Lundin Petroleum, a Swedish independent oil and gas exploration and production company, has increased its exploration spending in the second quarter of 2015 by $16 million when compared to the first quarter of the same year.
The company revealed Tuesday it will expense post-tax exploration costs of approximately $14 million and recognise a net foreign exchange gain of approximately $28 million for the second quarter of 2015.
According to Lundin, the profitability for the second quarter of 2015 will be impacted by certain expensed exploration costs as well as a foreign currency exchange gain, mainly related to the revaluation of loan balances. The company noted that these items will have no impact on the reported operating cash flow or EBITDA for the period.
During the second quarter of 2015 Lundin Petroleum will incur pre-tax exploration costs of approximately $61 million which will be charged to the income statement and offset by a tax credit of approximately $47 million. In the first quarter of 2015, Lundin spent $45 million for exploration of two wells, Gemini and Zulu.
The exploration costs in the second quarter of 2015 mainly relate to an exploration well drilled in Norway on the Morkel prospect in PL579 which was announced as an uncommercial oil discovery.
Lundin Petroleum will recognise a net foreign exchange gain in its income statement for the second quarter of 2015 of approximately $28 million. The foreign exchange gain mainly relates to the revaluation of loan balances at the prevailing exchange rates at the end of each reporting period. The US Dollar weakened against the Euro during the second quarter of 2015 resulting in a foreign currency exchange gain on the US Dollar denominated external loan which is borrowed by a subsidiary using a functional currency of the Euro.
The company explained that this foreign exchange gain was partly offset by settled foreign currency hedges and a weakening of the Norwegian Krone against the Euro during the quarter, generating a foreign currency exchange loss on an intercompany loan balance denominated in Norwegian Krone.