LONDON (Alliance News) - Faroe Petroleum PLC Tuesday said it has increased its stake in two gas fields in the UK North Sea, one of which is currently producing, after it agreed to acquire Roc Oil (GB Holdings) Ltd for up to USD20.0 million.
Faroe has conditionally agreed to buy the company from Roc Oil (Europe) Ltd for an initial USD17.0 million plus a deferred payment of USD3.0 million depending on certain performance targets.
Through the deal, Faroe will acquire the 12.5% stake Roc Oil (GB Holdings) holds in the Blane field and a 12% stake in the Enoch field, both in the North Sea.
Faroe already holds stakes in both fields, meaning that after the acquisition is completed it will hold a 30.5% non-operated interest in the Blane field and a 13.9% non-operated interest in the Enoch field.
The Blane field is already producing, pumping out an average gross production of 4,070 barrels of oil equivalent per day in 2014 with average operating costs of USD17.7 per barrel of oil. Faroe said there is "considerable upside potential to increase production" from the field and also improve the field's reserves and mine life, it said.
The Enoch field is currently suspended and is planned to be brought back on stream, pending resolution of certain technical and commercial matters. The field was closed in due to a leak at the subsea well-head, which has since been repaired, and the field is currently planned to be brought back on production during the second half of 2015.
The acquisition is expected to complete before the year-end and is subject to UK regulatory approval and a waiver of certain conditions by the Blane Unit joint venture partners.
Faroe said the deal will be funded from cash and existing resources.
"We are very pleased to announce this acquisition, which increases our stake in the low cost, high quality and long field life Blane asset," said Faroe Chief Executive Graham Stewart. "The transaction is also very tax efficient for us, providing shelter for both past and future tax losses in the UK."
"We have at this stage chosen not to amend our production guidance for the year but will review this at the time of our interim results in September," he added.
Faroe shares were down 0.3% to 72.50 pence per share on Tuesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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