Lundin Petroleum Annual Report 2012 Building Value 2012

LUNDIN PETROLEUM AB ANNUAL REPORT PETROLEUM AB ANNUAL LUNDIN LUNDIN PETROLEUM ANNUAL REPORT 2012 BUILDING VALUE 2012 Corporate Head Offi ce Lundin Petroleum AB (publ) Hovslagargatan 5 SE-111 48 Stockholm Sweden Telephone: +46-8-440 54 50 Telefax: +46-8-440 54 59 E-mail: [email protected] www.lundin-petroleum.com LUNDIN PETROLEUM Building value 1 Highlights 3 OIL RELATED MEASUREMENTS CURRENCY ABBREVIATIONS Business model 4 Chief Executive’s review – C. Ashley Heppenstall 7 bbl Barrel (1 barrel = 159 litres) CHF Swiss Franc Chairman’s statement – Ian H. Lundin 11 Reserves, resources and production 12 bcf Billion cubic feet (1 cubic foot = 0.028 m3) CAD Canadian Dollar Oil market overview 19 Bn Billion EUR Euro Economic evaluation of an exploration and production company 20 boe Barrels of oil equivalents GBP British Pound OPERATIONS boepd Barrels of oil equivalents per day NOK Norwegian Kroner Areas of operation 22 bopd Barrels of oil per day RUR Russian Rouble Norway 24 Bn boe Billion barrels of oil equivalents SEK Swedish Kroner South East Asia 34 Mbbl Thousand barrels USD US Dollar Continental Europe 37 Mbo Thousand barrels of oil TCHF Thousand CHF Other areas 39 Mboe Thousand barrels of oil equivalents TSEK Thousand SEK GOVERNANCE Mboepd Thousand barrels of oil equivalents per day TUSD Thousand USD Corporate responsibility 40 MMbo Million barrels of oil MSEK Million SEK Corporate governance report 2012 48 MMboe Million barrels of oil equivalents MUSD Million USD – Board of Directors 52 MMbpd Million barrels per day – Management 58 – Remuneration 59 MMbopd Million barrels of oil per day – Internal control and risk management for fi nancial reporting 62 Mcf Thousand cubic feet – Board of Directors summary table 64 Mcfpd Thousand cubic feet per day – Investment Committee/Executive Management summary table 66 MMscf Million standard cubic feet The Lundin Petroleum share and shareholders 68 MMscfd Million standard cubic feet per day Risk and risk management 70 MMbtu Million British thermal units FINANCIAL REPORT Contents of fi nancial report 72 Directors’ report of the Group 73 For further defi nitions of oil and gas terms and measurements vist www.lundin-petroleum.com Financial tables of the Group 82 Accounting policies 87 Notes to the fi nancial statements of the Group 92 Annual accounts of the Parent Company 105 Financial tables of the Parent Company 105 Notes to the fi nancial statements of the Parent Company 109 Board assurance 111 Auditor’s report 112 This information has been made public in accordance with the Securities Market Act (SFS 2007:528) and/or the Financial Instruments Trading Act ADDITIONAL INFORMATION (SFS 1991:980). Five year fi nancial data 113 Key fi nancial data 114 FORWARD-LOOKING STATEMENTS Reserve quantity information 115 Certain statements made and information contained herein constitute “forward-looking information” (within the meaning of applicable securities Shareholder information 116 legislation). Such statements and information (together, “forward-looking statements”) relate to future events, including the Company’s future performance, Defi nitions 117 business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and / or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities. Ultimate recovery of reserves or resources are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and refl ect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to diff er materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations and assumptions will prove to be correct and such forward-looking statements should not be relied upon. These statements speak only as on the date of this release and the Company does not intend, and does not assume any obligation, to update these forward- looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, operational risks (including exploration and development risks), productions costs, availability of drilling equipment, reliance on key personnel, reserve estimates, health, safety and environmental issues, legal risks and regulatory changes, competition, geopolitical risk, and fi nancial risks. These risks and uncertainties are described in more detail under the heading “Risks and Risk Management” and elsewhere in the Company’s annual report. Readers are cautioned that the foregoing list of risk factors should not be construed as exhaustive. Actual results may diff er materially from those expressed or implied by such forward-looking statements. Forward-looking statements included in this new release are expressly qualifi ed by this cautionary statement. RESERVES AND RESOURCES Unless otherwise stated, Lundin Petroleum’s reserve and resource estimates are as at 31 December 2012, and have been prepared and audited in accordance with National Instrument 51–101 Standards of Disclosure for Oil and Gas Activities (“NI 51–101”) and the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”). Unless otherwise stated, all reserves estimates in this Annual Report are the aggregate of “Proved Reserves” and “Probable Reserves”, together also known as “2P Reserves”. For further information on reserve and resource classifi cations, see “Reserves, Resources and Production” on pages 12 to 17. BOEs JOHAN SVERDRUP LUNDIN PETROLEUM References in this Annual Report to gross estimated contingent resources of the References to “Lundin Petroleum” or “the Company” pertain to the BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf : 1 bbl is based on an energy equivalency conversion method Johan Sverdrup discovery of 1,700 to 3,300 MMboe, include 800 to 1,800 MMboe corporate group in which Lundin Petroleum AB (publ) (company primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. in PL501 (Lundin Petroleum working interest 40%) and 900 to 1,500 MMboe in registration number 556610–8055) is the Parent Company or to PL265 (Lundin Petroleum working interest 10%). Lundin Petroleum’s estimated Lundin Petroleum AB (publ), depending on the context. DESIGNATED FOREIGN ISSUER contingent resources as at 31 December 2012 of 922.9 MMboe worldwide, The Company is a reporting issuer in certain Canadian jurisdictions. However, the Company is a “designated foreign issuer” as defi ned in National Instrument 715.5 MMboe in Norway and 640.0 MMboe in the Johan Sverdrup discovery, RESERVES 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers, and is subject to foreign regulatory requirements, including those of the include Lundin Petroleum’s working interest share of the mid-range estimated Unless otherwise stated, all reserves estimates in this Annual NASDAQ OMX Stockholm. As such, the Company is exempt from certain requirements otherwise imposed on reporting issuers in Canada. contingent resources for the Johan Sverdrup discovery of 520.0 MMboe in PL501 Report are the aggregate of “Proved Reserves” and “Probable and 120.0 MMboe in PL265. The contingent resource estimates in PL501 have been Reserves”, together also known as “2P Reserves”. See “Reserves, prepared by Lundin Petroleum, as operator of PL501, and were audited by Gaff ney, Resources and Production” on pages 12 to 17. Cline & Associates on behalf of Lundin Petroleum as at 31 December 2011. The contingent resource estimates in PL265 have been prepared by Statoil, as operator of PL265, and have not been audited on behalf of Lundin Petroleum. See Reserves, Printed in Sweden 2013 Resources and Production on pages 12 to 17. Landsten Reklam – Sjuhäradsbygdens Tryckeri 117 BUILDING VALUE OVER THE LAST DECADE LUNDIN PETROLEM HAS ADOPTED A SUCCESFUL EXPLORATION DRIVEN ORGANIC GROWTH STRATEGY. EXPLORATION DISCOVERIES ARE CONVERTED INTO RESERVES AND PRODUCTION FOLLOWING APPRAISAL AND DEVELOPMENT PROGRAMMES WHICH ARE THEN OPTIMISED THROUGHOUT THEIR LIFESPAN BY UTILISING THE LATEST TECHNOLOGY AND THE EXPERIENCE OF HIGHLY SKILLED PEOPLE. THE STRATEGY HAS BEEN SUCCESSFUL IN OUR FRENCH, MALAYSIAN AND IN PARTICULAR, OUR NORWEGIAN OPERATIONS WHERE WE ARE IN THE PROCESS OF DEVELOPING THE BRYNHILD, BØYLA, EDVARD GRIEG AND THE GIANT JOHAN SVERDRUP DISCOVERIES. THIS IS BY NO MEANS THE END OF OUR ORGANIC GROWTH PHASE. WE BELIEVE THAT

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