Annual Report 2010

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LETTER TO SHAREHOLDERS plan of development. Conceptual studies for the development of the Krabbe and Bøyla ﬁelds are progressing satisfactorily. 800 CASH FLOW (MUSD) Exploration Our exploration led growth strategy has yielded positive results particularly in Norway where we have been one of the most successful exploration companies in recent years. Following the successes in discovering Luno, Avaldsnes and Apollo we believe that our continued exploration driven strategy will lead to further discoveries. Lundin Petroleum’s 2011 work programme involves the drilling of a further ten appraisal and exploration wells in Norway including ﬁve wells in the Greater Luno Area. We also expect to commence drilling in 2011 in the Barents Sea with two exploration wells. Our historical exploration ﬁnding costs in Norway are less than USD 0.65 per barrel after tax. The current value of these discovered resources has created signiﬁcant value for our shareholders Our intention is to replicate the Norway success story in South East Asia. We have over the last few years built a local team of professionals, acquired licences and invested in 3D seismic acquisition. I have high hopes that our planned ﬁve well exploration drilling programme in Malaysia in 2011 will yield positive results and act as the springboard to create a new core development and production area for Lundin Petroleum. 600 400 200 0 06 07 08 09 10 MUSD 599 EBITDA (MUSD) 800 600 400 200 0 Oil and gas industry During 2010, the oil and gas industry has been prominent in the media. The unfortunate events of the Macondo oil spill in the Gulf of Mexico highlighted the increasing challenges facing our industry as we operate in ever harsher environments and drill deeper to produce the planet’s oil resources. Lundin Petroleum and our industry have certainly made major advances in terms of safety and environmental focus over recent years. I believe that whilst we continually strive to improve our performance the negative portrayal by the media of the oil and gas industry has been unjustiﬁed and does not reﬂect the advances that have been made. The availability of cheap energy has over recent decades been the primary catalyst for world economic growth which has improved the lives of the majority of the world’s population. As many of the world’s economies have come out of recession in recent months, focus has returned to the question of oil supply. Despite the investment in alternative forms of renewable energy, which we support, hydrocarbons will remain the primary provider of the world’s energy for the foreseeable future. Our industry faces the challenge in an escalating cost and increasingly regulated market to meet this continually increasing demand for hydrocarbon resources whilst balancing the need for improved environmental and safety performance. 06 07 08 09 10 MUSD 636 Corporate Responsibility In 2010, we decided to join the Global Compact as a means to reconﬁrm our commitment to ethical business practice. In joining the Global Compact, we committed to make the ten principles on human rights, labour, environment and anti-corruption an integral part of our business strategy, day-to-day operations and organisational culture; to incorporate the principles in our decision making process; to contribute to broad development objectives through partnerships to advance the Global Compact and responsible business practices through active outreach to stakeholders and the public at large; and to publish a Communication on Progress (COP). A number of initiatives were undertaken in 2010 in furtherance of this commitment; they are detailed in the Corporate Responsibility section of our Annual Report. Lundin Petroleum is ﬁrmly committed to the Global Compact and intends to continue to honor its commitments thereto in 2011 and beyond. I am very proud that we have grown our resource base and as a result created value for our loyal shareholders. The future will be more of the same and in this respect I believe we have the asset base and team to deliver. Yours sincerely, PRODUCTION (boepd) 40,000 30,000 20,000 10,000 0 06 07 08 09 10 32,700 boepd Strong production performance from Alvheim and Volund ﬁelds. C. Ashley Heppenstall President and CEO 5

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