Lundin Petroleum Slashes 2016 CapEx

Sweden's Lundin Petroleum said on Friday it will cut its 2016 capital spending by around a quarter compared to last year and doubled its production guidance due to a new oilfield coming onstream.

Oil and gas firms have been squeezing costs as crude prices have dropped by around 70 percent since mid-2014. Lundin said it expects to spend $1.1 billion on total capital expenditures this year, down 26 percent from last year.

"More than ever in this challenging oil price environment, a strong focus on operational efficiency, production performance and cost discipline will be in the forefront of our minds," Chief Executive Alex Schneiter said in a statement.

The company expects to produce between 60,000 and 70,000 barrels of oil equivalents per day (boepd) this year, which is about double the average rate achieved in 2015. The sharp increase will be mainly due to its Edvard Grieg oilfield off Norway, which came on stream at the end of November last year, it said.

Lundin also raised its estimated reserves to 685 million barrels of oil equivalents as of the end of 2015, up 292 percent from a year earlier. The jump in reserves mainly reflected the inclusion of the giant Johan Sverdrup field in the North Sea, expected to start production by end-2019.

Lundin, which has a 22.6 percent stake in the Sverdrup field, said the project was progressing according to plan and that "given the current market environment and optimisation efforts, the project is achieving significant cost reductions compared to the (original) estimate".

Lundin's shares were down 0.4 percent at 0830 GMT, underperforming a 1.6 percent rise in the STOXX 600 Oil & Gas index, as the company's new targets were lower than investors had expected.

"Production guidance is weaker than expected. Investments and the reserve revision are also lower than our forecasts ... All in all it's negative," DNB Markets analyst Helge Andre Martinsen said. DNB markets had expected 2016 production of 75,600 boepd, according to a research note published on Thursday.

Reporting by Ole Petter Skonnord and Stine Jacobsen