Issuu on Google+

Investment Research - Research Report 03 October 2011

Lundin Petroleum Sweden, Oil & Gas Exploration & Production

BUY

LUPE.ST (REUTERS) - www.lundin-petroleum.com/ – LUPE SS (BLOOMBERG) Share price: USD 17.1 Target price: USD 23.4 (16.6)

Unchanged

There is a giant elephant in the room…

Forecast Changes (USD) Old 2011 1,232 745 750 0.70

Year Sales EBIT PTP EPS

New 2011 1,232 745 750 0.70

0.0% 0.0% 0.0% 0.0%

Old 2012 1,325 586 566 0.50

New 2012 1,325 586 566 0.50

0.0% 0.0% 0.0% 0.0%

Source: ABG Sundal Collier

Other key data (USD) Mkt cap. (m) Mkt cap. (m, USD) Shares out. (m) Dil. shares (m) Free Float Shares, % EV (m) Net IB debt (m)

5,443 5,443 317.9 317.9 56.8 5,698 255

Source: ABG Sundal Collier

Trading data (USD) Share price Tr. Price +/- to target Daily traded shares (3 m, k) Daily traded value (3 m, k)

17.1 23.4 36.7% 2,675 45,796

Source: ABG Sundal Collier, company data

Performance Absolute

1m 15.9%

Market Cap (m): USD 5,443 Daily traded shares, -3m (k): 2,675

3m 12m 21.2% 102.4%

YTD 32.3%

Source: Datastream

Share price

LUPE announced today that the resources on Avaldsnes, its largest discovery yet, have been increased from 100-400 MMboe up to 8001800 MMboe. Avaldsnes is now possibly the second largest oil discovery ever made in Norway and in industry terms - an elephant. According to LUPE mgmt there is still significant upside in the area surrounding Avaldsnes. On the back of the resource hike we raise our target to USD 23.4 (16.6) or SEK 152 (SEK 107) and reiterate BUY. …and it keeps on getting bigger and bigger  Resources hiked – LUPE hiked the resources on Avaldsnes from 100-400 MMboe up to 800 – 1800 MMboe. Our core NAV has on the back of the announcement increased from SEK 97 to SEK 148 based on the mid-range resource estimate for Avaldsnes.  Resources not fully reflected in the share price – On the back of the announcement the share price reacted by SEK 26 close to the lower range estimate hike on Avaldsnes. We believe this is far too conservative given the development in the Avaldsnes area and see 25% upside potential from the current share price up to core NAV. Our core NAV is based on the mid-range of the resource estimate on Avaldsnes.  There is more to come – LUPE will drill its last appraisal in 2011 on Avaldsnes in November this year. The well will be a significant trigger as it should give a clear indication of whether the upper end of the 800-1800 MMboe is realistic. The potential impact for our core NAV if the well is positive is SEK 26 per share Valuation  Our updated sum-of-the-parts valuation points to a risked NAV SEK 152 per share. With an unwarranted discount to our core NAV reflected in the share price and subsequent significant triggers ahead, we remain positive on LUPE and reiterate BUY.  LUPE currently trades at a 25% discount to our core NAV; we believe the discount represents a buying opportunity and is unwarranted given LUPE’s track record of late.  The main risk to our BUY case is a negative outcome of the appraisal drilling on Avaldsnes.

Source: SIX

Key Highlights(USD) Year 2007 2008 2009 2010 2011e 2012e 2013e

Sales 813 978 812 799 1,232 1,325 1,340

EBITDA 397 462 341 472 910 771 802

Target price: USD 23.4

EBITA 249 304 171 326 745 584 600

EBITDA marg. 48.8% 47.2% 41.9% 59.1% 73.8% 58.2% 59.9%

Net profit 141 61 -537 129 223 158 161

Risk: Oil price, exploration

Please refer to important disclosures at the end of this report

EPS 0.46 0.12 -0.97 1.56 0.70 0.50 0.51

EPS growth -6.4% -73% -898% 261% -55% -29% 2.1%

EPS Core 0.46 0.28 0.20 1.56 0.70 0.50 0.51

EV/ EBITA 15.7 9.3 23.3 13.4 7.6 10.1 10.8

P/E 18.3 34.3 neg 7.9 24.4 34.5 33.8

P/E Core 18.3 14.8 32.8 7.9 24.4 34.5 33.8

FCF yield -3.1% -3.3% -0.75% 4.4% 5.0% 0.96% -8.6%

Div. yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Methodology: DCF

Anders Holte, anders.holte@abgsc.no, +47 22 01 61 39, Oslo Office


Investment Analysis resource hike on Avaldsnes, LUPE could reach 250 kboepd by 2020 making the company one of the largest independent oil companies in Europe.

Avaldsnes World class structure with material upside LUPE announced on Friday 30 September that resources on Avaldsnes have been hiked from 100400 MMboe up to 800-1800 MMboe. LUPE is the operator on Avaldsnes with 40% equity in the license. Our valuation of the discovery has been hiked from a risked estimate of SEK 21 per share up to SEK 69 per share.

Valuation Discount to core NAV unwarranted – represents a buying opportunity LUPE is one of the few shares in our E&P coverage space which historically has traded almost without discount to our core NAV. Based on the Avaldsnes resource hike we still believe that LUPE’s current share price reflects a discount to core NAV.

Avaldsnes/ Aldous structure map

Given management’s track record and the quality of its discoveries yet to be developed, we believe the discount to core NAV is unwarranted. We also believe using valuation multiples seen on transactions for smaller oil discoveries, with a significantly lower margin, does not reflect the true value of the discovery. We use a conservative USD 10 per barrel of capex for the field but this could proven to be significantly less given the size of the discovery. Our NAV estimate for Avaldsnes is now USD 6.5 per barrel based on a USD 90 per barrel flat oil price.

Source: Lundin Petroleum

The Avaldsnes discovery is the same discovery as Aldous Major South and stretches across at least two licenses, PL 265 and PL 501. The discovery has a total resource range of 1.2 – 2.6 bn where we estimate a net total to LUPE of 580 MMboe valued at a total of SEK 77 per share.

LUPE Valuation graph 200 180 27.0

160

LUPE will now continue to appraise the discovery with a new well in November. The final well on Avaldsnes in 2011 should indicate if the Avaldsnes discovery is in the upper range of the 800-1800 MMboe. The well carries a potential upside of SEK 27 per share, in our view.

5.5

3.7

SEK/share

140 Current share price

120 98.4

100 80

151.8

148.1

60 20.2

40

300,000

Upside on Avaldnes

Risked NAV

Exlporation

Discoveries

Developments

Producing assets

LUPE production forecast

Equity val bef expl

34.9

0

NIBD + Overhead

20

Source: ABG Sundal Collier 250,000

The portfolio of LUPE Norway is now estimated at 850 MMboe; given the operatorship and large stake in Avaldsnes (40%), we believe the portfolio is highly attractive for several larger independents and even majors. Although the LUPE share is seen as expensive, we believe that the likelihood of a LUPE takeover has increased substantially.

boe/d

200,000

150,000

100,000

50,000

2008

2009

2010 Russia

2011

2012

2013

Norw ay

UK

France

2014 Indonesia

2015

2016

Tunisia

2017 Netherlands

2018

2019

2020

Congo

Source: ABG Sundal Collier

The Avaldsnes discovery entails a substantial investment for LUPE in the range of USD 4-5bn. We believe LUPE will look at options to reduce its capex in the discovery going forwards.

Although LUPE management has guided on a doubling its current production of 32 kboepd by 2015; we believe the current portfolio could deliver substantially more. With the recent 03 October 2011

-2-

Lundin Petroleum


Key Data LUPE Exploration drilling #REF! EARB South

Norway

Skalle

Pulk (Salinas) 2012

Albert Aldous Major North

Aldous Major South

Tarap

Malaysia

Cempulut

Batu Hitam

Jangalau

Congo (Brazzaville)

Gemok Lideka

Makouala Jan-2011

Jan-2011

Mar-2011

Apr-2011

May-2011

High impact wells for the company

May-2011

Jun-2011

Discovery

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

Dec-2011

Dry

Source: ABG Sundal Collier, LUPE

LUPE drilling table Prospect

Location

Country

Net Unrisked LUPE share Mmboe

Pulk (Salinas) PL 533 Norway Albert PL 519 Norway Lideka Block Marine XI Congo (Brazzaville) Makouala Block Marine XIV Congo (Brazzaville) Total drilling

20% 40% 19% 22%

102 70 12 8

Risked net Prob resources 25% 25% 20% 20%

192

Risked Risked Unrisked USD USD/share USD/share

26 18 2 2

102 70 5 3

0.3 0.2 0.0 0.0

1.3 0.9 0.1 0.1

47

180

0.6

2.3

Time of spud Area Q4'11 Norwegian Sea Q2'11 Malyasia Q3'11 Congo (Brazzaville) Q3'11 Congo (Brazzaville)

Source: ABG Sundal Collier

03 October 2011

-3-

Lundin Petroleum


Valuation Summary LUPE Valuation summary table Valuation summary Field Producing assets Alvheim Volund Various Various Various Various

Country

Location

Lundin share

Norway Norway Tunisia France Netherlands Russia

PL 203 PL 150 Various Various Various Various

15% 35% Various Various Various Various

Total producing assets Developments Nemo Gaupe (Pi) Greater Luno

Norway Norway Norway

Norway Norway Norway Norway Norway Norway Norway France Netherlands Russia Norway Norway Norway Norway Norway Norway Malaysia Malaysia Malaysia

Prob

MMboe

21 15 1 23 3.5 17

100% 100% 100% 100% 100% 100%

21 15 1 23 4 17

79

PL 148 PL 292 PL 338

43% 40% 50%

Total development projects Discoveries Krabbe Marihøne A Viper Peik Alvheim III Luno South South East Tor Various Various Morskoya Avaldsnes Aldous Major South Apollo Caterpillar EARB South Skalle Tarap Cempulut Gemok

Net unrisked, MMboe

10 12.2 110

40% 15% 15% 15% 15% 50% 75% Various Various 49% 40% 10% 50% 15% 30% 25% 75% 75% 75%

Total discoveries Core EV NIBD Overhead Financial assets

9 3 2 4 8 4 17 10 14 110 520 60.0 32.5 2.0 24.0 62.5 37.0 56.0 19.0

MUSD

37.9 17.8 24 18.0 3.0

778 261 554 63 51

79

100% 100% 100%

132

PL 301 PL 340 PL 203 PL 008 PL 203 PL 338 PL 006c Various Various Lagansky PL 265 PL 501 PL 338 PL 340BS PL 505 PL 438 SB 303 SB 303 PM 308B

USD/boe

10 12 110

1,707

6.3 5.5 7.8

132

50% 100% 80% 50% 100% 100% 50% 100% 100% 30% 100% 100% 100% 80% 80% 25% 50% 50% 50%

4 3 1 2 8 4 9 10 14 33 520 60 33 2 19 16 19 28 10

993

792

1,204

1004

990

4.2 6.0 6.0 6.0 6.0 8.0 6.0 10.0 10.0 2.0 6.5 6.5 8.0 8.0 4.0 2.0 2.8 2.8 2.8

37 18 7.2 12 48 34 51 96 136 66 3,380 390 260 13 77 31 52 78 27 4,812

-

Core NAV Exploration Pulk (Salinas) Albert Lideka Makouala

61 68 862

Norway PL 533 Norway PL 519 Congo (Brazzaville) Block Marine XI Congo (Brazzaville) Block Marine XIV

Total exploration Risked NAV

20% 40% 19% 22%

102 70 12 8

25% 25% 20% 20%

26 18 2 2

4 4 2 2

7,509 297 20 50

USD/share

SEK/share

2.4 0.8 0.0 1.7 0.2 0.2

15.9 5.3 0.0 11.3 1.3 1.0

5.4

0.2 0.2 2.71 3.1

0.1 0.1 0.0 0.0 0.2 0.1 0.2 0.3 0.4 0.2 10.6 1.2 0.8 0.0 0.2 0.1 0.2 0.2 0.1 15.1 23.6 -0.9 -0.1 0.2

34.9

1.2 1.4 17.62 20.2

0.8 0.4 0.1 0.2 1.0 0.7 1.0 2.0 2.8 1.3 69.1 8.0 5.3 0.3 1.6 0.6 1.1 1.6 0.5 98.4 153.5 -6.1 -0.4 1.0

7,242

22.8

148

102 70 5 3

0.3 0.2 0.0 0.0

2.1 1.4 0.1 0.1

0.6

3.7

23.3

152

192

47

180

1,396

1051

7,422

Source: ABG Sundal Collier

Discount rate used is 10%. Oil price USD 90 per barrel flat going forwards. Avaldsnes discovery estimated at midpoint of resource estimate of 800-1800 MMboe. Aldous Major South discovery estimated at midpoint of resource estimate of 400-800 MMboe. Upside potential on Avaldsnes discovery is SEK 27 per share.

03 October 2011

-4-

Lundin Petroleum


Forecast Income Statement (USDm) Sales COGS Gros s profit Other operating items EBITDA Depreciation on tangibles Depreciation on intangibles EBITA Goodwill impairment charges Other impairment and amortisation EBIT Interest net Dividends received Exchange differences Other financial items Net financial items Associated income Other EO items Pretax profit Tax Net profit Minority interest Net profit dis continued Net profit to shareholders EPS EPS Core Total extraordinary items before tax Total extraordinary items after tax Tax rate Gros s margin EBITDA margin EBITA margin Pretax margin Net margin Growth rates Y/Y Sales growth EBITDA growth Net profit growth EPS growth Profitability ROE ROE Core ROCE ROCE Core ROIC ROIC Core Core earnings numbers EBITDA Core EBITDA Core margin EBITA Core EBITA Core margin Pretax profit core Net profit Core Net profit to shareholders Core Net Core margin

2004

2005

2004

2005

2004

2005

2004

2005

2006

2007

2008

2009

2010

2011e

2012e

2013e

599 -247 352 0.0 352 -105 0.0 247 0.0 0.0 248 -13 0.0 0.0 0.0 -13 0.0 0.0 235 -141 95 0.2 0.0 95 0.49 0.49 0.0 0.0 -59.8% 58.8% 58.8% 41.2% 39.3% 15.8% 2006 na na na na 2006 12.3% 12.3% 29.2% 29.2% 33.7% 33.7% 2006 352 58.8% 247 41.2% 235 95 95 15.8%

813 -416 397 0.0 397 -148 0.0 249 0.0 0.0 249 19 0.0 0.0 0.0 19 0.0 0.0 268 -127 141 0.0 0.0 141 0.46 0.46 0.0 0.0 -47.4% 48.8% 48.8% 30.6% 33.0% 17.4% 2007 36% 12.5% 49% -6.4% 2007 8.7% 8.7% 13.2% 13.2% 13.8% 13.8% 2007 397 48.8% 249 30.6% 268 141 141 17.4%

978 -516 462 0.0 462 -158 0.0 304 0.0 -78 247 -92 0.0 0.0 4.5 -87 0.0 0.0 160 -99 61 -1.1 0.0 60 0.12 0.28 0.0 0.0 -62.0% 47.2% 47.2% 31.1% 16.4% 6.2% 2008 20% 16.5% -57% -73% 2008 3.6% 8.2% 11.9% 15.6% 13.5% 13.5% 2008 462 47.2% 304 31.1% 238 139 138 14.1%

812 -472 341 0.0 341 -170 0.0 171 0.0 -645 -468 5.4 0.0 0.0 -26 -20 0.0 0.0 -488 -49 -537 0.0 0.0 -537 -0.97 0.20 0.0 0.0 10.0% 41.9% 41.9% 21.0% -60.1% -66.1% 2009 -16.9% -26% -984% -898% 2009 -37.3% 7.5% -25.7% 7.8% -15.0% -15.0% 2009 341 41.9% 171 21.0% 156 108 108 13.3%

799 -327 472 0.0 472 -145 0.0 326 0.0 0.0 394 -13 0.0 0.0 0.3 -12 0.0 0.0 381 -252 129 0.0 368 497 1.56 1.56 0.0 0.0 -66.0% 59.1% 59.1% 40.9% 47.8% 16.2% 2010 -1.7% 39% 124% 261% 2010 11.6% 44.5% 25.3% 25.3% 27.1% 27.1% 2010 472 59.1% 326 40.9% 381 129 497 62.3%

1,232 -322 910 0.0 910 -165 0.0 745 0.0 0.0 745 4.7 0.0 0.0 0.0 4.7 0.0 0.0 750 -527 223 0.0 0.0 223 0.70 0.70 0.0 0.0 -70.3% 73.8% 73.8% 60.4% 60.9% 18.1% 2011e 54% 93% 72% -55% 2011e 20.1% 20.1% 51.7% 51.7% 53.6% 53.6% 2011e 910 73.8% 745 60.4% 750 223 223 18.1%

1,325 -554 771 0.0 771 -188 0.0 584 0.0 0.0 586 -20 0.0 0.0 0.0 -20 0.0 0.0 566 -408 158 0.0 0.0 158 0.50 0.50 0.0 0.0 -72.2% 58.2% 58.2% 44.0% 42.7% 11.9% 2012e 7.5% -15.3% -29% -29% 2012e 12.1% 12.1% 35.4% 35.4% 36.4% 36.4% 2012e 771 58.2% 584 44.0% 566 158 158 11.9%

1,340 -537 802 0.0 802 -202 0.0 600 0.0 0.0 600 -28 0.0 0.0 0.0 -28 0.0 0.0 573 -412 161 0.0 0.0 161 0.51 0.51 0.0 0.0 -71.9% 59.9% 59.9% 44.8% 42.8% 12.0% 2013e 1.1% 4.0% 2.1% 2.1% 2013e 11.0% 11.0% 27.3% 27.3% 30.7% 30.7% 2013e 802 59.9% 600 44.8% 573 161 161 12.0%

Source: ABG Sundal Collier, company data

03 October 2011

-5-

Lundin Petroleum


Forecast

Cash Flow Statement (USDm)

2004

2005

EBITDA Net financial items Paid tax Non-cash items Cash flow before change in WC Change in WC Operating cash flow CAPEX tangible fixed assets CAPEX intangible fixed assets Acquisitions and disposals Free cash flow Dividend paid Share issues and buybacks Other non cash items Decrease in net IB debt

Balance Sheet (USDm) Goodwill Indefinite intangible assets Definite intangible assets Tangible fixed assets Other fixed assets Fixed assets Inventories Receivables Other current assets Cash and liquid assets Total assets Shareholders equity Minority Total equity Long-term debt Pension debt Convertible debt Deferred tax Other long-term liabilities Short-term debt Accounts payable Other current liabilities Total liabilities and equity Net IB debt Net IB debt adj. Net IB debt excl. Pension debt Working capital Capital invested EV Capital efficiency Total assets turnover Capital invested turnover Capital employed turnover Inventories / sales Customer advances / sales Payables / sales Working capital / sales Financial risk and debt service Net debt / Equity Net debt / market cap Equity ratio Net IB debt adj. / equity Current ratio EBITDA / net interest Net IB debt / EBITDA Interest cover

2004

2005

2004

2005

2004

2005

2006

2007

2008

2009

2010

2011e

2012e

2013e

352 -13 -0.3 0.0 339 0.0 308 -231 0.0 0.0 78 0.0 0.0 834 912

397 19 -46 93 463 0.0 463 -544 0.0 0.0 -81 0.0 0.0 -111 -193

462 -87 -62 313 626 0.0 626 -694 0.0 0.0 -68 0.0 0.0 -78 -146

341 -20 -26 196 490 0.0 490 -516 0.0 0.0 -26 0.0 0.0 56 30

472 -12 -25 123 557 0.0 557 -385 0.0 0.0 173 0.0 0.0 -115 58

910 4.7 -110 0.0 805 2.5 807 -533 0.0 0.0 275 0.0 0.0 -119 156

771 -20 -153 0.0 598 0.2 598 -546 0.0 0.0 52 0.0 0.0 -253 -201

802 -28 -217 0.0 558 0.0 558 -1,025 0.0 0.0 -467 0.0 0.0 -103 -571

2006

2007

2008

2009

2010

2011e

2012e

2013e

0.0 0.0 0.0 2,358 0.0 2,358 0.0 0.0 175 43 2,576 1,540 0.0 1,540 203 0.0 0.0 0.0 834 0.0 0.0 0.0 2,576 159 159 159 0.0 2,358 1,971 2006 0.46 0.51 0.71 0.0% 0.00% 0.00% 0.0% 2006 10.4% 8.8% 60% 10.4% na 27.1 0.5 19.0

0.0 0.0 0.0 2,967 0.0 2,967 0.0 0.0 241 75 3,283 1,723 0.0 1,723 427 0.0 0.0 0.0 1,132 0.0 0.0 0.0 3,283 352 352 352 0.0 2,967 3,906 2007 0.28 0.31 0.43 0.0% 0.00% 0.00% 0.0% 2007 20% 9.9% 52% 20% na nm 0.9 nm

0.0 0.0 0.0 2,964 0.0 2,964 0.0 0.0 215 57 3,237 1,642 0.0 1,642 556 0.0 0.0 0.0 1,039 0.0 0.0 0.0 3,237 498 498 498 0.0 2,964 2,829 2008 0.30 0.33 0.46 0.0% 0.00% 0.00% 0.0% 2008 30% 21% 51% 30% na 5.0 1.1 3.3

0.0 0.0 0.0 2,675 0.0 2,675 0.0 0.0 198 77 2,951 1,237 0.0 1,237 546 0.0 0.0 0.0 1,168 0.0 0.0 0.0 2,951 468 468 468 0.0 2,675 3,969 2009 0.26 0.29 0.42 0.0% 0.00% 0.00% 0.0% 2009 38% 13.4% 42% 38% na nm 1.4 nm

0.0 0.0 0.0 2,144 0.0 2,144 0.0 0.0 236 49 2,429 998 0.0 998 459 0.0 0.0 0.0 972 0.0 0.0 0.0 2,429 411 411 411 0.0 2,144 4,365 2010 0.30 0.33 0.51 0.0% 0.00% 0.00% 0.0% 2010 41% 10.4% 41% 41% na 37.7 0.9 26.1

0.0 0.0 0.0 2,597 0.0 2,597 0.0 0.0 227 145 2,969 1,221 0.0 1,221 400 0.0 0.0 0.0 1,346 0.0 1.2 1.2 2,969 255 255 255 -2.5 2,594 5,698 2011e 0.46 0.52 0.85 0.1% 0.10% 0.10% -0.1% 2011e 21% 4.7% 41% 21% 151 nm 0.3 nm

0.0 0.0 0.0 2,956 0.0 2,956 0.0 0.0 457 94 3,507 1,379 0.0 1,379 550 0.0 0.0 0.0 1,575 0.0 1.3 1.3 3,507 456 456 456 -2.6 2,953 5,898 2012e 0.41 0.48 0.80 0.1% 0.10% 0.10% -0.2% 2012e 33% 8.4% 39% 33% 208 38.6 0.6 29.2

0.0 0.0 0.0 3,779 0.0 3,779 0.0 0.0 439 73 4,291 1,539 0.0 1,539 1,100 0.0 0.0 0.0 1,649 0.0 1.3 1.3 4,291 1,027 1,027 1,027 -2.7 3,776 6,469 2013e 0.34 0.40 0.61 0.1% 0.10% 0.10% -0.2% 2013e 67% 18.9% 36% 67% 191 29.0 1.3 21.7

Source: ABG Sundal Collier, company data

03 October 2011

-6-

Lundin Petroleum


Valuation and Return Analysis

Valuation and ratios (USD) Share data Shares outstanding adj. Diluted shares (adj, avg) Diluted shares adj. Shares outstanding (adj, avg) Sales per share EBITDA per share EBITA per share EPS Dividend per share Operating cash flow per share, OCFPS Free cash flow per share, FCFPS EBITDA Core per share EBITA Core per share EPS Core BVPS BVPS adj. Net IB debt per share Share price Share price (high) Share price (low) Market cap. (m) Valuation P/E P/OCFPS P/FCFPS EV/sales EV/EBITDA EV/EBITA Dividend yield FCF yield P/BVPS P/BVPS adj P/E Core EV/EBITDA Core EV/EBITA Core EV/cap. employed Investment ratios CAPEX / sales CAPEX / depreciation CAPEX tangibles / tangible fixed assets CAPEX intangibles / definite intangibles Depreciation on intangibles / definite intangibles Depreciation on tangibles / tangibles

2004

2005

2006

2007

2008

2009

2010

2011e

2012e

2013e

2004

2005

2004

2005

193.2 193.2 193.2 193.2 3.10 1.82 1.28 0.49 0.00 1.60 0.40 1.82 1.28 0.49 7.97 7.97 0.82 09 12 08 1,812 2006 19.1 5.9 23.3 3.29 5.6 8.0 0.0% 4.3% 1.2 1.2 19.1 5.6 8.0 1.2 2006 38% 219% 9.8% na na 4.5%

421.6 307.4 421.6 307.4 2.64 1.29 0.81 0.46 0.00 1.51 -0.26 1.29 0.81 0.46 4.09 4.09 0.83 08 10 07 3,554 2007 18.3 5.6 Neg 4.81 9.9 15.7 0.0% -3.1% 2.1 2.1 18.3 9.9 15.7 1.9 2007 67% 368% 18.4% na na 5.0%

556.4 489.0 556.4 489.0 2.00 0.94 0.62 0.12 0.00 1.28 -0.14 0.94 0.62 0.28 2.95 2.95 0.90 04 13 03 2,331 2008 34.3 3.3 Neg 2.89 6.1 9.3 0.0% -3.3% 1.4 1.4 14.8 6.1 9.3 1.3 2008 71% 440% 23% na na 5.3%

546.9 551.6 546.9 551.6 1.47 0.62 0.31 -0.97 0.00 0.89 -0.05 0.62 0.31 0.20 2.26 2.26 0.86 06 08 03 3,500 2009 Neg 7.2 Neg 4.89 11.7 23.3 0.0% -0.7% 2.8 2.8 32.8 11.7 23.3 2.3 2009 64% 304% 19.3% na na 6.4%

317.9 317.9 317.9 317.9 2.51 1.48 1.03 1.56 0.00 1.75 0.54 1.48 1.03 1.56 3.14 3.14 1.29 12 12 4 3,955 2010 7.9 7.1 22.9 5.5 9.3 13.4 0.0% 4.4% 4.0 4.0 7.9 9.3 13 3.1 2010 48% 265% 17.9% na na 6.8%

317.9 317.9 317.9 317.9 3.88 2.86 2.34 0.70 0.00 2.54 0.86 2.86 2.34 0.70 3.84 3.84 0.80 17 17 11 5,443 2011e 24.4 6.7 19.8 4.62 6.3 7.6 0.0% 5.0% 4.5 4.5 24.4 6.3 7.6 3.9 2011e 43% 322% 21% na na 6.4%

317.9 317.9 317.9 317.9 4.17 2.43 1.84 0.50 0.00 1.88 0.16 2.43 1.84 0.50 4.34 4.34 1.43 17 17 11 5,443 2012e 34.5 9.1 >50 4.45 7.6 10.1 0.0% 1.0% 3.9 3.9 34.5 7.6 10.1 3.2 2012e 41% 291% 18.5% na na 6.3%

317.9 317.9 317.9 317.9 4.21 2.52 1.89 0.51 0.00 1.75 -1.47 2.52 1.89 0.51 4.84 4.84 3.23 17 17 11 5,443 2013e 33.8 9.8 Neg 4.83 8.1 10.8 0.0% -8.6% 3.5 3.5 33.8 8.1 10.8 2.5 2013e 77% 508% 27% na na 5.3%

Source: ABG Sundal Collier, company data

03 October 2011

-7-

Lundin Petroleum


Disclosures Analyst certification I/We, Anders Holte, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We further certify that I/we have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report.

Stock ratings distribution ABG Sundal Collier Ratings and Investment Banking by 30/09/2011 Sell Re se ar ch Co ver ag e % of To tal R atin g 63% 32% 6%

6%

Type of Ra tin g Buy Hold S ell

Hold 32%

Buy 62%

In ve stme nt B an kin g C lie nts ( IB C ) % of % of T ota l IBC Tota l Ra tin g b y T ype 76% 9% 18% 4% 6% 8%

IB C: Co mp an ie s i n re spe ct o f wh ich ABG SC or an affi li ate h as re cei ve d co mpe nsa tio n for i nv estme nt ba nk in g serv ic es wi thi n the p ast 12 mo nths

Analyst stock ratings definitions BUY = We expect this stock’s total return to exceed the market’s expected total return by 5% or more over the next six months. HOLD = We expect this stock’s total return to be in line with the market’s expected total return within a range of 4% over the next six months. SELL = We expect this stock’s total return to underperform the market’s expected total return by 5% or more over the next six months. TRADING BUY = We expect this stock’s total absolute return to exceed 10% over the next six weeks. TRADING SELL = We expect this stock’s total absolute return to fall below negative 10% over the next six weeks.

Analyst valuation methods When setting the individual ratings, ABG Sundal Collier assumes that a normal total absolute return (including dividends) for the market is 8% per annum, or 4% on a 6-month basis. Therefore, when we rate a stock a buy, we expect an absolute return of 9% or better over six months. We have more rigorous guidelines for trading buys and trading sells on small cap stocks, defined as having a market capitalisation below USD 1.5 billion. For trading buys on small cap stocks, we must identify a potential absolute return of 15% or more over the next six weeks. This more rigorous guideline reflects the fact that the low trading volume for small cap stocks inhibits the ability to trade them within a narrow price band. ABG Sundal Collier analysts publish price targets for the stocks they cover. These price targets rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company’s discounted cash flow (DCF). Another valuation method is the analysis of a company’s return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered. Price targets are changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value of a company’s assets changes (in the cases of investment companies, property companies or insurance companies) or when factors impacting the required rate of return change.

Stock price, company ratings and target price history Company : Lundin Petroleum Date : 02/10/2011

Current Recommendation: BUY Current Target Price: 23.4

Currency : USD

Current Share Price:

17.12

25 23

20

17 16 15

15

14

14

13

10

9.6

9.6

7.4 6.7 5.2

5

0 01/01/2008

HS 06/05/2008

09/09/2008

13/01/2009

B

H 19/05/2009

22/09/2009

26/01/2010

01/06/2010

05/10/2010

H 08/02/2011

B

14/06/2011

Source: Datastream & ABG Sundal Collier

03 October 2011

-8-

Lundin Petroleum


Disclosures Important Company Specific Disclosure The analyst and members of the analyst’s household own 0 shares in Lundin Petroleum. Employees and Partners in ABG Sundal Collier own 180 shares in Lundin Petroleum. ABG Sundal Collier has a delta position equal to 0 shares in Lundin Petroleum. ABG Sundal Collier Norge ASA or an affiliate is not engaged in making a market in the subject company’s securities at the time of this report’s publication. At the time of issuance of this report the analyst or a member of the analyst’s household did not serve as an officer, director or advisory board member of the subject company. ABG Sundal Collier is not aware of any other actual, material conflicts of interest of the analyst or ABG Sundal Collier of which the analyst knows or has reason to know at the time of the publication of this report. All prices are as of market close on 02 October, 2011 unless otherwise noted.

Disclaimer This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier Norge ASA, ABG Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers, representatives and employees. This report is provided solely for the information and use of professional investors, who are expected to make their own investment decisions without undue reliance on this report. The information contained herein does not apply to, and should not be relied upon by, retail clients. This report is for distribution only under such circumstances as may be permitted by applicable law. Research reports prepared by ABG Sundal Collier are for information purposes only. The recommendation(s) in this report is (are) has/have no regard to specific investment objectives and the financial situation or needs of any specific recipient. ABG Sundal Collier accepts no liability whatsoever for any losses arising from any use of this report or its contents. This report is not to be used or considered as an offer to sell, or a solicitation of an offer to buy. The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable, but ABG Sundal Collier makes no representation as to its accuracy or completeness and it should not be relied upon as such. All opinions and estimates herein reflect the judgment of ABG Sundal Collier on the date of this report and are subject to change without notice. Past performance is not indicative of future results. The compensation of our research analysts is determined exclusively by research management and senior management, but not including investment banking management. Compensation is not based on specific investment banking revenues, however, it is determined from the profitability of the ABG Sundal Collier Group, which includes earnings from investment banking operations and other business. Investors should assume that ABG Sundal Collier is seeking or will seek investment banking or other business relationships with the companies in this report. The research analyst(s) responsible for the preparation of this report may interact with trading desk and sales personnel and other departments for the purpose of gathering, synthesizing and interpreting market information. From time to time, ABG Sundal Collier and its affiliates and any shareholders, directors, officers or employees thereof may (I) have a position in, or otherwise be interested in, any securities directly or indirectly connected to the subject of this report, or (II) perform investment banking or other services for, or solicit investment banking or other services from, a company mentioned in this report. ABG Sundal Collier relies on information barriers to control the flow of information contained in one or more areas of ABG Sundal Collier, into other areas, units, groups or affiliates of ABG Sundal Collier. Norway: ABG Sundal Collier Norge ASA is regulated by the Financial Supervisory Authority of Norway (Finanstilsynet); Sweden: ABG Sundal Collier AB is regulated by the Swedish Financial Supervisory Authority (Finansinspektionen); UK This report is a communication made, or approved for communication in the UK, by ABG Sundal Collier Partners LLP, authorised and regulated by the Financial Services Authority in the conduct of its business. US: This report is being distributed in the United States in accordance with FINRA Rule 1050(f)(3)(B) by ABG Sundal Collier Inc., a FINRA member which accepts responsibility for its content. Research analysts are not registered/qualified as research analysts with FINRA or the NYSE, and are not associated persons of ABG Sundal Collier Inc. and therefore not subject to FINRA Rule 2711 and NYSE Rule 472, the research analyst conflict rules. Research reports distributed in the U.S are intended solely for “major institutional investors,” as defined under Rule 15a-6 of the Securities Exchange Act of 1934. Each U.S major institutional investor that receives a copy of this research report by its acceptance represents that it agrees it will not distribute this research report to any other person. Any U.S. major institutional investor receiving this report who wishes to effect transactions in any securities referred to herein should contact ABG Sundal Collier Inc., not its affiliates. Further information on the securities referred to herein may be obtained from ABG Sundal Collier Inc., on request. This report may not be reproduced, distributed or published by any recipient for any purpose whatsoever without the prior written express permission of ABG Sundal Collier. Additional information available upon request. If reference is made in this report to other companies and ABG Sundal Collier provides research coverage for those companies details regarding disclosures may be found on our website www.abgsc.com. © Copyright 2011 ABG Sundal Collier Norge ASA

03 October 2011

-9-

Lundin Petroleum


Disclosures

ABGSC Research Department Joint Global Co-ordinators of Research Karl Berglund Sweden +46 8 566 28 647 Ole Petter Kjerkreit Norway +47 22 01 61 40 Peter Hugreffe Denmark +45 33 18 61 12 Strategy Derek Laliberte Christer Linde, Technical Kim Evjenth

+46 8 566 28 678 +46 8 566 28 690 +47 22 01 60 37

Banks / Financials Magnus Andersson Rickard Henze Claus Højmark Jensen

+46 8 566 29 469 +46 8 566 28 646 +45 33 18 61 13

Construction & Real Estate Fredric Cyon Andreas Strand

+46 8 566 29 478 +47 22 01 60 28

Engineering Erik Pettersson Senai Ayob Anders Idborg

+46 8 566 28 635 +46 8 566 28 664 +46 8 566 28 674

Fish Farming Dag Sletmo Georg Liasjø

+47 22 01 61 65 +47 22 01 61 16

Food & Beverage Dag Sletmo

+47 22 01 61 65

Healthcare Peter Hugreffe Ankersen Erik Hultgård Morten Larsen

+45 33 18 61 12 +46 8 566 28 692 +46 8 566 28 693

lnvestment Companies Rickard Henze

+46 8 566 28 646

IT Anders Hillerborg Aleksander Nilsen Ole Petter Kjerkreit

+46 8 566 28 651 +47 22 01 61 12 +47 22 01 61 40

Media Martin Arnell Dag Sletmo

+46 8 566 28 695 +47 22 01 61 65

Metals & Mining Johannes Grunselius Martin Melbye Petter Nyström Niclas Gehin Robert Redin

+46 8 566 28 694 +47 22 01 61 37 +47 22 01 61 35 +47 22 01 60 83 +46 8 566 28 639

Oil & Gas Anders Hagen, Oil Service Ole Martin Westgaard, Oil Service Øyvind Hagen, Oil Service Anders Holte, Oil Service Kim Evjenth, Oil & Gas

+47 22 01 60 48 +47 22 01 61 60 +47 22 01 60 44 +47 22 01 61 39 +47 22 01 60 37

Renewable Energy Andreas Strand

+47 22 01 60 28

Pulp & Paper Martin Melbye Petter Nyström Niclas Gehin

+47 22 01 61 37 +47 22 01 61 35 +47 22 01 60 83

Retail Anna-Karin Envall Andreas Lundberg

+46 8 566 28 627 +46 8 566 28 651

Shipping/Transport Lars Heindorff Marius Magelie Alexander Høst

+45 33 18 61 15 +47 22 01 61 62 +47 22 01 60 98

Telecom Equipment Per Lindberg

+44 207 905 5658

Telecom Operators Ole Petter Kjerkreit

Norway (Oslo) Pb. 1444 Vika NO-0115 OSLO Norway

Norway (Bergen) Rådhusgaten 4 NO-5014 BERGEN Norway

Sweden (Stockholm) Box 7269 SE-103 89 STOCKHOLM Sweden

Tel: +47 22 01 60 00 Tel: +47 55 21 60 00 Tel: +46 8 566 286 00 Fax: +47 22 01 60 60 Fax: +47 55 21 60 60 Fax: +46 8 566 286 01

Sweden (Gothenburg) Kungsportsavenyen 21, 6th fl SE-41136 GOTHENBURG Sweden Tel +46 3 179 38 550

+47 22 01 61 40

Denmark Forbindelsesvej 12 DK-2100 COPENHAGEN K Denmark

United Kingdom 10 Paternoster Row, 5th fl LONDON EC4M 7EJ UK

USA 535 Madison Avenue, 17th fl. NEW YORK, NY 10022 USA

Tel: +45 33 18 61 00 Fax: +45 33 18 61 10

Tel: +44 20 7905 5600 Fax: +44 20 7905 5601

Tel. +1 212 605 3800 Fax. +1 212 605 3801

Germany Schillerstrasse 2, 5. OG DE-60313 FRANKFURT Germany Tel +49 69 96 86 96 0 Fax +49 69 96 86 96 99


Test File