Annual Report 2011

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DIRECTORS’ REPORT BALANCE SHEET Non-current assets Oil and gas properties amounted to MUSD 2,329.3 (MUSD 1,999.0) and are detailed in Note 10. Development and exploration expenditure incurred for the reporting period was as follows: Development expenditure in MUSD Norway France Netherlands Indonesia Russia Development expenditures from continuing operations Discontinued operations – United Kingdom Development expenditures which are reported at market price. Long-term receivables amounted to MUSD – (MUSD 23.8) following the conversion to shares of the MUSD 23.8 convertible loan to Africa Oil Corporation and their subsequent sale. Other financial assets amounted to MUSD 13.5 (MUSD 22.5), see Note 15, and include Etrion Corporation bonds of MUSD 9.6 (MUSD –) held by Lundin Petroleum. The comparative period for other financial assets included MUSD 16.5 of recoverable VAT in Russia of which MUSD 14.2 of Russian VAT was received during the reporting period and the outstanding receivable was reclassified to current assets at 31 December 2011. Deferred tax asset amounted to MUSD 15.3 (MUSD 15.1) and mainly relates to unutilised tax losses in the Netherlands. Current assets Trade receivables amounted to MUSD 145.0 (MUSD 94.2). A higher number of cargoes lifted in December 2011 and higher oil prices have resulted in the value of the trade receivables being higher at 31 December 2011. Short-term loan receivables amounted to MUSD – (MUSD 74.5) following repayment of the Etrion loan during the second quarter of 2011. Other receivables amounted to MUSD 23.1 (MUSD 19.8), see Note 19, and included an amount of MUSD 11.2 (MUSD –) for a carried interest in PL148 Brynhild, Norway, under the terms of an option agreement. In the first quarter of 2012, the seller exercised the option to sell its 30 percent working interest in the licence to Lundin Petroleum and the amount will be transferred to oil and gas properties in the first quarter of 2012 subject to completion of the deal. Cash and cash equivalents amounted to MUSD 73.6 (MUSD 48.7). Cash balances are held to meet operational and investment requirements. Non-current liabilities Non-current liabilities amounted to MUSD 1,216.8 (MUSD 1,240.3). Provision for site restoration amounted to MUSD 119.3 (MUSD 93.8), see Note 22, and relates to future decommissioning obligation liabilities. The increase compared to the comparative period results from the change in estimate of the decommissioning costs at 31 December 2011 and the inclusion of the decommissioning liability associated with the Gaupe development. Provision for deferred taxes amounted to MUSD 803.5 (MUSD 650.7) and is arising on the excess of book value over the tax value of oil and gas properties. Deferred tax assets are netted off against deferred tax liabilities where they relate to the same jurisdiction in accordance with International Financial Reporting Standards (IFRS). Other provisions amounted to MUSD 63.7 (MUSD 17.8), and are detailed in Note 24. Included in this amount is the non-current portion of the provision for Lundin Petroleum’s LTIP scheme amounted to MUSD 58.1 (MUSD 12.8). Long-term interest bearing debt amounted to MUSD 207.0 (MUSD 458.8) and relates to the outstanding loan under the Group’s MUSD 850 revolving borrowing base facility. 2011 186.8 30.9 4.1 6.4 4.2 232.4 – 232.4 2010 106.3 13.2 4.5 10.2 6.6 140.8 17.1 157.9 During the reporting period, an amount of MUSD 186.8 of development expenditure was incurred in Norway, primarily on the Gaupe field development and the Phase II drilling on the Alvheim field. MUSD 106.3 was spent on development projects in Norway in the comparative period, predominantly on the Volund field development and Alvheim field drilling. Exploration expenditure in MUSD Norway France Indonesia Russia Malaysia Congo (Brazzaville) Vietnam Other Exploration expenditures from continuing operations Discontinued operations – United Kingdom Exploration expenditures 2011 288.6 1.7 16.4 10.0 98.7 19.0 0.4 2.7 437.5 – 437.5 2010 160.8 1.0 13.5 18.3 10.6 2.5 15.3 4.4 226.4 0.2 226.6 During the reporting period, exploration expenditure of MUSD 288.6 was incurred in Norway mainly on the Tellus discovery well in PL338, the Caterpillar discovery well in PL340, the Earb South well in PL505, the Skalle well in PL438 and the Johan Sverdrup appraisal wells (combined Avaldsnes/Aldous Major South) in PL501 and PL265. MUSD 98.7 was incurred in Malaysia primarily for the drilling and testing of the Tarap and Cempulut wells on Block SB303, drilling the Batu Hitam and Janglau wells on Block PM308A and drilling the Bertam appraisal well on Block PM307. Two wells were drilled in Congo (Brazzaville) in the fourth quarter of 2011. Other tangible assets amounted to MUSD 16.1 (MUSD 15.3) and represent office fixed assets and real estate and are detailed in Note 11. Other shares and participations amounted to MUSD 17.8 (MUSD 68.6) and predominantly relate to the shares held in ShaMaran Petroleum 70 Lundin Petroleum ANNUAL REPORT 2011

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