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Expert Corporate Governance Service (ECGS)
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Lundin Petroleum, March 29, 2019

In general, Lundin Petroleum is in compliance with the Swedish regulations relating to the organisation and procedures of the Annual General Meeting.

Under ITEMS 15a-15i, the (re-)election of the board of directors is proposed.In light of insufficient independent representation on the board of directors as well as concerns over aggregate time commitments, ECGS recommends to vote OPPOSE to the (re-)election of: Mr. C. Ashley Heppenstall (ITEM 15b), Mr. Ian H. Lundin (ITEM 15c), Mr. Lukas H. Lundin (ITEM 15d), Mr. Torstein Sanness (ITEM 15f) and Mr. Jakob Thomasen (ITEM 15h).

Under ITEM 15j, the nomination committee proposes to re-appoint Mr. Ian H. Lundin as Chairman of the board of directors. ECGS has various concerns over his re-appointment and therefore recommends to vote OPPOSE.

Under ITEM 17, the nomination committee proposes to re-appoint PricewaterhouseCoopers as the Company's statutory auditor. Although the level of non-audit fees is in line with its guidelines, ECGS notes that PricewaterhouseCoopers has been in office for 18 years and there is no disclosure to suggest that the current mandate has been tendered in the past. This is not in accordance with ECGS' guidelines, which recommend a term of maximum 20 years (10 + 10 years, if a tender is undertaken). In view of the current term in office of the auditor, ECGS recommends to vote OPPOSE.

Under ITEM 18, the board of directors seeks approval of the Company's executive remuneration guidelines. Since the proposed (executive) remuneration guidelines are NOT in accordance with its guidelines, ECGS recommends to vote OPPOSE.

Under ITEM 19, the board of directors seeks approval of a LT incentive plan. ECGS notes that the maximum LTI (corresponding to 300% of annual base salary) exceeds the threshold in its guidelines. Accordingly, ECGS recommends to vote OPPOSE.

Under ITEM 21, the board of directors seeks authorisation to repurchase own shares. Although the authority requested would meet its guidelines, ECGS notes that the Company has negative shareholders equity and (even though reduced) still a substantial amount of net debt. Based on the above, ECGS does not agree with the share repurchase authority. In ECGS' view, the Company can better use (potential) excess cash to reduce the amount of (net) debt first and thereby strengthen its balance sheet instead of repurchasing shares. Accordingly, ECGS recommends to vote OPPOSE.

ITEMS 22a-22d are proposals made by shareholders. ECGS does not support the proposals and accordingly recommends to vote OPPOSE. Finally, ECGS notes that board Chairman Mr. Ian H. Lundin and CEO Mr. Alexandre Schneiter will be defendants in a (future) lawsuit alleging violations of international humanitarian law in Sudan. The final indictment however has yet to be issued.

Underlying
Lundin Petroleum AB

Lundin Petroleum is an oil and gas company. Co. has a global portfolio of assets with two main areas located in Norway and South East Asia. As of Dec 31 2014, Co. held close to 70 licences in Norway, with activities across exploration, appraisal, development and production. Co. also operated within several geographical areas, including France, Netherlands, Malaysia, Indonesia, Russia, Sweden and other countries.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

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Analysts
Expert Corporate Governance Service (ECGS)

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