Lundin Deepens Spending Cuts

Sweden's Lundin Energy  said on April 30 it would deepen planned spending cuts in 2020, despite seeing a year-on-year rise in operating profit in the first quarter.

The Norway-focused company, which has just changed its name from Lundin Petroleum, posted an operating income of $404mn for January through March, up from $261mn a year earlier. Core earnings (Ebitda) also grew to $581mn, from $400mn, despite an increase in charges.

Lundin's financial gains came on the back of a surge in oil and gas production to 152,400 barrels of oil equivalent/day in the first quarter, from 78,800 boe/d a year earlier, resulting from the launch last autumn of the Equinor-operated Johan Sverdrup oil project in the North Sea. This more than offset the collapse in prices, leading to an increase in revenues to $695mn from $484mn.

Lundin has also raised its guidance for 2020 output to 160,000-170,000 boe/d, to take into account a faster-than-projected increase in Sverdrup's flow.

Free cash flow soared to $407mn from $96mn, although net debt also rose to $3.69bn at the end of March, from $3.3bn a year earlier. The company's adjusted net result was up at $66mn, versus $59mn, aided by a $359mn foreign exchange gain caused by the weaker Norwegian krone.

Lundin said it would rein in 2020 costs by $300mn, after previously targeting a reduction of only $170mn. Its original plan was to spent $1.31bn during the year. The company will consider further cuts if low oil prices persist, it warned.

"As we head into the second quarter we will continue to apply very strict capital discipline across the company, to preserve the liquidity position and provide financial flexibility," CEO Alex Schneiter said. 

The Solveig Phase 1 development will also be delayed from the first to the third quarter of 2021. Lundin filed development plans for the project last June. It will also defer extended well tests at the Rolvsnes project by one year to the second quarter of 2022. These delays will result in a $185mn saving in capital spending this year, Lundin said.

Lundin has also halved the count for planned exploration wells this year to five, resulting in a fall in exploration and appraisal spending to $140mn from $225mn. Four of the wells in the original plan will be deferred to later years.

The company said in late March it would cut its dividends for 2019 by 44% to $1/share, and said on April 30 it would not make a further reduction.