Faroe Petroleum Release Unaudited Interim Results for the six months ended 30 June 2014
Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway, the UK and the Atlantic Margin, announces its unaudited Interim Results for the six months ended 30 June 2014.
· Norwegian exploration delivering significant success
o Pil oil discovery announced in March 2014, significantly larger than the pre-drill expectation followed by successful discovery in the Bue side-track well (combined 20 to 50 mmboe net to Faroe)
o A small oil and gas discovery was made on Novus and a condensate discovery on Solberg, announced in January and April 2014 respectively
o Butch East and Butch South West announced as unsuccessful in May and July 2014 respectively following the Butch Main oil discovery in 2011 which is now being planned for development
o 10 new licence awards in Norwegian 2013 APA Round (two of which are operated by Faroe)
· Strong production and pre-development portfolio
o Agreed to acquire 53.1% and 60% of operated Schooner and Ketch gas and condensate assets in the UK southern North Sea for initial consideration of £35 million with effect from 1 January 2014
o Njord and Hyme fields brought back onto production in July 2014 following successful completion of structural reinforcement work on the deck frame
o In line with our strategy to monetise discoveries, the Glenlivet interest is to be sold to Total (field operator) for a combined consideration of £10 million, part deferred
o Heads of agreement entered into with Perth partners enabling future joint development of Perth (Faroe 34.6%), Dolphin (Faroe 34.6%) and Lowlander (Faroe 100%)
o Average accounting production of 3,901 boepd(1) in the period (1H 2013: 7,477 boepd) – reduction mainly due to Njord and Hyme shut-in
o Average economic production, including Schooner and Ketch, of 7,592 boepd in the period (1H 2013: 7,890 boepd)
· Successful share placing in June 2014 raised £65 million (gross) – providing finance to accelerate activities, follow up recent exploration successes and target further production acquisition opportunities
· Undrawn reserve based lending facility of $250 million in place
· Exploration finance facility renewed and up-scaled to NOK1.5 billion in September 2014
· Revenue £53.5 million (1H 2013: £89.0 million) and EBITDAX £15.6 million (1H 2013: £56.9 million), with reductions due principally to Njord and Hyme shut-in
· Loss after tax £3.7 million (1H 2013: profit of £12.2 million) after exploration write-offs of £16.7 million (1H 2013: £13.6 million)
· Net cash £96.7 million at 30 June 2014 (31 December 2013: £40.6 million)
· Forward 2015 and 2016 exploration and appraisal programme fully funded from existing resources
· Five exploration wells scheduled in Norway in 2015, including two follow-up wells on the Pil oil discovery
· Economic production guidance for the full year 2014 of 7,000-10,000 boepd following the acquisition of Schooner and Ketch(1) – in line with previous guidance
· Exploration, development and production capital expenditure for 2014 forecast at approximately £130 million, amounting to approximately £60 million after Norwegian tax rebate (2013: pre-tax £122 million, post-tax £74 million) – in line with previous guidance
· Well positioned and funded to achieve significant near term growth through exploration drilling, field investments and potential asset acquisition
(1) Completion of the Schooner and Ketch acquisition is expected in Q4 2014. Faroe receives the economic benefit of production from the effective date of 1 January 2014 by way of an adjustment to the consideration, but can only account for production from the date of completion.
Graham Stewart, Chief Executive of Faroe Petroleum, commented:
“We are very pleased with the progress of the Company in the first half of 2014. The three outstanding achievements during the period were the significant Pil and Bue discoveries, the production acquisition of Schooner and Ketch and our £65 million share placing in June 2014. These three successes show that our exploration-led, production-backed growth model is continuing to deliver and has strong investor support.
“The combined recoverable volumes on the Pil and Bue discoveries are estimated to be between 80 and 200 mmboe gross (20 to 50 mmboe net to Faroe), potentially making it our largest exploration success to date. The discoveries have de-risked a number of very exciting prospects on the licence and the partnership has already committed to two further wells on the licence for drilling in 2015.
“The Schooner and Ketch operated production acquisition considerably boosts and diversifies our oil and gas cash flow generation. The transaction is highly tax efficient, providing shelter for our historic UK tax losses and future capital expenditure in the UK. As anticipated, the Njord and Hyme temporary shut-in reduced turnover and profits for the first half but with these fields having been brought back on production in July, Faroe’s production levels are now higher than ever before.
“The Company’s substantially oversubscribed share placing in June 2014 raised £65 million gross and we are very pleased with the strong support Faroe received from its existing and new investors. The placing strengthens the Company’s finances and allows us to accelerate activities, follow up recent exploration successes and target further production acquisition opportunities.”
Source: Faroe Petroleum