Lundin announce a discovery at Luno II

Lundin Petroleum AB (STO: LUPE) announced that an exploration well 16/4-6S on the Luno II prospect is a discovery with significant potential. A gross oil column of more than 40 metres of good quality light oil has been proven with oil water contact at just under 2000 metres below sea level.

The pressure reading indicates that the Luno II petroleum system is different of those in nearby Edvard Grieg and Johan Sverdrup fields. The well now goes into production testing and a resource estimate is expected in 2-3 weeks. Lundin is the operator of the license with a 40% stake in the project. It is partnered with Statoil (OSE: STL, NYSE:STO) and Premier Oil plc (LSE: PMO), both of which have a 30% chunk.

Lundin Petroleum reports

Lundin Petroleum (STO: LUPE) released interim accounts this morning. Second quarter daily production of 35.5 Mboe was above own earlier estimates helped by strong performance of Alvheim and Volund oil fields offshore Norway. The result would have been even better if not for a major disappointment in Tunisia, where Oudna field will now be abandoned following flowline damage. Operating income came in at around 318 million USD, EBITDA at 271.5 million and net result around 64.5 million. Compared to previous quarter, the numbers were largely flat and overall slightly better than analysts’ expectations.

Norwegian parliament has approved Edvard Grieg (formerly Luno) field development plan. Brynhild field has also received development approval. Overall the Swedish company promises to continue”aggressive” exploration programme. This is helped by a recently approved syndicate loan facility. Five exploration wells will be drilled in Norway this year and additional rig capacity has been secured to continue drilling activity in the following two years as well.

Kvarner gets Luno topside EPC contract

Kvaerner ASA (OSE: KVAER) said in a release today that it has received LOI from Lundin Norway AS, a subsidiary of Lundin Petroleum AB (STO:LUPE), for engineering procurement and construction of Edvard Grieg (formerly Luno) platform topside. It will have a total weight of 21000 tonne with a main topside module, a living quarter including utilities module, process module and a flare tower. The estimated value of the contract is 8 billion NOK with estimated delivery in 2015.

This is the second contract for Kvaerner from Lundin’s new platform on the NCS following 14500 tonne steel field jacket EPC contract announced in January. President & CEO Jan Arve Haugan feels this contract validates the company’s position as leading provider of complex integrated topsides. Several of Kvaerner's partners can expect their own contract awards stemming from this, with iving quarter already sub-contracted to Apply Leirvik AS. Most of the work will be done in Norway.

Edvard Grieg oil field is expected to begin production in late 2015, with forecasted peak production of 90 0000 bopd. Lundin is the operator and has a 50% stake with other partners being Wintershall Norge (a subsidiary of world’s leading chemical company BASF SE from Germany, 30%) and RWE Dea Norge AS (a subsidiary of RWE Dea AG which in turn is a subsidiary of German electric power and natural gas public utility RWE AG, 20%).

Lundin Petroleum AB jumps on appraisal well data

Worries that Lundin Petroleum AB (OMX: LUPE) might be about to lower the resource estimates of a portion of Johan Sverdrup any time subsided today after the firm announced data from appraisal well 16/2-11 in PL501 license. The well encountered 54 metre gross oil column of good reservoir properties in Upper and Middle Jurassic sandstone at predicted depth.

Production test in Middle Jurassic resulted in flow rates of over 2700 barrels of oil per day. The work will now shift to investigate lateral thickness and property variations as well as the establishments of an oil water contact to estimate possibility of a deeper oil-water contact in this area.

The company has now decided to delay the release of updated resources estimates most likely until the completion of 2012 appraisal program. Lundin Petroleum gained 7% for the day. Partners Statoil and Maersk were largely unaffected by the news in today’s trading

Investors await resource news from Lundin Petroleum

Dagens Industry reminded investors that a major value event may be triggered at any time in Lundin Petroleum (OMX: LUPE). In the beginning of January the stock retreated more than 15% in a flash on a relative dud from the southern flank of the discovery, which added to uncertainty considering the resource in the area. At that time the company said it is evaluating the impact of that well on the entire resource estimate for that part of the discovery.

Lundin is expected to present results from a fourth appraisal well in the license in question shortly. Dagens Industri says that a new resource estimate should be forthcoming soon after that. Other stocks that are expected to be affected are the partners Statoil and Maersk. The proportional effect, up or down, will be largest for Lundin Petroleum, which has a current market cap just below 50 billion SEK.

It was recently announced that the discovery in question, till then known as Aldous / Avaldnes, has been renamed as Johan Sverdrup in honour of the first Prime Minister of the country, who is often called the father of parliamentarianism in Norway. This highlights the importance of this new find, which is one of the five largest oil discoveries in NCS ever and the biggest one in the world in 2011.

There will be a lot of appraisal wells drilled in other parts of the discovery during this year as well. In total five to seven new wells are likely to be drilled in PL501 and PL265 in 2012. Lundin is still down just under 14% for the year and 3% last week despite a gain of 2.8% on Friday.

Active times ahead for Lundin Petroleum

Lundin Petroleum (OMX: LUPE) held its capital markets day on Thursday. The company called 2011 a transformational year during which it became a new giant in Norway. Production grew to 33,200 boepd (Barrels of Oil Equivalent Per Day) and total reserves plus contingent resources now stand at over 1 million barrels of recoverable oil. Contingent resources in Norway represent the largest portion of this at nearly 700 MMboe.

The company said its 2011 EBITDA has topped 1 billion U.S. Dollars. Cash margin netback in 2011 with an average Brent oil price of 111.25 USD was 88.55 USD/boe. The forecast for 2012 is somewhat lower with estimates given with Brent oil price of 95 and 115 USD per barrel at 68.8 USD/boe and 83.4/USD/boe respectively. Profit after tax estimated under the same scenarios stands at 13.9 and 18.3 USD/boe. For 2012 the company is guiding 32,000-38,000 boepd production.

Exploration activity will remain high in Norway (on both North Sea and Barents Sea) and in South East Asia. In South East Asia the company is active in Malaysia and Indonesia. In Indonesia Lundin has a 25+% non-operated stake in Singa gas field. The Singa license expires in 2017 and discussions to extend it are ongoing. In addition to that the company has six exploration licenses with commercial drilling planned for 2013. In Malaysia Lundin has acquired several prospective exploration licenses offshore Sabah and Peninsular with five exploration drills planned for 2012 on top of two gas- and one oil discovery in 2011.

The company is predicting it will double its production by 2015. Lundin notes that the oil price may surprise to the upside in 2012. Thorough presentation handout material is available for download from the company website at www.lundin-petroleum.com. The stock gained about 1% today but is down close to 10% for the year in the aftermath of the Avaldsnes appraisal well dud from couple weeks ago.

Luno and Draupne field development plans unfolding

Luno field operator and 50% owner Lundin Norway AS, a subsidiary of Lundin Petroleum AB (STO:LUPE)), announced that field development plan for the Luno field is starting to be put in place. The oil field is located in production license PL 388 in the North Sea offshore Norway, The license also covers Tellus discovery. Other partners are Wintershall Norge (a subsidiary of world’s leading chemical company BASF SE from Germany) with 30% stake and RWE Dea Norge AS (a subsidiary of RWE Dea AG which in turn is a subsidiary of German electric power and natural gas public utility RWE AG) with 20% portion.

Light oil was discovered in the field several years ago and subsequent appraisal wells have extended recoverable reserves. There is a detailed description of the early work done on the field at offshore-technology.com. Lundin expects 90,000 barrels of oil per day (bopd) peak production. Luno contains 186 million barrels of proven and probable oil equivalents (MMboe). The field is expected to start producing in late 2015.

Lundin is in negotiations with Det norske Oljeselskap ASA (OSE: DETNOR), the operator at Draupne field on license PL001B, which is located 8 kilometres northwest of Luno, for a unitized development plan. A coordinated development solution for the two fields was requested by The Ministry of Petroleum and Energy. The Ministry’s rationale was that both society and licensees can expect substantial savings from such a solution and made the companies aware that development and operation plans would not be accepted without such an agreement in place.

Partly processed oil and gas would be transported to Luno platform from Draupne field for stabilization and export. Lundin expects that an agreement will be conducted shortly. Draupne field is expected to produce 143 million barrels of oil and gas. Luno platform design capacity will accommodate in excess of 120,000 bopd when Draupne production is combined with Luno’s. The licensees at Draupne are DETNOR (35%), Statoil (OSE:STL, 50%) and Bayerngas Norge AS (owned in decreasing order by Bayerngas GmbH, Stadtwerke München, Swissgas and TIGAS-Erdgas, 15%).

Engineering, procurement and construction (EPC) company Kvaerner (OSE: KVAER) was awarded Luno field jacket EPC contract worth approximately 1.1 billion NOK by Lundin. Kværner will deliver a steel jacket weighing some 14 500 tonnes executed by Kvaerner's yard in Verdal. The engineering starts immediately and fabrication will start in Q4 2012 with expected delivery in the spring of 2014. .

Historic Kværner name returned to prominence after a few year hiatus after a spin-off from Aker Solutions. Kværner had been around for nearly 150 years before it started a period of rapid expansion acquiring several companies in different fields. This caught up to the company when the economy turned sour upon the collapse of the dot-com bubble in the beginning of the previous decade, and it was forced to merge with rival Aker ASA or face bankruptcy.

Total capital costs for Luno field are expected to be around 4 billion USD (nearly 24 billion NOK). This includes the processing platform on a jacket, the wells and export pipelines tied to existing infrastructure (to the Grane oil pipeline). Rowan Companies Inc has a contract to provide a Rowan Stavanger jack-up rig to the area to drill the Luno development wells at an average day rate of about 340 000 USD (2 million NOK+) in between June 2013 and November 2016 to drill 15 wells. Contracts for marine installation and topside are expected to be awarded soon.

Draupne operator DETNOR has contracts in place for front-end engineering and design (FEED) study of Draupne development with Aker Solutions (OSE: AKSO) and a 400 million USD 3-year drilling contract (extendable for 7) with Maersk Drilling (a subsidiary of A.P. Moller - Maersk Group (OMX: MAERSK A, OMX: MAERSK B) for newbuild jack-up rig, XL Enhanced 2, which is designed for use in ultra harsh environment and is currently under construction in Singapore scheduled to be delivered in 2014.

Lundin Petroleum down after appraisal well data adds to uncertainty on Avaldsnes resource

Lundin Petroleum (OMX: LUPE) has backed down nearly 15% this morning after the company notified the stock exchange on data acquired from Avaldsnes appraisal well drilled to delineate the southern flank of the Avaldsnes discovery. Lundin Petroleum’s far larger partners Statoil (40%) and Maersk (20%) are also under some pressure in early trading.

The top reservoir was found deeper than expected and was currently evaluated as unproducible. More research is required to determine if this is a local phenomenon. Revised resource estimate will be released upon the completion of the next appraisal well in around 1.5 months. The company currently estimates that the impact of this well on the southern extent of the discovery is a reduction of current resource estimates.

Connection between Aldous and Avaldsnes oil discoveries established

Statoil (OSE: STL) said that the recent oil find in the North Sea is even bigger than expected as communication between Aldous and Avaldsnes oil discoveries has been confirmed. If combined, this is a top ten oil discovery in Norway and largest since mid-eighties. The companies involved are Statoil, Lundin Petroleum AB (STO:LUPE), OMX: Maersk Oil of A.P. Moller – Maersk Group (OMX: MAERSK A, OMX: MAERSK B) Petoro AS and Det norske oljeselskap’s (OSE: DETNOR). Production is expected to start towards the end of this decade.

Successful wells bring some joy into a miserable day in the markets

Statoil (40%) as the operator and partners Petoro AS (30%), Det norske oljeselskap’s (OSE: DETNOR) (20%) and Lundin Norway AS (part of Lundin Petroleum AB (STO:LUPE))(10%) made a high-impact oil discovery on the Aldous Major South prospect (PL 265) in the North Sea. The reservoir is of excellent quality and preliminary volumes are estimated 200-400 million barrels of oil equivalent for this part of the prospect. Statoil estimates further upside adjacent to the discovery.

Lundin Petroleum estimates that the discovery is most likely an extension of the Avalsdnes discovery made by Lundin Petroleum in PL501. Together the discoveries may allow for a new stand-alone development in the North Sea. Markets had high hopes for the project as it was described as high-impact in prior investor meetings.

Total E&P Norge AS as operator.made a gas discovery at Norvarg prospect in the Barents Sea. North Energy ASA (OSE:NORTH),(20%) RockSource (OSE:RGT) (20%) and DETNOR (20%) are the partners in the license. Preliminary estimates indicate potential from 10 to 50 billion cubic metres of recoverable gas corresponding to between 63 and 315 million barrel of oil equivalents.

DETNOR’s stock benefited the most from being a part of both of the discoveries and was up nearly 15% for the day. The company said that Norvarg may represent significant value. Other public companies mentioned here were down with the rest of the market.

Fred Olsen Energy second quarter highlights

Drilling rig company Fred Olsen Energy ASA (OSE: FOE) reported an operating profit before depreciation of 929 million Norwegian kroner on 1 629 million revenues for second quarter of 2011. The highlight of the quarter was a six-well drilling contract for Bredford Dolphin with Lundin Norway AS, a wholly owned subsidiary of Lundin Petroleum AB (OMX: LUPE, TSX: LUP).

The company says there has been continued tender activity within all floater segments, which has globally materialized in new contracts for both mid-water and deepwater segments. Fred Olsen Energy feels that global market outlooks is positive and supported by increasing long-term demand for oil and sustainable oil prices.

Fred Olsen’s earnings per share were 8.6 NOK. The share closed up over 4% at 201.80 NOK to wrap up the week. The quarterly report in portable document format (pdf) is available by clicking here.