﬂ oating LIBOR 
Rate per annum

3,300
3,100

2,900

2,000
1,500

1.96%
2.28%

2.41%

1.75%
1.91%

Settlement period

Jan 2020 – Dec 2020
Jan 2021 – Dec 2021

Jan 2022 – Dec 2022

Jan 2023 – Dec 2023
Jan 2024 – Dec 2024

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.

82

Lundin Petroleum Annual Report 2019

Note 22 continued

The Group has entered into derivative ﬁ nancial instruments to address its exposure for exchange rate ﬂ uctuations for capital expenditure 
amounts relating to its committed ﬁ eld development projects and Corporate and Special Petroleum Tax amounts as summarised in the table 
below. 

Buy

MNOK 7,304.0
MNOK 2,470.0

MNOK 1,430.0
MNOK    530.0
MNOK    300.0

Sell

MUSD 842.7
MUSD 310.0

MUSD 183.4
MUSD   64.2
MUSD   33.0

Average contractual 
exchange rate

Settlement
period

NOK 8.67:USD 1
NOK 7.97:USD 1

NOK 7.80:USD 1
NOK 8.26:USD 1
NOK 9.09:USD 1

Jan 2020 – Dec 2020
Jan 2021 – Dec 2021

Jan 2022 – Dec 2022
Jan 2023 – Dec 2023
Jan 2024 – Dec 2024

Under IFRS 9, 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 2019, a net current payable of MUSD 21.9 (receivable of MUSD 14.0) and a net non-current payable of 
MUSD 108.1 (MUSD 62.2) 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 2019.

Operating result in the ﬁ nancial statements, MUSD

1,970.7

1,970.7

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

Average rate 2019
0.8932
9.4581
8.8003

10% USD weakening 
0.8120
8.5983
8.0003
-60.3

10% USD strengthening
0.9825
10.4039
9.6803
54.8

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 28, 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 277.3 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 2019:

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

824.9
-10%
-45.6

824.9
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 2019, the Group did not enter into oil price hedging contracts and there are no oil price hedging contracts 
outstanding as at 31 December 2019.

Lundin Petroleum Annual Report 2019

83

 
FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 22 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 2019, the Group’s trade receivables amounted to MUSD 305.1 (MUSD 153.7). 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 2019. 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 margin of between 2.0 to 2.5 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 size of the committed facility will reduce from USD 5.0 billion to USD 4.75 
billion as per 1 July 2020 and to USD 4.0 billion as per 1 January 2021.

The amendment of the interest rate margin during 2018 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.

84

Lundin Petroleum Annual Report 2019

Note 22 continued

MUSD

31 December 2019

31 December 2018

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

Current
Repayment within 6 months:
– Lease commitments
– Trade payables
– Tax liabilities
– Joint operations creditors
– Other current liabilities
– Derivative instruments
Repayment after 6 months:
– Bank loans
– Lease commitments
– Tax liabilities
– Derivative instruments

Note 23  Pledged Assets

1,500.0
5.3
85.4

2,500.0
14.5
25.4

11.3
4,141.9

2.7
17.8
58.7
133.6
8.5
16.6

92.0
2.8
284.6
16.6
633.9

–
–
19.3

3,465.0
–
45.6

–
3,529.9

–
26.6
14.8
147.4
7.6
9.0

–
–
55.6
11.0
272.0

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 22. 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 2019 amounted to MUSD 5,927.2 (MUSD 6,154.3) 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 96.

Note 24  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 tenth 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.

Lundin Petroleum Annual Report 2019

85

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 25  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

2019

107.3

–

4.0

1.5

0.2

2018

879.5

296.2

4.2

1.8

0.5

Following the redemption of 16 percent of the outstanding Lundin Petroleum shares previously held by Equinor, as approved at the 
Extraordinary General Meeting of Lundin Petroleum held on 31 July 2019, the Equinor Group is no longer considered a related party. Until end 
July, the Group has sold oil and related products to the Equinor group on an arm’s-length basis amounting to MUSD 107.3 (MUSD 879.5). Until 
end July, the Group did not purchase oil and related products from the Equinor group (MUSD 296.2).

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 27. 

As at the date of the IPC spin-off, the Group had a residual receivable for working capital from IPC of MUSD 27.4 of which the last portion was 
received during the year.

Note 26  Average Number of Employees

Average number of employees per country

Parent Company in Sweden

Subsidiaries abroad 
Norway
Switzerland
Netherlands
Total subsidiaries abroad

Total 

Board members and Group management

Parent Company in Sweden
Board members1

Subsidiaries abroad

Group management

Total Group

2019

2018

Total 
employees

of which men

Total 
employees

of which men

5

389
41
2
432

437

2

2

285
25
2
312

314

370
35
1
406

408

1

273
20
1
294

295

2019

2018

Total at 
year end

of which men

Total at 
year end

of which men

8

8

16

5

6

11

8

8

16

5

6

11

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

86

Lundin Petroleum Annual Report 2019

 
Note 27  Remuneration to the Board of Directors, Group Management and Other Employees

Salaries, other remuneration and social security costs
TUSD

2019

Salaries 
and other 
remuneration

2018

Social security 
costs

Salaries and other 
remuneration

Social security 
costs

Parent Company in Sweden
Board members
Employees

Subsidiaries abroad

Group management
Other employees

Total 
of which pension costs

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
Nick Walker
Other 3 
Total Group management

654
646

15,187
83,394

99,881

125
339

1,959
21,271

23,694
9,058

628
386

11,802
94,773

107,589

122
222

1,584
22,240

24,168
8,758

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 
2019

120
57
57
57
57
57
57
57
519

798
622
2,065
3,485

–
–
–
–
–
–
–
–
–

30
71
316
417

–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–

927
601
1,554
3,082

4,464
2,358
1,381
8,203

13
19
13
–
32
26
19
13
135

–
–
–
–

106
–
–
–
–
–
–
–
106

–
–
–
–

–
–
–
–
–
–
–
–
–

239
76
70
57
89
83
76
70
760

173
169
372
714

6,392
3,821
5,688
15,901

1  Other beneﬁ ts may include, but not limited to, school fees and health insurance for Group management.
2  This column shows bonuses awarded for achievements in 2019, including a discretionary award to the CEO and some other members of Group 

management, see page 49.

3  Comprises Chief Financial 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. 

Lundin Petroleum Annual Report 2019

87

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 27 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
Cecilia Vieweg
Torstein Sanness
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 
2018

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

–
–
–

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

175
441
616

4,853
7,565
12,418

¹   Other beneﬁ ts may include, but not limited to, 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 49.
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.

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 49–54 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 2019.

88

Lundin Petroleum Annual Report 2019

Note 28  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 2019 was SEK 265.33.

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 2019 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 2020
31 May 2021
31 May 2022
Outstanding at the end of the period

2016

107,794
–
-4,428
-103,366
–

–
–
–
–

2017

188,064
–
-7,750
-90,806
89,508

89,508
–
–
89,508

 Plan

2018

226,389
–
-9,766
-73,131
143,492

71,746
71,746
–
143,492

2019

–
190,161
-1,736
–
188,425

62,808
62,808
62,809
188,425

Total

522,247
190,161
-23,680
-267,303
421,425

224,062
134,554
62,809
421,425

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

Unit Bonus Plan 
MUSD

2015
2016
2017
2018
2019

2019

–
0.8
2.4
3.4
2.2
8.8

2018

3.4
2.1
2.9
1.9
–
10.3

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 2019 amounted to MUSD 9.5 (MUSD 8.3). The provision is calculated based on Lundin 
Petroleum’s share price at the balance sheet date. The closing share price at 31 December 2019 was SEK 318.30.

Performance Based Incentive Plan
The 2014–2019 AGMs resolved a long-term performance based incentive plan in respect of Group management and a number of key 
employees. 

The 2019 plan is effective from 1 July 2019 and the 2019 award has been accounted for from the second half of 2019. The awards made in 
respect of 2019 vest over three years from 1 July 2019 subject to certain performance conditions being met. Each award was fair valued at the 
date of grant at SEK 169.00 using an option pricing model. 

The 2018 plan is effective from 1 July 2018 and vests 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. 

Lundin Petroleum Annual Report 2019

89

 
FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Group

Note 28 continued

The 2016 plan was effective from 1 July 2016 and vested on 30 June 2019. 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 89.30 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 2016 plan, the 2016 plan vested in full in 2019 with Lundin 
Petroleum’s total shareholder return (TSR) ranking well above the upper quartile level as 2nd 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 2019 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
Exercised during the period
Outstanding at the end of the period

End of performance period
30 June 2020
30 June 2021
30 June 2022
Outstanding at the end of the period

2016

409,343
–
–
-409,343
–

–
–
–
–

2017

355,954
–
-5,535
–
350,419

350,419
–
–
350,419

 Plan

2018

278,917
–
-7,758
–
271,159

–
271,159
–
271,159

2019

–
316,855
–
–
316,855

–
–
316,855
316,855

Total

1,044,214
316,855
-13,293
-409,343
938,433

350,419
271,159
316,855
938,433

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

Performance Based Incentive Plan
MUSD

2019

2018

2015

2016
2017
2018
2019

–
0.6
1.5
1.7
1.0
4.8

0.6
1.3
1.4
0.7
–
4.0

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 2019 amounted to MUSD 7.3 (MUSD 6.0). The effect on equity is calculated based on the fair value at date of grant.

90

Lundin Petroleum Annual Report 2019

 
Note 29  Remuneration to the Group’s Auditors

TUSD

2019

2018

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
Out of which to PricewaterhouseCoopers AB

536
191
22
11
6
–
90
79
654
281

68
722
281

448
201
33
23
45
–
69
55
595
279

65
660
279

Audit fees include the review of the 2019 half year report. Audit related costs include special assignments such as licence audits and PSC 
audits. 

Note 30  Subsequent Events

In January 2020, Lundin Petroleum concluded a transaction with OX2 AB (OX2) to acquire a 100 percent interest in the Metsälamminkangas 
(MLK) wind farm project, in mid Finland. MLK will produce around 400 GWh per annum gross, once it is fully operational in 2022, from 24 
onshore wind turbines. The MLK operations will be managed by OX2. The investment, including the acquisition cost, is approximately MUSD 
200 gross over 2020 to 2021 and the project will be free cash ﬂ ow positive from 2022. It is Lundin Petroleum’s intention to farm-down 50 
percent of the 100 percent acquired MLK interest. 

In January 2020, Lundin Petroleum entered into a revolving credit facility amounting to MUSD 260 for the ﬁ nancing of the renewable power 
projects with a current interest rate margin over LIBOR of 1.25 percent. 

In February 2020, the drilling of the exploration well Hasselbaink in PL917 was completed. For more information on the results of this well, 
see page 23 of the Directors’ Report.

Lundin Petroleum Annual Report 2019

91

FINANCIAL STATEMENTS AND NOTES

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 18,885.5 (MSEK 1,657.8) for the year. The net result for the year included MSEK 19,148.4 (MSEK 1,812.4) ﬁ nancial 
income as a result of received dividends from a subsidiary. The net result excluding received dividends amounted to MSEK -262.9 
(MSEK -154.6).

The net result included general and administrative expenses of MSEK 248.1 (MSEK 180.9) and net ﬁ nance costs of MSEK 33.7 (ﬁ nance 
income of MSEK 5.3) when excluding the received dividends 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 23 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 tenth 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 63–68.

92

Lundin Petroleum Annual Report 2019

 
FINANCIAL STATEMENTS AND NOTES 

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 before tax 

Income tax

Net result

Note

1

2

3

2019

18.9

-248.1

-229.2

19,148.5

-33.8

19,114.7

18,885.5

–

18,885.5

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

2019

18,885.5

–

18,885.5

18,885.5

18,885.5

2018

21.0

-180.9

-159.9

1,818.1

-0,4

1,817.7

1,657.8

–

1,657.8

2018

1,657.8

–

1,657.8

1,657.8

1,657.8

Lundin Petroleum Annual Report 2019

93

FINANCIAL STATEMENTS AND NOTES

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

Dividends

Trade payables

Payables to Group companies

Accrued expenses and prepaid income

Other liabilities

Total current liabilities

Note

2019

2018

9

4

5

55,118.9

0.4

55,119.3

2.4

1,105.0

31.7

1,139.1

56,258.4

3.5

861.3

864.8

6,479.7

29,012.8

18,885.5

54,378.0

55,242.8

1.0

1.0

985.7

–

0.3

27.5

1.1

1,014.6

55,118.9

0.4

55,119.3

1.8

3.6

29.5

34.9

55,154.2

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

TOTAL EQUITY AND LIABILITIES

56,258.4

55,154.2

94

Lundin Petroleum Annual Report 2019

FINANCIAL STATEMENTS AND NOTES 

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

Expressed in MSEK

Cash ﬂ ow from operating activities

Net result

Adjustment for 

Foreign currency exchange loss 

Dividends from subsidiary

Other

Changes in working capital:

Changes in current assets

Changes in current liabilities

Total cash ﬂ ow from operating 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

Share redemption

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

2019

18,885.5

0.2

-1,159.5

1.4

137.9

-4.9

17,860.6

-0.1

-0.1

-3,347.6

-14,510.3

–

-17,857.9

2.6

29.5

-0.4

31.7

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

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

Restricted Equity

Unrestricted Equity

Expressed in MSEK

Balance at 1 January 2018

Total comprehensive income

Transactions with owners

Purchase of own shares

Cash distributions

Total transactions with owners

Balance at 31 December 2018

Total comprehensive income

Transactions with owners

Cash distributions

Share redemption

Bonus issue (sw. fondemission)

Total transactions with owners

Balance at 31 December 2019

Share 
capital

Statutory 
reserve

Other 
reserves

6,599.2

–

-119.5

–

-119.5

6,479.7

–

–

–

–

–

861.3

–

–

–

–

861.3

–

–

–

–

–

861.3

6,479.7

3.5

–

–

–

–

3.5

–

–

-0.6

0.6

–

3.5

Retained 
earnings 

47,472.6

1,657.8

–

-1,354.1

-1,354.1

47,776.3

18,885.5

-4,638.7

-14,124.2

-0.6

-18,763.5

47,898.3

Total

54,071.8

1,657.8

-119.5

-1,354.1

-1,473.6

54.256.0

18,885.5

-4,638.7

-14,124.2

-0.6

-18,763.5

54,378.0

Total 
equity

54,936.6

1,657.8

-119.5

-1,354.1

-1,473.6

55.120.8

18,885.5

-4,638.7

-14,124.8

–

-18,763.5

55,242.8

Lundin Petroleum Annual Report 2019

95

 
FINANCIAL STATEMENTS AND NOTES 

Notes to the Financial Statements 
of the Parent Company

Note 1  Finance Income 

Note 7  Remuneration to the Auditor 

2019

2018

MSEK

19,148.4

1,812.4

PwC

0.1

–

–

5.7

Audit fees

Audit related

19,148.5

1,818.1

Other fees

2019

2018

1.8

–

0.7

2.5

1.8

0.1

0.5

2.4

MSEK

Dividend

Interest income

Foreign exchange gain

Note 2  Finance Costs

MSEK

Interest expenses

Foreign exchange loss

Other

Note 3  Income Tax 

2019

0.2

0.2

33.4

33.8

2018

–

–

0.4

0.4

MSEK

2019

2018

Net result before tax

18,885.5

1,657.8

Tax calculated at the corporate tax rate 
in Sweden 21.4% (22%)

-4,041.5

-364.7

Tax effect of received dividend

4,097.8

398.7

Tax effect of expenses non-deductible for 
tax purposes

Increase unrecorded tax losses

-4.3

-52.0

–

-3.6

-30.4

–

Note 4  Other Receivables 

MSEK

31 December 
2019

31 December 
2018

Due from Group companies

1,101.3

VAT receivable

Other

1.7

2.0

1,105.0

0.2

1.2

2.2

3.6

Note 5  Accrued Expenses and Prepaid Income

MSEK

Social security costs

Directors fees

Audit fees

Outside services

31 December 
2019

31 December 
2018

1.7

0.6

1.4

23.8

27.5

1.1

0.6

1.1

0.6

3.4

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 23 in the notes to the ﬁ nancial statements of the 
Group.

96

Lundin Petroleum Annual Report 2019

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

Note 8  Proposed Disposition of Unappropriated 
Earnings

The 2020 Annual General Meeting has an unrestricted equity at 
its disposal of MSEK 54,378.0, including the net result for the 
year of MSEK 18,885.5. 

In accordance with the dividend policy, the Board of Directors 
propose that the Annual General Meeting resolves on a dividend 
for 2019 of USD 1.80 per share, corresponding to USD 511 
million (rounded off), to be paid in quarterly instalments of 
USD 0.45 per share, corresponding to USD 128 million (rounded 
off). Before payment, each quarterly dividend of USD 0.45 
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 
7 April 2020, with an expected record date of 2 April 2020 and 
expected ex-dividend date of 1 April 2020. The second dividend 
payment is expected to be paid around 8 July 2020, with an 
expected record date of 3 July 2020 and expected ex-dividend 
date of 2 July 2020. The third dividend payment is expected 
to be paid around 7 October 2020, with an expected record 
date of 2 October 2020 and an expected ex-dividend date of 
1 October 2020. The fourth dividend payment is expected to 
be paid around 8 January 2021, with an expected record date 
of 4 January 2021 and an expected ex-dividend date of 30 
December 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 
2019 dividend has been set to a cap of SEK 9.203 billion (i.e., SEK 
2.301 billion per quarter). If the total dividend would exceed 
the cap of SEK 9.203 billion, the dividend will be automatically 
adjusted downwards so that the total dividend corresponds to 
the cap of SEK 9,203 billion. 

FINANCIAL STATEMENTS AND NOTES | Notes to the Financial Statements of the Parent Company

Note 8 continued

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 1.80 per share 1

Brought forward

Unrestricted equity

4,969.1 

49,408.9

54,378.0

1  The amount is based on the USD to SEK exchange rate published by Sweden’s central bank (Riksbanken) as at 26 February 2020. The amount is based 
on the number of shares in circulation on 26 February 2020 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 26 Febru-
ary 2020 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 2019

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 Energy Holding BV

Lundin Petroleum Services BV

Lundin Russia BV

- Lundin Russia Ltd.

- Lundin Lagansky BV

76493202

68359985

27290574

656565-4

27292984

Collonge-Bellerive, 
Switzerland

Collonge-Bellerive, 
Switzerland

The Hague, Netherlands

The Hague, Netherlands

The Hague, Netherlands

Vancouver, Canada

The Hague, Netherlands

1,000

1,000

100

100

18,000

55,855,414

18,000

100

CHF 100.00

100

CHF 100.00

100

100

100

100

100

EUR 1.00

EUR 1.00

EUR 1.00

CAD 1.00

EUR 1.00

Lundin Petroleum Annual Report 2019

97

FINANCIAL STATEMENTS AND NOTES 

Board Assurance 

As at 28 February 2020, the Board of Directors and the President of Lundin Petroleum AB have adopted this annual report for the 
ﬁ nancial year ended 31 December 2019.

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, 28 February 2020

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 2, 2020

PricewaterhouseCoopers AB

Johan Rippe
Authorised Public Accountant
Lead Partner

98

Lundin Petroleum Annual Report 2019

 
 
 
 
 
FINANCIAL STATEMENTS AND NOTES 

Auditor’s Report

To the general meeting of the shareholders of Lundin 
Petroleum AB (publ), corporate identity number 556610-8055

other matters consideration of whether there was evidence of bias 
that represented a risk of material misstatement due to fraud.

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 2019 except for the 
corporate governance statement on pages 36–55. The annual 
accounts and consolidated accounts of the company are included on 
pages 19–98 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 2019 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 2019 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. Our opinions do 
not cover the corporate governance statement on pages 36–55. 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 2019. 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 

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.

We have obtained reporting from our component auditors on two 
occasions during 2019 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, 2019 
and after the year-end audit of the ﬁ nancial year 2019.

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.

Lundin Petroleum Annual Report 2019

99

 
FINANCIAL STATEMENTS AND NOTES | Auditor’s Report

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 USD 
5.473 million (USD 5.341 million) as per 31 December 2019. 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 9 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, short 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 has 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 
USD 128 million 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 2019. 

For non-producing ﬁ elds the company has expensed USD 126 million 
during the year as exploration costs. In addition, following a technical 
review as part of the year-end process, management determined 
that a stand-alone development of the Alta and nearby Gohta 
discoveries is no longer considered to be commercial, and a subsea 
tie-back development to either Johan Castberg or another future 
host development in the area is considered the most viable option. 
Following this review, capitalized costs of USD 128 million for related 
licenses in the Barents Sea were impaired as of 31 December 2019. 

Refer to pages 27–29 in the Directors’ report, pages 64–65 and 68 
in the Accounting Policies and note 9 in the ﬁ nancial statements for 
more information.

For producing ﬁ elds and the technical goodwill related to the Edvard 
Grieg cash generating unit we obtained management’s impairment 
indicator assessment and impairment test as per 31 December 2019. 
There were signiﬁ cant headroom in the goodwill impairment test 
mainly as a result of an upward revision in reserves and improved 
short term 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 eld 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 triggering the need for impairment tests 
for the Company’s producing oil and gas assets as per 31 December 
2019. 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 long-term 

assumptions communicated by peers, views published by an 
independent data 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 2019;

·  comparison of estimated future operating costs and capital 

expenditures to prior period proﬁ les;

·  benchmarking of inﬂ ation and discount rates applied.
As part of assessment of impairment indicators, we challenged the 
estimation of proven and probable reserves performed by the group’s 
external reserves auditor, ERC Equipoise Ltd. We have performed the 
following audit procedures; 
·  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 internal controls related to assumptions used in 

determining reserves, and approving the ﬁ nal 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 2019. 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/licenses 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.

100

Lundin Petroleum Annual Report 2019

Key audit matter

How our audit addressed the Key audit matter

Recognition and valuation of current taxes and deferred taxes

We obtained the Company’s annual tax calculation 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 2019 the current 
and deferred income tax expense amounted to USD 849 million (USD 
1,038 million) of which USD 443 million (USD 948 million) related 
to a deferred tax expense. The group has recognised a net deferred 
tax liability of USD 2.413 million at December 31, 2019 (USD 2.103 
million) 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 28–29  in the Directors’ report, pages 67–68 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 
USD 571 million as of December 31, 2019 (USD 490 million). 
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 29 in the Directors’ report, pages 66 and 68 in the 
Accounting Policies and note 18 in the ﬁ nancial statements.

The tax calculation is subject to 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, 2019 and Dec 31, 2018 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 documents presented by the Company’s external legal 
advisors as part of the tax correspondence.

We critically assessed management’s annual review of provisions 
recorded. The provisions contain estimates from both own operated 
assets and non-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 site provision liability 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. 

For non-operated assets we have also assessed the competence of the 
operator performing the estimate. Our procedures conﬁ rmed that 
management’s estimate of future decommissioning and restoration 
costs are appropriate.

Lundin Petroleum Annual Report 2019

101

 
 
FINANCIAL STATEMENTS AND NOTES | Auditor’s Report

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 1–18 and 
104–113. 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.

when it exists. Misstatements can arise from fraud or error and are 
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 2019 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 

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.

102

Lundin Petroleum Annual Report 2019

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 Chief Executive Ofﬁ cer 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.

The auditor’s examination of the corporate governance statement
The Board of Directors is responsible for that the corporate governance 
statement on pages 36–55 has been prepared in accordance with the 
Annual Accounts Act.

Our examination of the corporate governance statement is 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.

A corporate governance statement has been prepared. Disclosures in 
accordance with chapter 6 section 6 the second paragraph points 2-6 of 
the Annual Accounts Act and chapter 7 section 31 the second paragraph 
the same law are consistent with the other parts of the annual accounts 
and consolidated accounts and are in accordance with the Annual 
Accounts Act/ the Annual Accounts Act for Credit Institutions and 
Securities Companies/ the Annual Accounts Act for Insurance Companies.

PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm, was 
appointed by the Annual General meeting on 29 March 2019 and has been 
the company’s auditor since the company was listed on the Stockholm 
Stock Exchange 6 September, 2001.

Stockholm, 2 March 2020

PricewaterhouseCoopers AB

Johan Rippe 
Authorised Public Accountant
Lead Partner

Lundin Petroleum Annual Report 2019

103

ADDITIONAL INFORMATION

104

Lundin Petroleum Annual Report 2019

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 page 106. 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

Operating cash ﬂ ow1

CFFO

EBITDA1

Free cash ﬂ ow

Net result

Adjusted net result

Net debt

Data per share from continuing operations
USD

Shareholders’ equity per share

Operating cash ﬂ ow per share 1

CFFO per share

EBITDA per share 1

Free cash ﬂ ow per share

Earnings per share

Earnings per share fully diluted

Adjusted earnings per share

Adjusted earnings per share fully diluted

Dividend per share 2 

2019

2,948.7

1,537.1

1,378.2

1,918.4

1,271.7

824.9

252.7

4,006.7

-5.63

4.87

4.36

6.07

4.03

2.61

2.61

0.80

0.80

1.11

2018

2,640.7

1,864.1

1,718.3

1,932.5

663,0

225.7

295.3

2017

1,997.0

1,530.0

1,299.3

1,501.5

203.7

380.9

156.5

2016

950.0

857.9

668.7

752.5

-328.2

-399.3

28.6

3,398.2

3,883.6

4,075.5

-1,13

5.51

5.07

5.71

1.96

0.67

0.66

0.87

0.87

0.45

-1.03

4.50

3.82

4.41

0.60

1.13

1.13

0.46

0.46

1.21

-0.70

2.63

2.05

2.31

-1.01

-0.79

-0.79

0.09

0.09

–

2015

380.3

558.1

238.0

246.3

-1,035.2

-679.7

2.0

3,786.1

-1.61

1.81

0.77

0.80

-3.35

-2.18

-2.18

0.01

0.01

–

Number of shares issued at year end

285,924,614

340,386,445

340,386,445

340,386,445

311,070,330

Number of shares in circulation at year end

284,051,304

338,513,135

339,153,135

340,386,445

309,070,330

Weighted average number of shares for the year

315,833,140

338,592,250

340,237,772

325,808,486

309,070,330

Weighted average number of shares for the year 
fully diluted

316,551,300

339,513,634

341,380,316

326,738,233

310,019,890

Share price

Share price in SEK

Share price in USD 3

Key ratios from continuing operations (%)

Return on equity4

Return on capital employed

Net debt/equity ratio4

Net debt/EBITDA ratio 1

Equity ratio

Share of risk capital

Interest coverage ratio

Operating cash ﬂ ow/interest ratio 1

Yield

318.30

34.23

221.40

24.72

187.80

22.88

198.10

21.86

122.60

14.52

–

72

–

2.1

-26

13

20

16

3

–

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

1   Excludes the reported after tax accounting gain of MUSD 756.7 in 2019 on the divestment of a 2.6 percent working interest in the Johan Sverdrup 

project and 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 Dividend per share represents the actual paid out dividend per share.   
3  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.
4  As the equity at 31 December 2019, 31 December 2018, 31 December 2017, 31 December 2016 and 31 December 2015 is negative, these ratios have not 

been calculated.

Lundin Petroleum Annual Report 2019

105

ADDITIONAL INFORMATION 

Relevant Reconciliations of Alternative Performance 
Measures

EBITDA
MUSD

Operating proﬁ t

Minus: gain from sale of assets

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

2019

1,970.7

-756.7

443.8

125.6

128.3

–

6.7

2018

1,418.7

–

458.0

53.2

–

–

2.6

2017

812.4

–

568.4

73.1

30.6

14.4

2.6

EBITDA

1,918.4

1,932.5

1,501.5

Operating cash ﬂ ow
MUSD

Revenue and other income

Minus: gain from sale of assets

Minus: production costs

Minus: purchase of crude oil from third parties

Minus: current taxes

Operating cash ﬂ ow

Free cash ﬂ ow
MUSD

2,948.7

2,640.7

1,997.0

-756.7

-164.8

-84.3

-405.8

–

-152.4

-533.8

-90.4

–

-164.2

-303.3

0.5

1,537.1

1,864.1

1,530.0

Cash ﬂ ows from operating activities (CFFO)

Minus: cash ﬂ ows from investing activities

Free cash ﬂ ow

1,378.2

-106.5

1,271.7

1,718.3

-1,055.3

663.0

1,299.3

-1,095.6

203.7

Adjusted net result
MUSD

Net result

Adjusted for gain or loss from sale of assets

Adjusted for impairment costs of oil and gas properties

Adjusted for impairment of other shares

Adjusted for loan modiﬁ cation gain

Adjusted for unwinding of loan modiﬁ cation gain

Adjusted for foreign currency exchange gain or loss

Adjusted for tax effects of above mentioned items

Adjusted net result

824.9

-756.7

128.3

–

–

41.5

131.7

-117.0

252.7

225.7

380.9

–

–

–

-183.7

26.1

164.9

62.3

295.3

14.4

30.6

11.2

–

–

-255.3

-25.3

156.5

2016

-244.7

–

386.2

101.9

506.1

–

3.0

752.5

950.0

–

-168.4

-2.1

78.4

857.9

668.7

-996.9

-328.2

-399.3

–

506.1

–

–

–

4.2

-82.4

28.6

2015

-588.7

–

159.1

146.5

526.0

–

3.4

246.3

380.3

–

-104.6

–

282.4

558.1

238.0

-1,273.2

-1,035.2

-679.7

–

526.0

–

–

–

573.0

-417.3

2.0

Net debt
MUSD

Bank loans

Minus: cash and cash equivalents

Net debt

4,092.0

-85.3

4,006.7

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

106

Lundin Petroleum Annual Report 2019

ADDITIONAL INFORMATION 

Key Ratio Definitions

Operating cash ﬂ ow: Revenue and other income less production costs less purchase of crude oil from third parties less current taxes and less 
gain on sale of assets.

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.

Free cash ﬂ ow: Cash ﬂ ow from operating activities (CFFO) less cash ﬂ ow from investing activities in accordance with the consolidated 
statement of cash ﬂ ow.

Adjusted net result: Net result adjusted for the following items:  
·  Gain or loss from sale of assets is adjusted since the gain or loss does not give an indication of future or periodic performance.
·  Impairment and reversal of impairment is adjusted since this affects the economics of an asset for the lifetime of that asset, not only the 

period in which it is impaired or the impairment is reversed. 

·  Other items of income and expenses are adjusted when the impact on net result in the period is not reﬂ ective of the company’s underlying 
performance in the period. Such items may be unusual or infrequent transactions but they may also include transactions that are signiﬁ cant 
which would not necessarily qualify as either unusual or infrequent. 

·  Foreign currency exchange gain or loss is adjusted since the gain or loss does not give an indication of future or periodic performance as 

currency exchange rates change between periods.

·  Tax effects of the above mentioned adjustments to net result 

Net debt: Bank loan less cash and cash equivalents.

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.

CFFO per share: Cash ﬂ ow from operating activities (CFFO) divided by the weighted average number of shares for the year.

EBITDA per share: EBITDA divided by the weighted average number of shares for the year.

Free cash ﬂ ow per share: Free 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.

Adjusted earnings per share: Adjusted net result attributable to shareholders of the Parent Company divided by the weighted average 
number of shares for the year.

Adjusted earnings per share fully diluted: Adjusted 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.

Dividend per share: Paid out dividends per share for the year.

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 of the last four quarters.

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: Operating cash ﬂ ow divided by the interest expense for the year.

Yield: Dividend per share in relation to quoted share price at the end of the year.

Lundin Petroleum Annual Report 2019

107

ADDITIONAL INFORMATION 

Five Year Financial Data

Income statement summary 1
MUSD

Revenue from own production

Revenue from third party activities

Gain from sale of assets

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

2019

2,074.3

84.3

756.7

33.4

-164.8

-443.8

-125.6

-128.3

–

-84.3

2,001.9

-31.2

1,970.7

-295.0

-1.8

1,673.9

-849.0

824.9

–

824.9

824.9

–

824.9

2019

5,522.6

145.1

486.8

6,154.5

-1,598.8

–

-1,598.8

3,051.6

3,888.4

813.3

6,154.5

2018

2,071.8

536.1

–

32.8

-152.4

-458.0

-53.2

–

–

-533.8

1,443.3

-24.6

1,418.7

-153.2

-1.3

1,264.2

-1,038.5

225.7

–

225.7

225.7

–

225.7

2018

5,354.7

131.2

353.9

5,839.8

-383.8

–

-383.8

2,657.8

3,262.0

303.8

5,839.8

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

–

–

-555.9

-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

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. 

108

Lundin Petroleum Annual Report 2019

ADDITIONAL INFORMATION 

Reserve Quantity Information

Proved plus probable reserves (2P)

1 January 2019

Changes during the year

Acquisitions/Dispositions

Revisions

Extensions and new projects

Production

31 December 2019

1  The year end 2019 2P oil reserves reported include 19.5 MMbbl of NGL’s.
2   The factor of 6,000 is used by the Company to convert one scf to one boe.

Proved plus probable plus possible reserves (3P)

1 January 2019

Changes during the year

Acquisitions/Dispositions

Revisions

Extensions and new projects 

Production

31 December 2019

1  The year end 2019 3P oil reserves reported include 24.9 MMbbl of NGL’s.
2   The factor of 6,000 is used by the Company to convert one scf to one boe.

Norway
oil reserves
MMbbl

715.8

-67.9

-1.1

46.1

-31.7

661.2 1

Norway
oil reserves
MMbbl

862.9

-80.0

-2.6

65.9

-31.7

814.5 1

Norway 
gas reserves
Bn scf 2

177.5

-10.3

1.5

41.7

-18.0

192.4

Norway 
gas reserves
Bn scf 2

227.8

-12.1

4.2

56.4

-18.0

258.3

Lundin Petroleum Annual Report 2019

109

ADDITIONAL INFORMATION 

Definitions and Abbreviations

Reserves defined
Lundin Petroleum estimates reserves and resources according to 2018 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 

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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

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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 2019 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

Cancellation of shares/Bonus issue

Total

2006

2014

2016

2019

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

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

-54,461,831

285,924,614

285,924,614

285,924,614

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

3,478,713

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111

ADDITIONAL INFORMATION 

Shareholder Information

Lundin Petroleum will publish the following interim reports:

· 30 April 2020 
· 29 July 2020 
· 29 October 2020 
· 28 January 2021 

Three month report (January–March 2020)
Six month report (January–June 2020)
Nine month report (January–September 2020)
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 Tuesday 31 March 2020 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 Wednesday 25 March 2020; and
·  notify Lundin Petroleum of their intention to attend the meeting no later than Wednesday 25 March 2020 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. Such registration must be effected by Wednesday 25 
March 2020, at the latest.

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ADDITIONAL INFORMATION 

This information is information that Lundin Petroleum AB is required to make public pursuant to the Swedish Securities Markets Act. 
The information was submitted for publication at 08.00 CET on 4 March 2020.

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 Lundin Petroleum’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 proven 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 Lundin 
Petroleum 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 “Risk management” and elsewhere in 
Lundin Petroleum’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.

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Lundin Petroleum Annual Report 2019

113

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 2019