Interim results from Faroe today which to be honest had been signalled ahead of today's meeting. Profits were much higher as commodity prices were higher, EBITDAX of £72.2m, the Fenja sale and a lack of impairments. Fully funded net group capex for 2018 is estimated to be c.£225m. Unrestricted cash and net cash at 30th June was £158.6m and £82.6m and the $250m rbl was undrawn.
Where the company really delivered the goods was in operations where the successful Iris Hades discovery added 42 mmboe of 2C resources net to Faroe and really moved the dial. Production was down to 12,402 boepd due to anticipated temporary shut-ins on Trym and Tambar in Q1. Full year guidance is 12,000-14,000 boepd of which two thirds is oil. Near to medium term target is on schedule at 35,000 boepd.
There is little doubt that Faroe is in a very strong position in what it describes as a ‘transformational' year and few could argue about that. They are in control of their largest investment programme ever having just made their largest ever discovery, with a strong balance sheet having partially sold some of Fenjal to reinvest elsewhere in the business.
Faroe have delivered five consecutive years of reserve growth which is an enviable status in the sector, have'significant visibility ‘ on 2C resource evolution and at extremely low historic finding costs of ~$1/boe after tax. The chart in the presentation shows the way to 35,000 boepd and beyond with significant upside which looks eminently achievable.
When you read all this it is no surprise that DNO have climbed aboard the good ship Faroe, in every single metric they display the signs of delivering in the short,medium and long term and the management team with all its support is first rate. The presentation pack was very good, bordering on a first go at a defence document, let's hope that it does not go in that direction. Shareholders are very fortunate to be in Faroe stock and should not be bullied or bribed out of it for short term gain, after all the company didn't get here on a wish and a prayer.
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