May 2010

Dear fellow Shareholders,

The primary objective for myself and Lundin Petroleum's management is to create value for our shareholders. I strongly believe that to achieve this objective it is necessary to adopt a long term perspective. And whilst I am confident that oil prices will increase in the forthcoming years this is something that we cannot control. What we can control is expanding our portfolio of resources particularly through an organic growth strategy. To achieve this we adopt three main criteria. Firstly, to focus upon areas where we believe there is potential to find new hydrocarbons in a size which will be material to Lundin Petroleum, secondly, to employ strong technical personnel with excellent local knowledge, and thirdly, to adopt a corporate strategy that encourages making risk capital available for exploration.

The strategy is starting to pay dividends. Our reserves continue to increase with a 400 percent reserve replacement ratio announced earlier this year for the second consecutive year. Our production increased last year by 20 percent to 38,200 barrels of oil equivalents per day (boepd) and we see further production increases in 2010 with the Volund field, offshore Norway, now onstream. At the same time we maintain our strong focus on exploration particularly in Norway where we have successfully grown a large portfolio managed by an exploration team widely considered as one of the best in the business. This year we will be drilling eleven exploration wells targeting unrisked potential resources of 330 million barrels of oil equivalent (MMboe).

The end game is, however, the crystallisation of value for our shareholders. In this respect I am extremely pleased that we recently completed the spin off of our United Kingdom business into a new independent oil company, EnQuest plc. EnQuest will be primarily focused on the UK North Sea and by combining our UK assets with those of Petrofac we have created a new company with critical mass, a strong balance sheet with no debt and a management team with proven experience in creating value from mature assets. Whilst the deal has already created significant value for our shareholders, with an expected profit after tax realisation of about USD 350 million, I am very confident that EnQuest will grow and create even more value for its shareholders.

Financial Performance
During the first quarter of 2010 I am pleased that we generated strong profitability and cash flow; net profit after tax was USD 24.5 million and operating cash flow USD 145.7 million up 113 percent and 41 percent respectively from the same period last year.

Despite the spin off of our UK business, our balance sheet remains strong with unutilized borrowing capacity and strong liquidity.

Production
It was the strong production performance from the Alvheim field, offshore Norway which contributed to our 20 percent production increase in 2009 over the previous year. Production was in line with forecast at approximately 36,000 boepd in the first quarter of 2010. In April 2010, production commenced from the Volund field, offshore Norway where rates are expected to increase to a plateau rate of close to 9,000 boepd net to Lundin Petroleum. This will have a material impact upon Lundin Petroleum's production and operating cash flow going forward. Following the spin off of our UK business we are now forecasting production for 2010 at between 29,000 and 33,000 boepd and expect to exit 2010 at the upper end of this range.

As a result of the spin off of our UK business, the cost of operations of our remaining assets will materially reduce. Cost of operations is forecast to reduce from the current USD 16 per barrel to approximately USD 10 per barrel on a go forward basis.

Development
We are making good progress with the development of a number of new fields in Norway which will provide further production growth over the next few years. The most advanced is the Pi oil and gas field where a plan of development will be submitted to the Norwegian government in May 2010. The development of this 28 MMboe field involves a subsea tieback to the Armada field in the United Kingdom with first oil and gas forecast for late 2011 at an initial production rate of approximately 5,000 boepd net to Lundin Petroleum. We also expect to make decisions this year to proceed with the development of both the Nemo and Krabbe fields.

During the first quarter of this year, we drilled a second successful appraisal well on the Luno field. This was very important for us as it encountered a 50 meter oil column with excellent reservoir characteristics which will most likely result in an upgrade to our current 95 million gross barrels of Luno reserves. We expect to finalise the Luno development concept later this year with a plan of development submission in 2011.

Exploration
Our major area of focus for exploration drilling in 2010 is the Greater Luno Area and Greater Alvheim Areas. Drilling will commence at the end of the second quarter on the Avaldsnes prospect in PL 501 and thereafter we will have a sustained period of exploration drilling in Norway. We are also confident regarding our exploration activities in Malaysia and Indonesia where we have acquired significant quantities of 3D seismic over the last couple of years and will be commencing drilling activity in 2011.

As we predicted world oil prices have recovered from last years lows as the world has pulled itself out of recession following the financial crisis. The world's emerging economies, led by China, are driving forward demand for commodities including oil and today are the engine for the world's growth.
Lundin Petroleum is today smaller following the spin off of the UK business. However our growth will continue from a smaller base driven by our core areas in Norway, South East Asia and Russia with leverage to exploration success having actually increased.

Best Regards,

C Ashley Heppenstall
President & CEO