TIDMFPM
RNS Number : 3646M
Faroe Petroleum PLC
28 July 2017
28 July 2017
Faroe Petroleum plc
("Faroe", "Faroe Petroleum" or the "Company")
Acquisition of a further Interest in UK producing Blane
Field
Faroe Petroleum, the independent oil and gas company focusing
principally on exploration, appraisal and production opportunities
in Norway and the UK, is pleased to announce the conditional
acquisition of a further 13.9935% interest in the Blane Field in
the UK North Sea ("Blane Interest") from JX Nippon Exploration and
Production (U.K.) Limited ("JXN") for a total consideration of
$5.25 million (the "Acquisition").
Highlights
o Value accretive: consideration of $5.25 million corresponds to
approximately $5.0/boe; value synergies include greater
profitability, tax efficiency and enhanced debt capacity
o Strategic fit: deal consolidates Faroe's existing Blane
position to in aggregate a 44.5% non-operated interest; high
quality 42(0) API oil, tied-back to Ula (Faroe 20%), one of Faroe's
key hubs
o High margin field: Blane is a low operating cost field and the
derived 2016 EBITDAX attributable to the Blane Interest was $5.4
million
o Upside potential: Blane had 2016 gross production of
approx.2,900 boepd and has potential to grow reserves, extend field
life and reduce unit opex
Blane was discovered in 1989, and is located on the Central
Graben of the UK continental shelf, extending into the Norwegian
sector. Production commenced in September 2007 from a Tertiary
Palaeocene Forties sands reservoir with a structural closure. The
field has been developed as a sub-sea tie-back to the Ula platform
(Faroe 20%), located on the Norwegian continental shelf (34
kilometres to the north east), and currently comprises two
horizontal production wells with gas lift and one water injection
well.
The 13.9935% interest in the Blane Field is derived from a
17.0653% interest in UK Licence P111 covering Block 30/3a
(upper).
The Acquisition is expected to complete before the year-end and
is subject to UK regulatory approval, the approval of the Blane
joint venture partners and the resumption of production after the
completion of certain scheduled sub-sea works this summer. The
Acquisition consideration of $5.25 million, prior to working
capital adjustments from the effective date of 1 January 2017, is
to be funded from existing cash resources.
The Blane Field is operated by Repsol Norge AS and the other
joint venture partners are Dana Petroleum (BVUK) Limited and Repsol
Sinopec Resources UK Limited.
Graham Stewart, Chief Executive of Faroe Petroleum,
commented:
"We are pleased to announce this Acquisition, which further
increases our stake in this low cost, high quality and long life
asset and at a fair value of $5.0 per boe. Raising our stake again
in Blane, offers significant upside potential as we realise
synergies through Blane's use of our key Ula hub; increasing net
production, reducing average operating costs, increasing
profitability and providing access to further reserves potential
from the field. The transaction is also very tax efficient for us,
providing shelter for both past and future tax losses in the UK.
Faroe continues to advance a number of key projects in and around
the Ula hub area, all of which will serve to extract greater value
from this particular deal through improved operating
synergies."
- 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 Rider/ 1010
Jeremy Low
FTI Consulting Tel: +44 20 3727 1000
Edward Westropp/ Emerson
Clarke
John Wood, UK Asset Manager of the Company with over fifteen
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.
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
"API" the American Petroleum Institute gravity, or API gravity, is a measure of how heavy or
light
a petroleum liquid is compared to water: if its API gravity is greater than 10, it is
lighter
and floats on water; if less than 10, it is heavier and sinks. Less dense oil or "light
oil"
is preferable to more dense oil as it contains greater quantities of hydrocarbons that
can
be converted to gasoline.
"boe" barrel of oil equivalent
"boepd" barrel of oil equivalent per day
"EBITDAX" earnings before interest, depreciation, depletion, amortization and exploration
expenses
"mmboe" millions of barrels of oil equivalent
"net" the portion that are attributed to the equity interests of Faroe
"2P Developed Reserves" + those additional Reserves which analysis of geoscience and engineering data indicate
"2P Reserves" 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 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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