Faroe Petroleum : 20/09/2016 Unaudited Interim Results for the six months ended 30 June 2016 Download pdf 312kB

Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway and the UK, announces its unaudited Interim Results for the six months ended 30 June 2016.

Highlights

Operations - significant Brasse discovery and acquisition of package of producing assets from DONG boost production, cash flow, reserves and resources
• Exploration programme delivers considerable increase in resources

o Faroe-operated Brasse oil and gas discovery (Faroe 50%) estimated at 43-80 mmboe in good reservoir located near Brage and Oseberg production facilities
o Kvalross exploration well (Faroe 40%) in Norwegian Barents Sea, announced as dry in February 2016
o Further new exploration licence awards - six APA licences awarded in Norway in January 2016 and one licence option, located close to the producing Corrib field, awarded offshore Ireland in July 2016

• Average first half production of 9,030 boepd from existing portfolio (H1 2015: 10,971 boepd) - decrease mainly due to planned suspension of Njord and Hyme in early June 2016
• Average operating cost per boe approximately $25 (2015: $23) - increase primarily due to lower production resulting from Njord and Hyme suspension and higher tariff charges on Schooner and Ketch
• Acquisition of four producing fields in Norway from DONG adding 19.8 mmboe of reserves for consideration of $70.2 million(effective date 1 January 2016, expected to complete in H2 2016)

Finance - balance sheet strengthened following £66 million placing and open offer in July and August 2016
• Revenue £23.1 million (H1 2015: £51.1 million) and EBITDAX £16.8 million (H1 2015: £39.8 million)
• Realised hedging gains of £4.1 million net after premium (H1 2015: £4.2 million) - mainly on gas sales
• Operating loss £34.3 million (H1 2015: £5.6 million profit) and loss after tax £13.0 million (H1 2015: £6.7 million) - reflecting lower revenue and higher expensed exploration costs
• Exploration and appraisal capex £14.8 million (H1 2015: £25.2 million), excluding Kvalross which was expensed in the period, equivalent to net £3.7 million (H1 2015: £6.3 million) on a post-tax basis, taking account of 78% Norway exploration tax rebate
• Cash and net cash at 30 June 2016 £83.9 million and £60.9 million respectively (31 December 2015: £91.5 million and £68.5 million), excluding the subsequent placing and open offer
• Reserve based lending facility in place, of which £23 million is drawn (31 December 2015: £23 million)
• Raised £66.0 million, before expenses, in share placing and open offer in July and August 2016, to fund acquisition from DONG and to accelerate Brasse discovery towards development

Outlook - upwards revision of production guidance and continuing focus on growth
• Production guidance for full year 2016, including the impact of fields acquired from DONG, revised upwards to 16,000-18,000 boepd, previously 15,000-17,000 boepd, reflecting better than expected performance from the Trym, Brage and Oselvar fields, split approximately 60% liquids and 40% gas
• 90% of H2 2016 gas production (post-tax) hedged at average price of 41p/therm and 66% of 2017 gas production (post-tax) hedged at average price of 39p/therm
• Exploration and appraisal programme continues with Njord North Flank exploration well (Faroe 7.5%) ongoing and Dazzler/Boné exploration well in Norwegian Barents scheduled for late 2016 or early 2017
• Net capital expenditure for 2016 on exploration, development and production forecast at approximately £65 million pre-tax (2015: £85 million), equivalent to £25 million on post-tax basis (2015: £38 million post-tax)
• Development plans for Oda (formerly known as Butch) progressing well with FDP scheduled for late 2016 and first oil expected in 2019, whilst the FDP for the Njord Future Project, including the Snilehorn development, is scheduled for early 2017. Both projects are expected to benefit materially from industry-wide cost reductions
• Progressing towards development concept selection on Pil - expected at end of 2016
• With a strengthened balance sheet and much enhanced production portfolio, Faroe is well positioned to progress its exploration-led, production-backed growth strategy to create significant shareholder value

Graham Stewart, Chief Executive of Faroe Petroleum, commented:

'I am pleased to announce Faroe's results for the first half of 2016, a period of strategic delivery for the business with: another significant discovery in Norway at the Faroe-operated Brasse exploration well; production performing above guidance; and post period end, the transformational acquisition of a portfolio of Norwegian production assets from DONG was announced in July 2016.

'Pre-acquisition net production was above guidance averaging at approximately 9,000 boepd with opex per boe of $25, from which we continue to generate cash, despite the challenging market conditions. Faroe has had considerable success with the drill bit in recent years, and we are now seeing the real value of that success materialise. We have made good progress in advancing the high quality Oda development project (Faroe 15%) with first oil scheduled in 2019. Field Development Plan sanction of the Njord Future Project is expected in early 2017, and in addition, concept selection for development of the Pil field (Faroe 25%) is expected by the end of the year. We are very pleased to be progressing these important new projects all of which are taking advantage of falling costs.

'The transformational acquisition of a package of producing assets from DONG, negotiated on a bilateral basis, creates a new strategic hub for Faroe, centred round the Ula field platforms, in one of our core areas offshore Norway. The fields, benefitting from the synergies of owning several field interests in and around Ula, will have a material impact on production, reserves, cash flow and debt capacity. In parallel with the acquisition, we raised gross £66.0 million of equity in July and August 2016 to fund the acquisition and accelerate the progress of Brasse towards development.

'As we proceed towards the year end we remain busy with the drill bit with results due shortly from the near-field Njord North Flank exploration well (Faroe 7.5%); we also look forward to spudding the high impact Barents Sea well Dazzler/Boné (Faroe 20%), and plan the early integration of the new DONG assets and asset team into our business. I look forward to updating you on our progress in due course.'

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For further information please contact:

Faroe Petroleum plc
Graham Stewart/Jonathan Cooper
Tel: +44 1224 650 920

Stifel Nicolaus Europe Limited
Callum Stewart/Ashton Clanfield
Tel: +44 20 7710 7600

RBC Capital Markets
Matthew Coakes/Daniel Conti/Roland Symonds
Tel: +44 20 7653 4000

FTI Consulting
Edward Westropp/Tom Hufton
Tel: +44 20 3727 1000