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Faroe Petroleum: Year End results

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Oilfield Technology,


Operations: strong production performance and reserves growth

  • Strong production performance and low operating costs.
  • Total average economic production for 2015 at 10 530 boe/d (2014: 9106 boe/d) – with Faroe’s main fields performing above expectations.
  • Balanced product mix of approximately 58% liquids and 42% gas.
  • Average operating cost per boe reduced by approximately 30% to US$23 (2014: US$33) – improvement due to a combination of higher volumes, improved cost efficiencies and a weaker Norwegian krone.
  • Acquisition of additional interests in Blane and Enoch, announced in September 2015, strengthening our tax-efficient UK production base.
  • Significant reserves growth

  • 2P Reserves increased by 88% with closing reserves at 57.4 million boe (2014: 30.6 million boe) – mainly reflecting the transfer from 2C Contingent
  • Resources of the significant Pil and Butch oilfields

  • 2C Contingent Resources decreased to 98.3 million boe (2014: 109.1 million boe) .
  • due to the reclassification of Pil and Butch fields to 2P Reserves, partly offset by the Boomerang discovery and the increased interest in South East Tor, all in Norway.
  • Exploration programme adding 2C Contingent Resources

  • An oil discovery of 13-31 million boe (net to Faroe 3-8 million boe) made on the Boomerang well in September 2015, adding to the 2014 Pil and Bue discoveries; the second of the two Pil follow-up wells, Blink, was dry.
  • The Portrush and Bister wells were announced as dry while the Skirne East (Shango) well was a small gas discovery, all in Norway.
  • Five APA licences awarded in Norway in January 2015. Award of a further six new exploration licences, including two operatorships, under the 2015 APA licensing round was announced on 20 January 2016.
  • Financial –strong balance sheet and positive cashflows from operations, despite impairments

  • Cash and net cash of £91.5 million and £68.5 million respectively at 31 December 2015 (31 December 2014: £92.6 million cash and £69.6 million net cash) – with £23.0 million ($33.0 million) drawn against the £155million ($225million) Reserve Based Lending facility.
  • Revenue (excluding hedging gains) of £113.0 million (2014: £128.8 million) – reduction reflects lower commodity prices, partly offset by increased production.
  • EBITDAX £60.4 million (2014: £59.1 million) –includes realised hedging gains of £9.3 million (2014: £0.5 million) classified as Other Income.
  • General and administrative expenses reduced –net charge in the Income Statement 44% lower at £3.7 million (2014: 6.6 million).
  • Loss after tax of £52.9 million (2014: £55.0 million) after pre-tax impairment charges of £45.1 million (2014: £38.5 million) and exploration write-offs of £83.6 million (2014: £131.7 million).
  • Pre-tax exploration and appraisal capex of £61.9 million (£14.8 million post-tax) (2014: £87.2 million pre-tax, £23.0 million post-tax) and development and production investments (including acquisitions) of £23.1million (2014: £48.3million.

  • Outlook –fully-funded exploration programme and well positioned for further potential acquisitions

  • 2016’s exploration and appraisal programme continues, fully-funded from existing resources.
  • Three exploration wells scheduled for 2016 (Kvalross well announced as dry in February 2016) all of which benefit from Norway’s 78% exploration tax rebate.
  • 2016 exploration and appraisal capex is estimated to be approximately £50 million pre-tax (£12 million post-tax) and development and production capex for 2016 is estimated to be approximately £20 million.
  • Production guidance for 2016 of 7000- 9000 boe/d, split 55% liquids (oil and condensate) and 45% gas.
  • 80% of 2016 and 50% of 2017 expected post-tax gas production hedged at average floor of 45p/therm and 22% of H1 2016 post-tax oil production is hedged at an average floor of US$5/bbl.
  • Well positioned to capitalise on market conditions to add value through further selective value-enhancing asset acquisitions.

  • Graham Stewart, Chief Executive of Faroe Petroleum, commented:

    “2015 was another year of growth and good progress for Faroe despite a backdrop of significantly lower commodity prices. We delivered our exploration drilling programme safely and under budget, adding further material 2C resources, and doubled our 2P reserves in high quality assets, principally in Norway. Our diverse North Sea production portfolio also outperformed expectations, averaging 10 530 boe/d with lower unit operating costs of US$23 /boe, down by 30% from the previous year.

    “We stated a year ago that we would aim to run a cash-neutral budget for 2015 and we are pleased to end the year with cash of £91.5 million (2014: £92.6 million) after drilling five exploration wells and acquiring further interests in the Blane and Enoch production assets in the UK.

    This outcome is testament to the quality of our portfolio and our consistently prudent financial management, in what remains a very difficult market.

    “Looking ahead to 2016, the business is in a good position to face the continuing challenges of our industry and to seek to capitalise on our relative financial strengths as we pursue attractive consolidation opportunities in our core areas on the UK and Norwegian continental shelves.”

    Adapted from a press release by Louise Mulhall

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