17-01-00 Lundin Oil AB and Red Sea Oil Corporation are pleased to announce that they are in discussions regarding a business combination of Red Sea and Lundin. The Board of Directors of Lundin and Red Sea have agreed to proceed in principle with a business combination, subject to mutually agreeable terms, which will most likely involve the offer to Red Sea shareholders of newly issued shares in Lundin.

Lundin currently owns 58 % of the outstanding shares in Red Sea. Red Sea has a 60 % interest in and is the operator of Area NC177 in Libya, including the undeveloped En Naga North and West oil field. Lundin has a 40 % interest in Area NC177. Lundin shares are quoted on the Stockholm Stock Exchange and the NASDAQ market and the Red Sea shares are quoted on the Canadian Venture Exchange. The transaction would constitute a "related party transaction" in accordance with applicable Canadian securities legislation.
Accordingly, an independent committee of the Board of Directors of Red Sea has been formed in order to assess the fairness of any offer to those shareholders other than Lundin and other insiders. The committee will appoint an independent third party in order to assist it in reviewing any potential offer and who will prepare appropriate valuations on Lundin and Red Sea as part of its mandate.

"The combination of Red Sea and Lundin is a logical development, particularly as Lundin already owns 58 % of Red Sea. The greater financial capacity of Lundin to raise project financing should ensure that the En Naga North development can proceed", was said in a statement.