Faroe Petroleum plc, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in the Atlantic Margin, the North Sea and Norway, provides operational update following completion of the transaction with Petoro AS (“Petoro”), to swap Faroe’s interest in the Maria discovery for Petoro’s interests in a number of high quality oil and gas production assets in Norway.
1.The Petoro asset swap (Norway) represents:
oProducing 2P reserves of 14.2 mmboe net to Faroe as at 1 January 2011 with anticipated greater reserves replaced than have been produced since that date;
oAssociated net average production over 2011 estimated at 7,600 boepd*; and
oEliminates requirement to fund over £250 million of development costs on Maria field
2.Faroe self‐funded from cash flow, cash reserves and debt facilities for current planned high impact exploration programme and the committed field investment plan
3Fulla discovery (UK) proves producible oil, de‐risks neighbouring Freya discovery and takes project forwards to a work programme to mature reserve estimates and development solutions
Petoro Asset Swap
The Company confirmed that the Petoro asset swap transaction has now been completed. The transaction (which had an effective date of 1 January 2011) took the form of an asset for asset swap, comprising Petoro’s interests in the Brage, Hyme, Njord, Ringhorne East and Jotun fields (the “Petoro Assets”) and Faroe’s 30% interest in the Maria discovery. There was no cash consideration from either party, although Faroe will receive the net benefit of production sales from the Petoro Assets for the 11 months to 30 November 2011 in cash.
The 2P reserves of the Petoro Assets were calculated by Senergy to be 14.2 mmboe at 1 January 2011 and it is expected that additional reserves have been added over 2011 in excess of those produced over the same period, as a result of development projects and improved field performance. Production from the Petoro Assets over 2011 is estimated to be approximately 7,600 boepd* net to Faroe.
Group Production Update
The Petoro Assets are expected to average production of 7,600 boepd over 2011, with production from Faroe’s existing production assets estimated to average 2,500 boepd* over the same period.
For 2012, the Company expects that average net Faroe Group production will be in the range of 6,000 to 8,000 boepd reflecting reduced production primarily from the Njord field due to a riser replacement programme currently underway and continuing into 2012, and the tie in of the new Hyme field to Njord. The Njord riser replacement programme has necessitated the shutting in of production wells on the Njord field and as the risers are replaced the wells are progressively being brought back on stream. The Hyme field development (Faroe 7.5%) is scheduled for installation in 2012, and will necessitate the shutdown of the entire Njord field for approximately three months while the field is tied in to the Njord platform. As a consequence, average 2012 production from Njord will not reflect full field capacity, however 2013 production is expected to benefit from the Njord wells being back on stream as well as the new Hyme production wells.
Graham Stewart, Chief Executive of Faroe Petroleum plc, commented:
“We are very pleased to announce the completion of the transformational Petoro transaction, which is an excellent example of value creation from exploration success. Within 18 months of discovering the Maria field we have, through this swap deal, become the owners of material interests in a high quality production portfolio operated by Statoil and ExxonMobil, with significant reserves, revenues and upside potential.
The deal increases considerably the Company’s cash flows and debt capacity and, in line with our strategy, allows us to finance our current planned high impact exploration programme, as well as our committed field investment plan. Furthermore the transaction eliminates the requirement for Faroe to fund over £250 million of appraisal and development costs on the Maria field.”
Offshore Energy Today Staff, December 5, 2011; Image: Faroe Petroleum