Lundin to publish 2nd Qtr. 2021 financial results on 28th July
Lundin Energy AB (Lundin Energy) will publish its financial report for the second quarter 2021 on Wednesday, 28 July 2021. For the second quarter 2021, Lundin Energy will expense pre-tax exploration and appraisal costs of approximately MUSD 119 and recognise a net foreign exchange gain of approximately MUSD 45.
Exploration and appraisal costs
It is the Company’s policy to capitalise costs associated with its exploration and appraisal activities and if it is determined that a commercial discovery has not been achieved, the associated costs are charged to the income statement. For the second quarter of 2021, Lundin Energy will incur a pre-tax charge to the income statement of approximately MUSD 119 relating to exploration and appraisal costs. These costs will be offset by a tax credit of approximately MUSD 93. The costs are mainly related to the Shenzhou well in PL722, the Iving wells in PL820S and relinquished licences.
Notes issuance and foreign exchange gain
Lundin Energy issued USD 2 billion of Senior Notes (the Notes) during the second quarter of 2021 with a fixed interest rate. The Company used the gross proceeds of the Notes issuance, in combination with cash on hand, to repay USD 2 billion of the corporate credit facility term loans with a floating interest rate. As a result, part of the outstanding interest rate hedge contracts are no longer considered effective under hedge effectiveness testing. The mark-to-market fair value of these ineffective contracts of approximately MUSD -38 (loss) will be recognised as a non-cash item in the income statement during the second quarter of 2021. As a result of the USD 2 billion repayment of the corporate credit facility term loans, part of the unamortized capitalised financing fees were expensed during the second quarter.
Lundin Energy will recognise a net foreign exchange gain of approximately MUSD 45 for the second quarter of 2021. The Norwegian Krone was stable against the US Dollar and the Euro strengthened against the US Dollar by approximately 1 percent during the second quarter of 2021. The foreign exchange gain is largely non-cash and mainly relates to the revaluation of loan balances at the prevailing exchange rates at the balance sheet date.
Change in under/overlift balances
Lundin Energy recognises income based on its sold volume (sales method). Consequently, changes in inventory and under/overlift balances are reported as an adjustment to cost, valued at production cost, including depletion. During the second quarter of 2021, Lundin Energy was underlifted by 10.1 Mboepd.
Revenue from crude oil sales from third parties
Lundin Energy markets its own crude oil production and at times markets crude oil from third parties. For the second quarter 2021, revenue from the sale of crude oil from third parties amounted to MUSD 171.8 offset by the purchase of crude oil from third parties of MUSD 170.4, resulting in a gross profit of MUSD 1.4 on third party activities for the second quarter 2021.
Release of report and audiocast on 28 July 2021
Lundin Energy’s financial report for the second quarter 2021 will be published on Wednesday 28 July at 07:30 CEST, followed by a live audiocast at 14:00 CEST where Nick Walker, President and CEO, and Teitur Poulsen, CFO, will be commenting on the report and the latest developments in Lundin Energy.
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