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• WHAT’S THIS ALL WORTH? • The 50-170mm boe range at Pil equates to 31p-106p/share; • Upside from the sidetrack/Bue could add ~90p of value; • Solberg/Rodriguez is probably net neutral; • In addition, news from Butch East is still awaited where the company has exposure to up to 260mm bbls (worth 11p-68p/share risked/fully unrisked); • Again, I would draw investors to the flip side of the argument – what is your downside from here? • With a core NAV (ie producing assets plus cash) of 86p, plus contingent (discoveries yet to be developed) of an additional 43p….you can now add ~15-20p for Pil as it is a proven discovery with contingent resources; • SO ~145-150p of Core+Contingent vs a share price of 140p this morning…with a sidetrack that could add a further 70p of upside, plus Bue which could add ~20p, plus Butch East which could add 68p – all within the next two months; • On top of this near-term interest, we believe that the broader investment case for FPM remains incredibly strong: you buy FPM for a genuinely diversified exploration portfolio which is well financed, with cashflow being just a small contributor to balance sheet strength: $250M undrawn RBL facility; Norwegian facility of £110M equivalent; UK tax losses of £75M; ~£40M cash; • Fundamentally undervalued with multiple catalysts on the immediate horizon, I would be aggressively adding at current levels. STRONG BUY
agree - Solberg a little disappointing in my view, probably worth 2-3p off the NAV. But as you say, Pil could be a big game changer. And the broker view is that we get Butch East within the next 10 days as well. Happy days
Not sure the market has yet fully got its head round the double news today. Solberg neither here nor there, but Pil is big.
Great news here this morning IMO and the market likes it too :-)
Fpm given a buy recommendation in Investors Chronicle and a positive write up.
Had an interesting chat with an analyst at JP Morgan today who was extremely bullish about the upcoming drill results believing the COS to be higher than the official figures. His drawback was the lack of forward thinking around development costs and the extent to which the finance facility is really free to make productive acquisitions.
this morning considering the platform and underscores the very strong exploration success of the last year.
I have added another £50k here last week. Solberg and Butch east are both effectively appraisal wells testing the extremeties of the fields already discovered (ie determining how far they stretch). Solberg for Rodriguez and Butch East for the Main butch discovery. I am expecting these any day after some bad weather delays. Both are high impact. Butch could be a very sizeable development and it is easy to see how Faroe could this year after Pil double its resource base. We also now await the Pil DST and flow test/side track results. Results tomorrow, I see Faroe (22% owned by Dana Petroleum) as a very low risk exposure to some very high impact North Sea activity. They have some of the success drill bit wise as Tullow oil!
Call with COO on this morning’s discovery at Pil • Seems like a materially larger discovery than pre-drill estimates 16-56MMbboe. The initial pre-drill volumes were driven by a ‘flat spot’ on the seismic which was interpreted to be the oil-water-contact, however this has turned out to be the gas-oil-contact, the implication being that the high end of the pre-drill volume range (56MMboe) is likely to represent just the gas cap to what is thought could be a much larger discovery with oil beneath it. •Recoverable volumes could turn out to be >2x as big as the pre-drill estimates. •In the next two days VNG (operator) will get to TD before rigging up to carry out the drill stem test (DST), which will take a few weeks. They will then announce the DST results around mid to end March and then also confirm the sidetrack, the results of the side track will be known around mid to end April. •Subject to positive DST results it is expected the discovery will be comfortably commercial. The Jurassic Rogn is a good reservoir, for example it is the main producing formation at the large Draugen field c60km away. •Importantly it was indicated there are also several other look-a-like prospects on the licence of similar size. VNG could get around to testing the first of these as early as this autumn. •Pil, like Hyme and Snilehorn will probably ultimately be tied back to the Njord production hub facilities and gives Faroe even more motivation to ensure the Nojord facilities are ready to take oil and gas production for another 20-30 years. •Elsewhere it was suggested the results from the currently drilling Solberg well will be known in the next week or two, with Butch East then to follow in c2-3weeks.
Great news and a great buy ! Onwards and upwards from here !
I have snaffled 75k here over the last week. Three drills are now in progress with butch east, lower risk and essentially a part appraisal well with big upside due any day. It is overdue although I suspect some bad weather has caused delay. The unused finance facilities also allow them to buy in production growth and I expect them to do this.
Thanks guys for the info. Sort of confirms my gut reaction that these are cheap ! Ta.
Hi Tailender Think there's a couple of dynamics at work here. There was a bit of disappointment that Novus wasn't commercial on its own. This news was on 27 Jan and was probably worth 6p from the share price. And second, there has been a bit more market interest in the oil majors recently at the expense of the smaller E&P's. Over the next couple of month's we get results from Butch East, Pil and Solberg. Plus there will be the initiation of coverage from the old Macquarie boys who are now at Jeffries. Faroe is their favourite so we should get a bit of a push then as well. But 105p is ridiculous. I think fair value now is in excess of 130p even before the three drill results over the next couple of months. Also, check out the company presentation published today on the Faroe website.
Hi Tailender ... Agree re great fundamentals & valuation. I would agree with last sentence if you dropped the word "logical". Think there is a fashion element. N Sea unfashionable versus onshore shale gas. Maybe FPM is for value folks not high risk players?
For some reason FPM has only recently appeared on my radar, but I note that the market cap is less than the shareholders equity, it has some interesting assets in the Norwegian segment of the North Sea but it's not just another hopeful exploration outfit....IT ACTUALLY HAS REVENUE AND PROFITS ! So why is SP down almost 20% over past 5 or 6 weeks ? Have done usual research and can't find any disasters about to happen, broker opinion generally positive. What am I missing, after all, we know the market price is a logical reflection of all the data available, isn't it !?!
CEO Graham Stewart says that ` Our sustainable exploration programme combined with the opportunity to grow significantly our production portfolio gives us the potential to generate very considerable value for shareholders ` Sounds very positive to me !
Faroe Petroleum (FPM) has announced that the Solberg appraisal well, operated by Wintershull, has begun drilling to asses the Rodriguez discovery. Buy.
Cantor Fitzgerald new target price 225p. Surely this share is grossly undervalued at 110p and IMO a strong buy ! Cannot understand investors not getting into this NOW ! Be warned - I said the same about Ormonde Mining when sub 5p - its now approaching 7p !
10 more licences granted to Faroe on top of the previous good news this year. This share is a strong buy and will head towards £2 throughout this year. Get in now or you will miss the boat !
From brokers following today's Norwegian North Sea licence awards. Faroe has repeated its success of reent years concludes RBC
Added another 5000 this morning with Nomura target raised to 200 ! Nice to see a small rise this afternoon and noted that there were plenty of buys throughout the day. Hoping the price continues to rise, but will consider adding more if price falls below 117 again.
I agree Cheeko. I bought into this yesterday after reading only positive sentiment in the media, reviewing the last year's RNS log and researching its strategy. At this price it would be a difficult share to ignore.
Faroe Petroleum consistently gets `buy` ratings from brokers, with target prices 175/185 ! Now Liberum Capital have a target price of 180. Surely, sometime during 2014, this share will advance, making this an excellent buying opportunity at the present price of 117 !
Westhouse target price now 185 !
Faroe Petroleum received a 'buy' rating from Westhouse Research following the company's announcement that it has started drilling the Butch East exploration well in the Norwegian North Sea. The Butch East well is estimated to target 136m of barrels (mmb) gross. "This well is material in terms of valuation and has the potential to substantially add to the value of the main Butch field which is estimated to contain 55mmb gross or c.8mmb net to FPM," Westhouse said.