August 2010

Dear fellow Shareholders,

I am pleased that during the second quarter of 2010 we generated a profit after tax of over USD 365 million. This was predominantly attributable to the successfully completed spin off of our United Kingdom (UK) business into a new independent oil company, EnQuest plc which was completed during the second quarter. The Lundin family remain the largest shareholder in EnQuest which will be primarily focused on the UK North Sea and whilst the company is independent of Lundin Petroleum we remain confident that it will grow from its current base and create further value for its shareholders.

I am also confident about the future for Lundin Petroleum and we have made good progress with the rest of our asset portfolio during the second quarter of 2010. Production continues to outperform forecasts driven by strong performance from the Alvheim and Volund fields, offshore Norway. We will again deliver healthy reserve replacement ratios this year as a result of likely reserve increases from the Luno field following the appraisal well completed earlier this year. Indeed we are progressing development planning for the Luno field and we expect to firm up our plans with a concept selection decision later this year. We remain very focused on increasing our reserves through exploration drilling. Our exploration programme in the second half of this year is very active with eight exploration wells planned targeting net resource potential of over 200 million barrels of oil equivalent (MMboe).

There has been a major focus on the oil and gas industry over recent weeks as a result of the blowout of BP's Macondo well in the Gulf of Mexico. The environmental implications resulting from the well blowout are clearly very concerning to all industry participants. We accept that we will experience an increased level of government regulations around the world as a result of this incident with the likely consequence of increased costs. The majority of Lundin Petroleum's operations are currently located in Norway where a high level of government regulation is already in place and as a result we have not yet experienced, and in the future are unlikely to experience, major impacts on our cost structure.

During the second quarter 2010 a report was released about the alleged role of Lundin Petroleum and other companies in Sudan in the period 1997 to 2003. This report and the subsequent media coverage in Sweden contain unfounded allegations and accusations regarding our role in the Sudanese conflict. The factual reality is that neither myself, our management team or the Board of Directors were in any way involved or complicit in any alleged wrongdoings in Sudan. At all times, through a process of stakeholder engagement and community development projects we believe that we played a positive role in the peace process and development of Sudan.

Financial Performance
As I mentioned above, we generated strong profitability during the period driven by the profit from the sale of our UK business. We also generated strong operating cash flow of USD 281.5 million during the six month period ended 30 June 2010. For each barrel produced from continuing operations, over USD 49.50 per barrel of operating cash flow was generated. This is such a high number as a result of cost of operations of USD 8.53 per barrel, low cash taxes and the fact that over 90 percent of our production comes from tax/royalty regimes versus production sharing contracts.

As a result of our strong cash flow generation our liquidity position remains strong. Our capital expenditure programme is funded from internally generated cash flows and our drawn debt remains at conservative levels with significant undrawn borrowing capacity .

Production
During the second quarter of 2010 production averaged over 30,000 boepd. Excluding the UK, production increased by 13 percent over the first quarter of 2010 as a result of first production from the Volund field, offshore Norway, which came onstream in April 2010. We expect that production will increase further during the second half of the year when Volund reaches its plateau production. As a result of this performance I am pleased that we are able to increase our guidance range for 2010 production from 29 - 33,000 boepd to 31 - 34,000 boepd.

Development
We are progressing a number of development projects in Norway which over the next 5 years is expected to double production to over 60,000 boepd.

The Gaupe (formerly named Pi) oil and gas development recently received Norwegian Government approval following the submission of the plan of development in the second quarter of 2010. The Gaupe project, operated by BG, is a subsea tieback to the Armada field in the United Kingdom with a plateau production rate of 5,000 boepd net to Lundin Petroleum which is expected to come onstream in late 2011.

Earlier this year we drilled a second successful appraisal well on the Luno field. The well, which encountered excellent reservoir characteristics, has now been incorporated into our Luno subsurface model. As a result I expect that we will announce later this year a material upgrade to our current 95 million barrels of Luno gross certified reserves. The Luno development concept selection will be finalised later this year with a plan of development submission in 2011.

In Russia we are keen to progress development options for the large Morskaya oil discovery in the Northern Caspian. The size and offshore location of this field is such that it is categorised as 'strategic' by the Russian Government and therefore requires 50 percent ownership by a state owned company prior to development. We are in discussions with various parties to facilitate this requirement and therefore allow us to progress the Morskaya development.

Exploration
We have generated over recent years a major exploration portfolio which we have matured through a material investment in seismic acquisition. We are now in a phase of active drilling operations and we are confident that investments will lead to further organic growth of our resource base.

Our major area of activity in the second half of 2010 will be in Norway with a major focus around our existing Greater Alvheim and Greater Luno core areas. We are also well advanced in our 2011 exploration programme which will see the commencement of exploration drilling in the Barents Sea offshore Norway and offshore Malaysia.

During the last quarter the economic sentiment has been more negative following the strong recoveries after the world financial crisis. There is clearly uncertainty associated with the sustainability of economic recovery in developed countries as the various financial stimuli are removed.

Nevertheless the world's emerging economies such as China and India continue to grow and will be the main driver of commodity demand growth going forward. As a result whilst short term oil prices will remain volatile the long term demand for hydrocarbons will remain strong and this coupled with uncertain supply will lead to higher oil prices.

This is clearly positive for Lundin Petroleum. Our reserves and production growth remains strong. We have exposure to exploration with the potential to materially increase our resource base. This will ultimately increase shareholder value which is the key objective for myself and our management team.

Best Regards,

C Ashley Heppenstall
President & CEO