TIDMFPM
RNS Number : 5506W
Faroe Petroleum PLC
10 February 2017
10 February 2017
Faroe Petroleum plc
("Faroe", "Faroe Petroleum", the "Company")
Operational Update
Faroe Petroleum, the independent oil and gas company focussing
principally on exploration, appraisal and production opportunities
in Norway and the UK, is pleased to provide an update on operations
and guidance for 2017.
Graham Stewart, Chief Executive of Faroe Petroleum
commented:
"2016 was transformational for Faroe with the acquisition of a
Norwegian portfolio of producing assets from DONG doubling group
production, the material Brasse discovery in Norway, and a
successful GBP66million equity fund raise. Production from our
UK/Norwegian portfolio averaged approximately 17,400 boepd in 2016,
and we increased our 2P reserves base by 42% to 81 mmboe. We ended
the year with a significant cash position of GBP97million and a new
seven year Reserve Based Lending facility of $250million which is
undrawn.
"We are now poised for a major growth phase as we invest across
our core hub assets in 2017 and beyond, and believe that we have
the asset base to reach our stated goal of 40-50,000 boepd over the
next five years. We continue to seek to capitalise on our strong
financial position to pursue consolidation opportunities in our
core areas on the UK and Norwegian continental shelves, while
kicking off another exciting high impact exploration drilling
campaign."
Highlights
Reserves and Resources - significant increase in reserves and
high grading of contingent resources in 2016
Faroe has completed its internal assessment of reserves and
resources at 1 January 2017, which are as follows:
-- 2P Reserves increased by 42% with closing reserves at
81.3mmboe (1 Jan-16: 57.4 mmboe). The significant increase
(reserves replacement of approximately 5 times) is a result of both
the acquisition of interests in the Norwegian Ula, Tambar, Trym and
Oselvar producing fields and positive reserve revisions
-- 2C Contingent Resources are 7.5% lower at 90.9 mmboe (1
Jan-16: 98.3 mmboe) reflecting the addition of new resources from
the 2016 Brasse discovery which in part compensates for the
reduction in resources associated with the respective withdrawal
and relinquishment of interests in the Perth, Lowlander, Tornado
and Solberg licences
The table set out below presents the 2P Reserves net to Faroe by
geographic location and split into oil and liquids reserves and gas
reserves. The reserves are reported in accordance with the
Petroleum Resources Management System (PRMS), the joint
reserves/resources definitions of the Society of Petroleum
Engineers, the World Petroleum Congress and the American
Association of Petroleum Geologists.
Proven plus Probable (2P) Reserves at 1 January
2017
------------------------------------------------------------------
Liquids (mmstb) Gas (bcf) Total (mmboe)
----------------- ----------------- ----------- ---------------
Brage Area 7.2 3.9 7.8
----------------- ----------------- ----------- ---------------
Trym 0.5 11.3 2.4
----------------- ----------------- ----------- ---------------
Ula Area
(excl. Blane) 21.3 13.3 23.5
----------------- ----------------- ----------- ---------------
Njord Area 29.1 79.5 42.4
----------------- ----------------- ----------- ---------------
Total Norway 58.0 108.0 76.0
----------------- ----------------- ----------- ---------------
UK (incl.
Blane) 2.9 14.3 5.3
----------------- ----------------- ----------- ---------------
Group 60.9 122.3 81.3
----------------- ----------------- ----------- ---------------
Production - significantly enhanced through asset acquisitions
and field development programme to deliver long term profitable
production growth
-- Total average economic production(1) for the full year 2016
was 17,395 boepd, of which approximately 58% was liquids and 42%
gas. This record high was the result of a combination of production
from the Company's pre-existing portfolio, which benefited from
Njord and Hyme production up to the end of May 2016, along with
production from the recently acquired interests in the Norwegian
Ula, Tambar, Trym and Oselvar producing fields
-- Average full year 2017 production is currently forecast to be
in the range of 12,000-15,000 boepd from all fields, split
approximately 60% liquids and 40% gas. The forecast reduction in
production reflects the work programmes being undertaken on some of
the Company's fields, notably from those acquired from DONG; the
Njord and Hyme fields will not produce while facility refurbishment
continues, the Tambar field will experience production interruption
to enable both in-fill drilling and gas lift installation to boost
production from 2018 onwards and the Trym field is at risk of
potential capacity constraints across the Harald host facility. The
range will be narrowed when there is greater clarity on the level
of production from Trym
-- Average Opex per boe(2) in 2016 was approximately $24/boe.
Opex per boe in 2017 is expected to be in the range of $25/boe to
$29/boe reflecting primarily lower production rates as the
investment programme is executed. Unit Opex is expected to decrease
materially as new production is brought on stream and following
continuing efforts to improve cost efficiency
-- Faroe continues to seek suitable value-enhancing production
acquisitions, taking advantage of consolidation opportunities and
the Company's strong balance sheet
(1) Economic production for 2016 includes the Ula, Tambar, Trym
and Oselvar fields, where Faroe received the economic benefit from
the associated production from 1 January 2016 but can only account
for it from the completion of the acquisition on 6 December 2016.
Accounting production for 2016 was 8,022 boepd
(2) Based on economic production and Opex for the Ula, Tambar,
Trym and Oselvar fields from 1 January 2016
Development - high quality developments progressing in 2017 to
deliver material organic growth in production profile
The Ula Hub Area
-- The Oda oil field (Faroe 15%) field development plan (FDP)
has been submitted with the field being developed as a subsea
tie-back to the AkerBP-operated Ula oil field (Faroe 20%). Oda has
estimated reserves of 46 mmboe in an excellent reservoir, with
first oil scheduled for 2019 and gross plateau production expected
to be 35,000 boepd (5,250 boepd net to Faroe) as well as the Ula
hub benefitting from the feed through tariff
-- Tambar field (Faroe 40%) gas lift and infill well programme
is expected to be sanctioned in late February 2017 with the Ula hub
destined to benefit from the additional gas from Tambar
The Njord Hub Area
-- This project is progressing to plan with a final investment
decision (FID) and FDP submission expected in March 2017. The Njord
Future Project, which encompasses refurbishment of the Njord
facilities, development of the Bauge (previously Snilehorn) field,
and potentially further Faroe-owned fields in the area is planned
to recommence production in 2020
-- During 2017 work will continue to mature the significant Pil,
Bue and Boomerang discoveries (Faroe 25%) towards development,
following the selection of a sub-sea tie back to the Njord
production hub as the preferred solution. The formal concept
selection and FEED will be committed to in Q1 2017 with project
sanction expected by the end of the year
The Brage Hub Area
-- The Brage field (Faroe 14.3%) infill well programme is
progressing to plan including targets defined on 4D seismic and
with detailed planning ongoing. Mobilising for the first well will
begin in April 2017 and we expect it to be on stream in Q4
Exploration & Appraisal - following a successful 2016 with
the drill bit for Faroe, 2017 has commenced with the high impact
Boné well
-- The Boné well (previously named Dazzler) (Faroe 20%), in the
Barents Sea commenced drilling on 11 January 2017 and is
progressing to plan
-- An appraisal well on the 2016 Brasse discovery (Faroe 50% and
operator) is planned for the summer of 2017
-- Further potential wells are being matured for late 2017 or
early 2018 including a potential well on the newly-awarded Brasse
extension (Faroe 50% and operator), a well on the Norwegian Sea
Aerosmith licence (Faroe 20%) and the recently awarded Goanna
licence in the Norwegian North Sea (Faroe 30%)
-- The Brasse discovery (Faroe 50% and operator) feasibility
studies are continuing and we expect further delineation from the
appraisal programme scheduled for the summer 2017
Financial - Faroe ended 2016 in a robust financial position with
significant cash reserves, enhanced production cashflow and a new,
undrawn seven year RBL facility
-- 2016 year-end unaudited cash and net cash position was approximately GBP96.8million
-- The $250million Reserve Based Lending facility was amended
and extended in December 2016 with existing and new lenders to
include a further $100million accordion - the seven year facility
was undrawn at the 2016 year-end
-- 2016 exploration and appraisal capex was approximately
GBP46million pre-tax (GBP11million post-tax) and development and
production capex was approximately GBP12million (unaudited)
-- 2017 exploration and appraisal capex is estimated to be
approximately GBP45million pre-tax (GBP10million post-tax) and
development and production capex approximately GBP90million, split
as follows:
o Njord Area: GBP30million
o Ula Area: GBP49million
o Brage Area: GBP11million
-- 2017 hedging programme in place to underpin value:
o Approximately 85% of gas production hedged on a post-tax basis
at average price of 39p/therm (5.9 million therms sold forward in
Q1 at an average price of 55p/therm)
o Approximately 30% of post-tax oil production hedged at $54/bbl
(principally with puts)
- Ends -
Conference Call
An updated presentation is available on our web site
(www.faroe-petroleum.com) and a conference call for sell-side
analysts will take place at 08.30 a.m. today. Please use the
dial-in details below and request access to the Faroe Petroleum
conference call.
Dial-in: +44 (0) 1452 562 815
Passcode: Faroe Petroleum
For further information please contact:
Faroe Petroleum plc Tel: +44 1224 650 920
Graham Stewart, CEO
Stifel Nicolaus Europe Tel: +44 20 7710 7600
Limited
Callum Stewart / Nicholas
Rhodes / Ashton Clanfield
RBC Capital Markets Tel: +44 20 7653 4000
Matthew Coakes/Roland
Symonds
FTI Consulting Tel: +44 20 3727 1000
Edward Westropp/Kim
Camilleri
John Wood, UK Asset Manager of the Company with over 15 years'
experience of the oil and gas industry and who holds an M.Sc in
Petroleum Engineering from Imperial College, has read and approved
the production and development disclosure in this regulatory
announcement.
Andrew Roberts, Group Exploration Manager of Faroe Petroleum and
a Geophysicist (BSc. Joint Honours in Physics and Chemistry from
Manchester University), who has been involved in the energy
industry for more than 25 years, has read and approved the
exploration and appraisal disclosure in this regulatory
announcement.
Reserves Assessment
To assess the reserves, the Company has used the definitions and
guidelines set out in the 2007 Petroleum Resources Management
System prepared by the Oil and Gas Reserves Committee of the
Society of Petroleum Engineers (SPE) and reviewed and jointly
sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG) and the Society of
Petroleum Evaluation Engineers (SPEE).
Glossary
"APA" awards in pre-defined areas
"bscf" billions of standard cubic feet
"best estimate" an estimate representing the
best technical assessment of
projected volumes. Usually the
P50 value. For Contingent Resources,
the term of best estimate is
denoted as 2C
"boe" barrel of oil equivalent
"Contingent Resources" Those quantities of petroleum
estimated, as of a given date,
to be potentially recoverable
from known accumulations by
application of development projects
but which are not currently
considered to be commercially
recoverable due to one or more
contingencies. Contingent Resources
are a class of discovered recoverable
resources
"FDP" Field Development Plan
"mmboe" millions of barrels of oil equivalent
"mmstb" millions of barrels of stock
tank oil
"net" the portion that are attributed
to the equity interests of Faroe
"Proved + Probable those additional Reserves which
Reserves" or "2P" analysis of geoscience and engineering
data indicate are less likely
to be recovered than Proved
Reserves but more certain to
be recovered than Possible Reserves.
It is equally likely that actual
remaining quantities recovered
will be greater than or less
than the sum of the estimated
Proved plus Probable Reserves
(2P). In this context, when
probabilistic methods are used,
there should be at least a 50%
probability that the actual
quantities recovered will equal
or exceed the 2P estimate
"reserves" reserves are those quantities
of petroleum anticipated to
be commercially recoverable
by application of development
projects to known accumulations
from a given date forward under
defined conditions. Reserves
must further satisfy four criteria:
they must be discovered, recoverable,
commercial, and remaining (as
of the evaluation date) based
on the development project(s)
applied. Reserves are further
categorized in accordance with
the level of certainty associated
with the estimates and may be
sub-classified based on project
maturity and/or characterized
by development and production
status
Notes to Editors
The Company has, through successive licence applications and
acquisitions, built a substantial and diversified portfolio of
exploration, appraisal, development and production assets in
Norway, the UK and Ireland.
Faroe Petroleum is an experienced licence operator having
operated several exploration wells successfully in Norway and the
UK and is also the production operator of the Schooner and Ketch
gas fields in the U.K. Southern Gas Basin and the Trym and Oselvar
fields in the Norwegian North Sea. Faroe also has extensive
experience working with major and independent oil companies both in
Norway and in the UK.
The Company's substantial licence portfolio provides a
considerable spread of risk and reward. Faroe has an active E&A
drilling programme and has interests in a portfolio of producing
oil and gas fields in the UK and Norway, including the Schooner and
Ketch gas fields and the Blane oil field in the UK, and interests
in the Brage, Ringhorne East, Ula, Tambar, Oselvar and Trym fields
in Norway. In December 2016 the Company completed the acquisition
of a package of Norwegian producing assets from DONG Energy
including interests in the Ula, Tambar, Oselvar and Trym fields.
Full year average production for 2017, is estimated to be between
12,000-15,000 boepd.
In November 2013 and March 2014 Faroe announced the Snilehorn
and Pil discoveries in the Norwegian Sea in close proximity to the
Njord and Hyme fields. More recently, in July 2016 the Company
announced the Brasse discovery, next to the Brage field, and the
Njord North Flank discovery, next to the Njord field, both in
Norway.
Norway operates a tax efficient system which incentivises
exploration, through reimbursement of 78% of costs in the
subsequent year. Faroe has built an extensive portfolio of high
potential exploration licences in Norway which, together with its
established UK North Sea positions provides the majority of
prospects targeted by the Company's sustainable exploration
drilling programme.
Faroe Petroleum is quoted on the AIM Market of London Stock
Exchange. The Company is funded from cash reserves and cash flow,
and has access to a $250million reserve base lending facility, with
a further US$100million available on an uncommitted "accordion"
basis. Faroe has a highly experienced technical team who are
leaders in the areas of seismic and geological interpretation,
reservoir engineering and field development, focused on creating
exceptional value for its shareholders.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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