Annual Report 2005 (6 MB) - Lundin Petroleum

WORDS FROM THE CHAIRMAN
IAN H. LUNDIN
Chairman
We continue to do what we do best,
explore, develop, produce and acquire
oil and gas reserves wherever they
may be.
Dear Fellow Shareholders,
2005 was a year of consolidation where we reaped the rewards of the
acquisition of the United Kingdom and Norwegian assets from DNO. The
Broom fi eld was the shining star of the portfolio of acquired producing
assets. The fi eld which came onstream in August 2004 continued to
produce above expectations and acted as the main driver in achieving
an overall production growth of 15 percent in 2005. We had some
setbacks in 2005 with wells failing to deliver on their exploration
promise, particularly in Nigeria. These failures are another demonstration
of the diffi culty the industry is facing in replacing reserves. However,
despite the lack of exploration successes, Lundin Petroleum managed to
increase its reserve base by 12 percent in 2005. This is a result of both
good reservoir management and the conservative approach we take
to reserves evaluation. Future production growth will be driven by two
ongoing developments: the Alvheim project in Norway and the Oudna
fi eld in Tunisia. When these fi elds come onstream in late 2006 and early
2007, overall production should exceed 50,000 boepd or about 50
percent more than the average 2005 production of 33,000 boepd. In
parallel, a number of exploration wells will be drilled in Norway, Sudan,
Indonesia, France and Ireland which have the potential to increase our
reserves base several times over. Of all our exploration plays, Block 5B in
Sudan has the biggest potential. Drilling is expected to commence in the
4th quarter of 2006 on Block 5B, and a discovery would ensure continued
growth in production for years to come.
The oil industry’s hunger for new reserves has resulted in a buying
frenzy of both companies and producing fi elds. It is clear that as long as
these conditions prevail it will be diffi cult to grow through acquisitions.
Therefore concentrating on internally generated growth and maintaining
a high level of exploration activity are the main priorities for the
Company.
Lundin Petroleum is going from strength to strength as we continue to
generate our own opportunities. This, of course, can only be achieved
with a motivated and hard working management and staff . On behalf of
the Board, I would like to thank all the employees for their eff orts and
their dedication which have allowed the Company to reach its current
position as a leading European independent oil and gas company.
I expect that the demand for oil and gas will continue to grow at a steady
rate of 2–3 percent per year. In parallel, spare production capacity will
continue to shrink resulting in a very tight market which will remain
extremely sensitive to political events.
In my opinion, we can expect spikes in the oil price up to USD 100 per
barrel during the next twelve months.
For Lundin Petroleum, this only means that we have to continue to do
what we do best, explore, develop, produce and acquire oil and gas
reserves wherever they may be.
Sincerely,
Ian H. Lundin
Chairman of the Board
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