November 2011

Dear fellow Shareholders,

The major news in the third quarter of 2011 was clearly the announcement of increased contingent resources in the Avaldsnes discovery, offshore Norway. As we had previously indicated the Avaldsnes structure extends to the west into the Statoil operated PL265 and this was confirmed with the Aldous Major South discovery. Avaldsnes and Aldous Major South are essentially one connected giant oil field. Our Avaldsnes appraisal drilling programme in PL501, where we are operator, coupled with Statoil's discovery well and subsequent appraisal well in PL265 has confirmed that the thickness and quality of the Jurassic reservoir is better than previously assumed. As a result, Lundin Petroleum has increased the contingent resource range for the Avaldsnes discovery in PL501 to between 800 million and 1.8 billion barrels of gross recoverable oil. Statoil has announced a contingent resource range of 900 million to 1.5 billion barrels of gross recoverable oil for the Aldous Major South discovery. As a result, the Avaldsnes/Aldous Major South discovery is estimated to contain gross contingent resources of between 1.7 and 3.3 billion barrels of recoverable oil. This makes the discovery one of the five largest discoveries ever made on the Norwegian Continental Shelf, the largest discovery since the mid 1980s and the largest exploration find in the world this year. Furthermore the discovery is located in 115 metres of water depth, in a reservoir of less than 2,000 metres, close to existing infrastructure with spare capacity and with oil that is of excellent quality. It is truly remarkable that a discovery of this size and quality could be made by Lundin Petroleum, in the heart of the Norwegian North Sea, 45 years after the first exploration activity began in the area.

This news is transformational for Lundin Petroleum. The priority right now is to fully appraise the discovery to better define the resource range and to provide information for development planning. The resource range is still wide but my experience is that big fields usually get bigger. The discovery is material for everyone and we are working closely with Statoil and our partners to move the project forward. The discovery is material for everyone and as such everyone is aligned in moving forward as quickly as possible. There is no question in my mind that this discovery, will contribute a significant percentage of total North Sea production in years to come and due to its size, location and quality of reservoir, will be one of the most valuable discoveries ever made in the North Sea.

Financial Performance
Lundin Petroleum produced a net result for the first nine months of 2011 of MUSD 169.3. The strong production performance continues and has resulted in operating cash flow of MUSD 586.8 and EBITDA of MUSD 767.3 for the period. Our balance sheet remains very much under leveraged, with net debt of only MUSD 125. Our current production and development assets, excluding the recent Avaldsnes discovery, will comfortably support debt capacity of well above USD 2 billion. We expect to continue to generate strong operating cash flow from our producing assets which will be the primary source of funding for our future development and exploration expenditures. We will however refinance our existing reserve based lending facility to provide the Company with additional liquidity and flexibility.

Production
During the first nine months of 2011 production averaged 32,800 barrels of oil equivalent per day (boepd) which is at the high end of our forecast. The third quarter production of 33,900 boepd was particularly strong as a result of the continued out performance of the Volund field, offshore Norway. We maintain our previous production guidance of 31,000 - 34,000 boepd for 2011. Production in 2012 is forecast to increase with the impact of new production from the Gaupe field, offshore Norway.

Development
We maintain our medium term five year production forecast of over 60,000 boepd, driven principally by our various Norwegian development projects. This five year forecast excludes Avaldsnes/Aldous Major South which is expected to produce comfortably at multi hundreds of thousands of barrels per day, and will have a huge positive impact on our future production.

If we briefly look at the progress on our various development projects:
-The Gaupe field development wells are drilled and the facilities are substantially complete. We are now awaiting arrival of the pipe laying vessel to allow us to complete the development and commence production.
-We have submitted the plan of development for the Brynhild field to the Norwegian Ministry of Petroleum and Energy for approval and are expecting a response shortly.
-We still expect to submit a plan of development for the Bøyla field subsea tieback to the Alvheim FPSO in the first half of 2012.

The front end engineering and design studies for the Luno/Tellus field development have been completed. The development concept provides for the option to jointly develop the nearby Draupne field. We have been advised by the Norwegian Ministry of Petroleum and Energy that the Luno and Draupne partners should progress a joint development solution to achieve cost savings. We agree with the conclusions of the Ministry and believe that our joint development concept will deliver such cost savings benefits. We are in discussions with the Draupne partners in relation to our development solution. We still plan to submit the plan of development for Luno before year end 2011 to ensure we can continue to achieve our forecast 2015 first oil date.

Exploration
Our view has always been, that despite being seen as a mature area, the Norwegian Continental Shelf represented an area with excellent exploration potential. The higher historical tax environment compared to the UK coupled with the fact that the independent sector was not active in Norway until 10 years ago meant that exploration drilling activity was much lower in Norway than in the UK. The geological setting is essentially the same and therefore the lower drilling activity in Norway creates an opportunity for aggressive exploration driven companies such as Lundin Petroleum. Our exploration success with the discovery of Luno, Apollo and now Avaldsnes clearly show that this strategy has worked.

Nevertheless we believe there is more to be found. Despite the priority in respect of rig capacity to the appraisal of Avaldsnes, we will have an aggressive exploration programme in Norway in 2012 with eight new exploration wells. We will be drilling three new exploration wells in the Southern Utsira High where we feel we have a very good understanding of the subsurface. The exploration drilling will continue in 2013. We will be drilling one well in the Møte Basin in the Northern North Sea close to where there have been interesting recent discoveries in the UK. In the Barents Sea, where we are one of the largest acreage owners, there will be two further exploration wells. We have built a licence portfolio of close to 50 licences in Norway over the last 10 years and we continue to increase our activity by obtaining new licences in the annual licensing rounds. We plan in forthcoming years to continue to drill out the numerous prospects we have identified in this portfolio.

Our exploration drilling campaign in Malaysia is proceeding well. The Tarap gas discovery announced in the second quarter has been followed up with a further gas discovery at Cempulut. The two discoveries coupled with a third existing discovery in our licence means we have contingent resources of over 250 billion cubic feet (bcf) of gas in SB303 offshore East Malaysia. This is most likely sufficient to consider a cluster development in an area which is facing an increasing gas deficit. Our Malaysian drilling campaign is ongoing with two further wells this year and five planned wells next year.

Happy Birthday
During the third quarter of this year Lundin Petroleum celebrated its 10th birthday. After selling Lundin Oil to Talisman Energy and creating significant shareholder value, we started Lundin Petroleum in 2001 with about USD 50 million of cash equity. I am very proud that we have been able to grow the company to a market value of USD 8 billion over the 10 years without asking our shareholders for any new equity. This success doesn't come without hard work and sacrifices from my management team and employees. Ten years ago in my first Letter to Shareholders when we started Lundin Petroleum I talked about our late founder Adolf Lundin's life long quest to find the elusive elephant - or billion barrel oil field. My parting quote was 'Lundin Petroleum plans to deliver'. Well Adolf we delivered and I know you are looking down on us all a very proud man. We are looking forward to the next 10 years and intend to continue to deliver.

Best Regards,

C Ashley Heppenstall
President & CEO