The huge loss was caused by a pounds 360m exceptional write-down in the value of its fields because of the collapse in oil prices. There was a further pounds 34m charge to cover a halving of its head office staff in London.
The exploration budget for this year has also been halved to pounds 55m and Lasmo is warning that it will suffer another operating loss unless oil prices recover to $12 a barrel - something many commentators and oil majors such as Shell believe unlikely.
Joe Darby, the chief executive of Lasmo, said that "constructive discussions" were continuing with Enterprise about a possible merger, after it had been thought that the talks had failed completely.
But he said other options were also being examined to secure the company's future. These include talks on everything from alliances in individual fields to full blown mergers, Lasmo executives said.
Lasmo made a loss before write-downs of pounds 48m last year, compared with a pounds 48m profit in 1997. The average oil price for 1998 was $12.75 against the $15 Lasmo needed to break even.
Despite the losses, the group is maintaining the dividend for the year at 2.3p and is putting its faith in the low cost fields it is developing and a cost reduction plan targetted at achieving savings of pounds 30m a year.
Lasmo's high-cost mature fields in the North Sea and Indonesia, which currently account for 90 per cent of production, will be run down over the next three years and replaced by production from low-cost fields in Venezuela, Pakistan, Libya and Algeria, which will be profitable at $5 to $10 a barrel. By 2002, around half of Lasmo's production will be from these four areas.
In the meantime, Lasmo is aiming to be cash neutral this year, keeping its net debt at pounds 672m - the same level as it ended last year.