Faroe Petroleum: Final Results for the Year Ended 31 December 2017

Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway and the UK, announces its audited results for the year ended 31 December 2017.


Exploration and appraisal – significant Brasse resource upgrade and active exploration programme

  • Successful Brasse (Faroe 50% and operator) appraisal well and flow test with 2P Reserves of 30.7 mmboe (net)
  • 2P Reserves raised to 97.7 mmboe (2016: 81.3 mmboe) – incorporating Brasse upgrade and sale of 17.5% of Fenja post period end)
  • 2C Resources decreased to 78.6 mmboe (2016: 90.9 mmboe), reflecting transfer of Brasse from 2C to 2P
  • Drilled the Goanna (Faroe 30%, fully carried) and Boné (Faroe 20%) wells during period, both announced as dry
  • Eight new exploration licences awarded in Norway under 2017 APA Licensing Round, announced January 2018
  • Drilling of Iris/Hades exploration well (Faroe 20%) and Fogelberg appraisal well (Faroe 25% ) ongoing

Development and production – excellent production performance and progress in high-quality development projects 

  • Average 2017 economic production of 14,349 boepd (2016: 17,395 boepd) – reflecting suspended production from Njord and Hyme in 2017 (pending completion of Njord Future Project) and natural decline in other fields
  • Excellent progress across portfolio of high-quality development projects:
    • Tambar (Faroe 45%) – first of two infill wells on stream in March 2018; installation of gas lift continues
    • Oda (Faroe 15%) – PDO approved by the MPE and project progressing on plan and budget
    • Njord & Bauge (Faroe 7.5%) – PDO approved by the MPE and project progressing on plan and budget
    • Fenja (Faroe 25%, reduced to 7.5% in 2018) – PDO submitted in December 2017
  • Further 14% of Blane oil field acquired from JX Nippon for consideration of $5.25 million (Faroe now 44.5%)

Finance – solid financial platform following $100 million bond issue and enhanced cashflow from production

  • Unrestricted gross cash at 31 December 2017 £149.1 million (31 December 2016: £96.8 million). Net cash (net of 2017 $100 million bond) at 31 December 2017 was £75.0 million (31 December 2016: £96.8 million)
  • Debut bond issue of a $100 million senior unsecured bond in November 2017 with a fixed coupon of 8%, complementing existing credit facilities and providing financial flexibility and optionality
  • $250 million reserve based lending (“RBL”) facility, undrawn at 31 December 2017 (31 December 2016: £nil), and NOK 1 billion exploration finance facility (“EFF”) in place
  • EBITDAX £82.2 million (2016: £25.8 million) – includes £7.8 million initial Oselvar net compensation receipt
  • Exploration & appraisal capex £47.7 million (2016: £47.5 million), equates to £11.5 million (2016: £12.1 million) post-tax, and development and production capex £96.0 million (2016: £32.8 million)
  • In February 2018, sold 17.5% stake in the Fenja development to Suncor for post-tax cash consideration of $54.5 million, retaining a 7.5% stake, and reducing Faroe's share of development capex by approx. $220 million

Outlook – material production growth through fully funded organic development and production investments 

  • Production guidance for 2018 is 12,000-15,000 boepd split approximately 67% liquids and 33% gas
  • Opex in 2018 is expected to be in range $23-27 per boe
  • Approximately 85% of gas production hedged to end-2018 averaging 42p/therm; and approximately 60% of oil production hedged to end-2018 averaging $57/bbl (all on a post-tax basis, principally with put options)
  • Exploration and appraisal drilling programme in 2018 includes 4 to 6 wells, all in Norway
  • Net capital expenditure for 2018 on exploration is estimated at approximately £80 million pre-tax (£20 million post-tax), and on development and production is estimated at approximately £175 million – all fully funded

Graham Stewart, Chief Executive of Faroe Petroleum, commented:

“I am pleased to announce our full year results for 2017 which was another significant period for the Company and one in which Faroe continued its evolution into a full cycle E&P business. We had further appraisal drilling success on our largest ever oil discovery, Brasse, in Norway which contributed to record growth in 2P reserves to 98 mmboe (after our sale of part of Fenja in 2018), with further 2C contingent resources of 79 mmboe. We trebled our development capital investment year on year to approximately £100 million, and are on track to deliver our organic production growth target of over 35,000 boepd in the medium term from existing projects, representing growth of around 2.5 times 2017 production.

“Financially, the year was also strong for Faroe, generating EBITDAX of £82.2 million from ongoing operations and completing our debut bond issue in November 2017 to raise $100 million on good terms. In February 2018, as part of our ongoing management of the portfolio and capital allocation, we announced a partial sale of our interest in the Fenja oilfield development in Norway, bolstering our strong financial position and freeing up capital for allocation to the pending Brasse field development.

“Faroe now has the distinct advantage of being in a fully-funded position and with clear line of sight to deliver material value growth, whilst continuing to pursue our significant exploration, appraisal and infill programme. Opportunities to accelerate further growth through potential value-accretive acquisitions and disposals also continue to be a major focus for the Company going forward.”

To read the full announcement please click here

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