Lundin Sees Q4 Earnings Spike on Sverdrup Launch

Lundin Petroleum’s core earnings surged by almost 45% yr/yr in the fourth quarter, on the back of the launch of the Johan Sverdrup oil project in October, the Swedish company reported on January 31.

Earnings before interest, tax, depreciation and amortisation (Ebitda) reached $695.5mn in the three months ending December 31, versus $480.7mn in the same period last year. Adjusted net profit came to $78.9mn up from $75.9mn.

Lundin’s oil and gas production soared 65% to 135,100 boe/day, resulting in a 15% climb in revenues to $749.7mn. The company has a 20% stake in Sverdrup, which came on stream on October 5.  The giant Equinor-operated North Sea field was flowing at a rate of 350,000 boe/day at the end of 2019. Output is expected to reach 440,000 boe/day this summer and eventually 660,000 boe/day, under a second development phase starting in late 2022.

Sverdrup’s start-up has “laid the foundations for a period of sustainable and efficient production growth,” Lundin CEO Alex Schneiter said in a statement.

On the downside, Lundin ended the year with more than $4.01bn in net debt, accumulated as a result of heavy investments at Johan Sverdrup and other major projects. Its net debt a year earlier was $3.4bn. The company generated $153.8mn in free cash flow in the fourth quarter, down from $173.3mn a year earlier.

Moving ahead, Lundin said in a separate statement it expected output to rise to 145,000-165,000 boe/day in 2020, from a 93,300 boe/day average for 2019. It also plans to jack up development, appraisal, exploration and abandonment spending by 30% to $1.27bn. Development spending will grow by a third to $895mn, to pay for further drilling at Edvard Grieg and increased work at its tie-back projects. Exploration and appraisal expenditure will meanwhile fall to $225mn from $298mn last year, when Lundin carried out an extensive exploration campaign that yielded mixed results.

Some $50mn will be spent on abandonment this year, largely relating to wells at the Brynhild field, versus $4mn in 2019. Lundin will also allocate $100mn for wind and hydropower projects, compared with a zero spend on renewables last year.