Annual Report 2010

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DIRECTORS’ REPORT Directors’ Report LUNDIN PETROLEUM AB (PUBL) REG NO. 556610-8055 Group Structure as at 31 December 2010 Lundin Petroleum AB (S) Lundin Petroleum BV (N) Lundin Marine BV (N) Lundin Exploration BV (N) Lundin Petroleum SA (Sw) Lundin Services BV (N) Ikdam Production SA (F) 40% Lundin Norway AS (No) Lundin Netherlands BV (N) Lundin Tunisia BV (N) Lundin International SA (F) Lundin Gascogne SNC (F) Lundin Russia BV (N) Lundin Lagansky BV (N) Petroresurs 1 (R) 70% Lundin Russia Services BV (N) Lundin Russia Ltd (C) RF Energy 1 (Cy) Pechoraneftegas 1 (R) 50% Recher-Komi 1 (R) 50% Lundin South East Asia BV (N) Lundin Malaysia BV (N) Lundin Vietnam BV (N) Lundin Indonesia Holding BV (N) Lundin Lematang BV (N) Lundin Rangkas BV (N) Lundin Cakalang BV (N) Lundin Baronang BV (N) Lundin South Sokang BV (N) JURISDICTION (C) (Cy) (F) (N) Canada Cyprus France Netherlands (No) (R) (S) (Sw) Norway Russia Sweden Switzerland 1 Natuna Ventures BV (N) See Group Financial Statements Note 19 and Parent Company Financial Statements Note 14 for full legal names and all subsidiaries Note: The Group structure shows significant subsidiaries only The address of Lundin Petroleum AB’s registered oﬃce is Hovslagargatan 5, Stockholm, Sweden. The main business of Lundin Petroleum is the exploration for, the development of, and the production of oil and natural gas. Lundin Petroleum maintains a portfolio of oil and gas production assets and development projects in various countries with exposure to exploration opportunities. The Group does not carry out any research and development. The Group maintains branches in most of its areas of operation. The Parent Company has no foreign branches. OPERATIONAL REVIEW EUROPE Norway The net production to Lundin Petroleum for the twelve month period ended 31 December 2010 (reporting period) from the Alvheim ﬁeld (Lundin Petroleum working interest (WI) 15%), oﬀshore Norway, was 12,900 barrels oil equivalent per day (boepd). The Alvheim ﬁeld has been on production since June 2008 and continues to perform above expectations. This excellent reservoir performance has resulted in increased gross ultimate recoverable reserves during 2010 to 276 million of barrels of oil equivalent (MMboe). Phase 2 of Alvheim development drilling commenced in the second quarter of 2010 and involves the drilling of ﬁve multilateral wells. The ﬁrst Phase 2 well came on production in late 2010, with three wells to be drilled in 2011 and a further well to be drilled in 2012. The cost of operations for the Alvheim ﬁeld averaged below USD 3.50 per barrel for the reporting period. The net production to Lundin Petroleum from the Volund ﬁeld (WI 35%) amounted to 5,300 boepd for the reporting period. The ﬁrst two development wells (one producer and one water injector) on the Volund ﬁeld were successfully completed in 2009 but due to limitations in production capacity on the Alvheim FPSO the ﬁrst Volund production well did not commence production until April 2010. Phase 2 of Volund development drilling which involved a further two multilateral production wells was successfully completed in the third quarter of 2010. As a result, Volund ﬁeld production increased to 9,700 boepd net in the fourth quarter of 2010 which was above the 8,700 boepd net Volund ﬁeld ﬁrm capacity booked on the Alvheim FPSO. In October 2009, a new oil discovery, estimated to contain gross recoverable resources of 20 MMboe on the Marihøne prospect in PL340 CHANGES IN THE GROUP During the ﬁrst quarter of 2010, Lundin Petroleum announced its intention to spin-oﬀ the United Kingdom (UK) business. The spin-oﬀ was completed on 6 April 2010 with the sale of the UK business in exchange for shares in the newly incorporated company, EnQuest plc, and the subsequent distribution of the EnQuest shares received to Lundin Petroleum shareholders on 9 April 2010. The results of the UK business are included in the Lundin Petroleum accounts up until the end of the ﬁrst quarter of 2010 and are shown as discontinued operations. For more detail refer to Note 13. On 12 November 2010, Lundin Petroleum completed the distribution of its shares in Etrion Corporation to Lundin Petroleum’s shareholders, in connection with the listing of the shares of Etrion on the NASDAQ OMX Stockholm exchange. The result from Etrion is included in the consolidated accounts up to the date of the distribution. On 29 December 2010, Lundin Petroleum completed the sale of its non-operated interests in Salawati Basin and Salawati Island assets in Indonesia to RH Petrogas. 57

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