But at the same time, the company stood by its plans for $96m of investments in renewable energy projects in 2020, and also maintained its dividend policy. Its strong cash flow generation gave it a great deal of flexibility to allocate capital to development, debt repayment, dividends, or investments in exploration and renewables.
It was also helped by high levels of discipline across all of its teams, underpinned by strong ESG principles, which played a key role in emotionally bonding employees to a higher purpose.
On the social pillar, Lundin Energy responded quickly to the COVID-19 pandemic by the immediate implementation of detailed contingency plans to reduce the risk of the virus spreading in its operations and workforce. And it continued to take actions in support of the UN Sustainable Development Goals. For example, it contributed $300,000 to two Geneva-based institutions to provide food aid to the city’s residents in need of supplies during the lockdown.
On the economic pillar, there was no material disruption in operations despite the pandemic-related restrictions, and this ensured continued strong free cash flow generation through high levels of production at low operational expenditure
“Business continuity was not materially impacted, with 2020 production at the upper end of the original guidance range, and all our key projects are on track, thanks to our dedicated workforce who worked tirelessly to ensure appropriate risk mitigation and monitoring,” President and CEO Nick Walker said in the company’s 2020 Sustainability Report.
Future growth was also ensured by the winning of new exploration licenses, the continuation of key development projects, and the consolidation of its resource base through the acquisition of promising additional interests at low entry cost.
The company’s financial agility has also enabled it to take advantage of market opportunities. Lundin Energy has nine projects totaling roughly 200 MMboe (millions of barrels of oil equivalent per day) which it plans to accelerate to benefit from a temporary tax incentive announced by the Norwegian government.
On the environmental pillar, Lundin actually accelerated its decarbonization strategy. The objective of carbon neutrality was brought forward from 2030 to 2025, and the company has set a budget of $750m for investments in the electrification of offshore platforms, renewables (hydroelectricity and wind farms), and natural carbon capture projects.
The firm is now seen as a beacon for industry transformation, an inspiring example leading the energy transition by providing affordable energy to meet global demand while decarbonizing the whole system along the value chain. It also gained recognition from various ESG rating agencies in 2020, including Vigeo Eiris, ISS-oekom, Sustainalytics, MSCI and CDP.