TIDMFPM
RNS Number : 5338I
Faroe Petroleum PLC
20 June 2017
20 June 2017
Faroe Petroleum plc
("Faroe", "Faroe Petroleum", the "Company")
2017 Annual General Meeting Operational Update
Faroe Petroleum, the independent oil and gas company focusing
principally on exploration, appraisal and production opportunities
in Norway, the UK and Atlantic Margin, is pleased to provide an
operational update ahead of its Annual General Meeting later
today.
HIGHLIGHTS
Production
-- Strong Production: averaged 15,100 boepd for the period from 1 January to 31 May 2017
Finances and balance sheet
-- Cash increased: to GBP113.8 million (unaudited) at 19 June
2017 from GBP96.8 million 31 December 2016
-- Undrawn RBL facility: Faroe has an undrawn reserves based
lending credit facility ("RBL") of $250 million (plus $100 million
accordion)
Development and projects
-- Oda PDO approved: Plan for the Development and Operation
("PDO") for Oda approved by the Norwegian Ministry of Petroleum
triggering cash compensation payments to Faroe estimated to be
GBP14 million net in 2017 and 2018
-- Njord Future and Bauge PDOs: PDO approval from the Norwegian
Ministry of Petroleum expected shortly; projects progressing to
plan
-- Tambar infill and gas lift project on track: in-fill drilling
and gas lift installation project was approved in March; main
contracts awarded and the project is underway to boost production
from 2018 onwards
-- Brage infill drilling underway: the drilling of the first of
two production wells has commenced
Exploration and appraisal
-- Brasse appraisal progressing well: drill stem production test
underway and results expected shortly
Two additional E&A wells committed: drilling programme
progressing / developing with two new E&A wells, both benefit
from 78% Norwegian tax rebate
o Goanna exploration well committed with full carry to Faroe at
30% WI ("Working Interest"): committed to drill the Goanna
exploration well; spud expected Q4 2017
o Fogelberg appraisal well committed: appraisal well to be
drilled on Fogelberg with 33% WI; spud expected late 2017 or early
2018
-- East Corrib farm out for full carry at 20% WI: Irish
Ministerial approval granted for a farmout to Nexen of licence
16/23, West of Ireland
Production
Group production averaged approximately 15,100 boepd in the
period from 1 January to 31 May 2017, with better than forecast
performance from the main producing fields in the portfolio. The
average operating cost per barrel of oil equivalent for producing
fields for the same period was approximately US$25.
Average production guidance for the year remains at 13,000 to
15,000 boepd reflecting various forecast shutdowns to enable
production enhancing work to be undertaken. A review of this
guidance will be undertaken following the summer maintenance
period.
Finances and balance sheet
Cash: cash increased to GBP113.8 million (unaudited) at 19 June
2017 from GBP96.8 million at 31 December 2016
Credit facilities: other than the revolving Norwegian credit
facility, funded by the tax rebate, Faroe remains debt-free: Faroe
has an undrawn RBL credit facility of $250 million plus a $100
million accordion.
Committed projects financed: prudent financial management
combined with strong production and improved commodity prices
ensures that the Company remains fully financed for its committed
projects.
Development and projects
Oda: in May 2017, the Partners in the Oda development received
PDO approval of the Oda field (licence PL 405) from the Norwegian
Ministry of Petroleum and Energy. The Oda field (Faroe 15%) in the
Norwegian North Sea, will be developed via a four-slot seabed
template with two production wells, and one water injection well,
which will tie back to the Ula platform (Faroe 20%), located
approximately 13 kilometres to the east.
The Oda subsea tie-in will connect to the existing pipeline
between Oselvar (Faroe 55% and operator) and Ula and reuse the
existing Oselvar facilities at the Ula platform. Production from
Oselvar is scheduled to cease in 2018 to allow the Oda tie in works
to be undertaken and the Oselvar owners will be financially
compensated accordingly. The net compensation payment to Faroe as
an Oselvar and Ula joint venture partner, is estimated to be
approximately GBP14 million due to Faroe in 2017 & 2018 (this
takes into account the payment it makes as an Oda joint venture
partner and the final tariff compensation payable to Ula). An
initial payment to Faroe of GBP7.4 million is due later this
month.
Njord and Bauge: approval of the PDO for the Njord Future
Project and Bauge field (Faroe 7.5%) is expected shortly from the
Norwegian Ministry of Petroleum and Energy. In the meantime the
works on the Njord A Facility in the Stord dry dock are continuing
on time and on budget, with the pre-fabrication of new pontoons
progressing on schedule. In parallel, the project to refurbish the
Njord B storage tanker is also progressing to plan. The planning
for the Bauge subsea tie-back continues with the finalisation of
the contract strategy for project execution.
Tambar infill and gas lift project: in-fill drilling and gas
lift installation project, to boost production from 2018 onwards,
is now underway and on track. The main scope for this project is
the installation of gas lift for up to five wells, and the drilling
of two infill wells. The installation of gas lift is expected to
allow for long term robust flow rates as water cut starts to
increase. The Mærsk Interceptor rig will arrive on location between
October and December 2017 to be used to drill the infill wells and
provide accommodation.
Brage infill drilling: the Brage drilling rig has been
remobilised as planned for the drilling of three wells, with one
producer-injector pair in the Statfjord horizon and one producer in
the Fensfjord. The first Statfjord producer is scheduled to come on
stream in September. Continued further infill drilling beyond the
current three wells will be subject to the results from the ongoing
drilling campaign.
Exploration and appraisal
Brasse: Licence PL740/B (Faroe 50% and operator) - following the
successful appraisal well results announced last week, the Drill
Stem Test ("DST") is now underway to provide further confirmation
of well productivity, investigation of reservoir distribution and
important additional information for development project planning.
The results are expected shortly together with a decision on the
commitment of a side-track.
Goanna: Licence PL881 (Faroe 30%) was awarded in February 2017
as part of the APA16 licence round and is operated by Wellesley
Petroleum (70%). The Goanna licence is located in the Northern
North Sea, near the border with the UK and east of the very large
producing Statfjord and Snorre fields, which offer the potential
for alternative export routes upon success. The Goanna prospect
straddles the border between PL881 and PL037, the Statfjord group.
The PL881 joint venture expects to drill a well on this licence in
Q4 2017 targeting a structural and stratigraphic prospect of Upper
Jurassic age sandstones, using the Deepsea Bergen rig on favourable
market rates. Faroe's associated costs of drilling this well will
be fully carried at 30% WI by its joint venture partner up to the
budgeted dry hole cost.
Fogelberg: In February 2017, the PL422 joint venture was awarded
a licence extension with a deadline to submit a PDO by July 2019.
To make sure a robust development plan can be proposed with a well
justified 2P reserves base and production profile, and before
committing to the Front End Engineering and Design (FEED) project,
the licence group has committed to drill an appraisal well. The
well will be drilled in a down-dip location with the objective of
adding additional 2P reserves, and dependent on the results, drill
a side-track on the crest of the structure to conduct a production
test on this 2010 discovery. Faroe is increasing its working
interest to 33.3% in this Centrica-operated (66.7%) licence. The
drilling operations, again utilising the Deep Sea Bergen rig, are
expected to commence in late 2017 or early 2018, back-to-back after
the Goanna well. The objectives of the appraisal well are to
increase reserves and reduce volume uncertainty by establishing the
Free Water Level (FWL) or the Gas Down To (GDT) and verify
reservoir quality and productivity by conducting a DST, which will
allow optimisation of well count and design (and potential cost
savings).
East Corrib: Faroe recently executed a farm out of its Irish
licence option 16/23 (Faroe 100%) to Nexen Petroleum UK. Under the
terms of the farm-out agreement, which has received Ministerial
approval, Nexen has taken over operatorship of this licence and an
80% working interest (Faroe 20%) and in return will meet the full
costs of the associated work programme, including any acquisition
of seismic data and the possible drilling of an exploration well,
if a positive drilling decision is made after the seismic work
phase has been completed.
Graham Stewart, Chief Executive of Faroe Petroleum
commented:
"I am pleased to report that Faroe Petroleum is performing very
well across its range of activities, with strong production
performance in the first five months averaging 15,100 boepd,
appraisal success on the Brasse discovery, a growing low cost
exploration and appraisal programme and significant progress on our
development projects.
"The Company has also delivered good financial performance with
strong cash flow, improved cash reserves and an undrawn Reserve
Based Lending facility of $250 million - this ensures we have
significant financial flexibility going forward.
"I am particularly encouraged, that as we enter the second half
of 2017, alongside the excellent progress made across our
production and development portfolio, we have been able to increase
further the level of low cost and high impact activity in our
exploration and appraisal portfolio, with the addition of the
Goanna and Fogelberg wells later this year, as well as the farm-out
to Nexen, for a full cost carry, on the East Corrib licence west of
Ireland.
"With our focused strategy, centered principally around
realising value from both our considerable exploration success and
M&A success, Faroe is now in position for a major growth phase
as we take advantage of low industry costs and invest across our
core assets in 2017 and beyond. We believe that we now have the
asset base to reach our stated goal of increasing production to
over 40,000 boepd organically within the next five years, with
robust economics even at low commodity prices.
"Looking ahead, while we actively pursue our organic programme,
we will also continue to seek to capitalise on our strong strategic
and financial position to pursue further consolidation
opportunities on the Norwegian and UK continental shelves."
- Ends -
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
BMO Capital Markets Tel: +44 (0) 207 236
Neil Haycock/ Tom 1010
Rider/ Jeremy Low
FTI Consulting Tel: +44 20 3727 1000
Edward Westropp/ Emerson
Clarke
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 30 years, has read and approved the
exploration and appraisal disclosure in this regulatory
announcement.
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.
Glossary
"APA" awards in pre-defined areas
"bscf" billions of standard cubic feet
"boe" barrel of oil equivalent
"boepd" barrels of oil equivalent per
day
"PDO" Field Development Plan
"mmboe" millions of barrels of oil equivalent
"net" the portion that are attributed
to the equity interests of Faroe
"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 UK 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
13,000-15,000 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.
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No. 596/2014, and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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