Faroe Petroleum Plc Regulatory News (FPM)

11 Sep 2006 07:01

Faroe Petroleum PLC11 September 2006 11 September 2006 FAROE PETROLEUM PLC ("Faroe Petroleum" or the "Group") Unaudited Interim Results for the six months ended 30 June 2006 Faroe Petroleum, the independent oil and gas group focused on the AtlanticMargin, the North Sea and Norway, with 22 licences offshore the Faroe Islands,UK West of Shetlands, and North Sea, announces its Unaudited Interim Results forthe six months ended 30 June 2006. HIGHLIGHTS Financial & Corporate • Loss of £1.0 million (2005 restated: £0.3 million) reflecting increased activity and unrealised foreign exchange losses • Successful institutional placing of £25.0 million (£23.5 million net of expenses) in April 2006 • Cash of £42.4 million (2005: £23.9 million) - adequate funds to meet current commitments Strategy • Robust portfolio strategy to explore, appraise and develop in Atlantic Margin and North Sea • Pursuing diversification to enhance the balance of risk and reward • Secured entry to Norway as a new opportunity base • Added first near-term gas properties through acquisitions in UK Southern Gas Basin • Entered new strategic joint venture with subsidiary of US corporation Liberty Mutual Group to pursue joint acquisitions of interests in undeveloped discoveries in UK North Sea Portfolio Activity • Farmed out 80% of cost and operation of drilling Halibut 14/21-Aa wildcat well to Oilexco o Traces of hydrocarbons were encountered, but not in commercial quantities • Commenced drilling of the Statoil-operated, sub-basalt Brugdan wildcat well in the Faroes • Seismic and site surveys undertaken over Freya Licence, West of Shetland • State-of-the-art electromagnetic survey acquired over Tornado Licence, West of Shetland • Entered the next phase of Faroes Licence 005 with well commitment on Anne Marie prospect • Applied for licences in UK's 24th Licensing Round, results expected in October 2006 • Acquired first UK Southern Gas Basin interests: o 10.0% interest in discovery blocks 42/12 and 42/13 acquired from Sterling Resources o 5.9% interest in package of pre-development gas assets from ConocoPhillips • Portfolio now consists of 22 licences: 5 in the Faroes, 15 in UK and 2 in Holland Outlook • Firming up drilling programme • Minke Main gas field development well expected to be drilled in October 2006 • Preparing to farm out near-term Atlantic Margin wells • Preparing for Breagh appraisal well scheduled for 2007 • Preparations underway for applications in Norway's APA 2006 Licensing Round Joe Darby, Chairman of Faroe Petroleum, commented: "The first six months of 2006have seen us make a number of strategically important moves, with expansion intoboth the UK Southern Gas Basin and Norway. We are delighted to have secured astrong team from the outset in Norway and are off to a good start. I am alsopleased with our strengthened finances, through careful cash management and thesuccessful £25 million institutional placement in April, enabling us toparticipate in an ongoing drilling programme and to further grow and develop ourportfolio." ENQUIRIES:Faroe Petroleum plc Financial DynamicsGraham Stewart Billy CleggTel: 01224 652 810 Tel: 0207 269 7157gstewart@faroe-petroleum.com billy.clegg@fd.com FAROE PETROLEUM PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2006 CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW We are pleased to announce the Unaudited Interim Results for the six months to30 June 2006 for Faroe Petroleum. Substantial progress was made during thefirst half of 2006, both strengthening the Company and building on its strategicasset position. Despite continuing high oil prices, the challenges of high rigutilisation, increasing exploration costs and growing competition, we continueto make excellent progress towards our strategic goals. As the Company continues to diversify and strengthen its portfolio, we are verypleased to have made a successful entry into Norway through the establishment ofa new Norway team in Stavanger, and importantly to have satisfied the Norwegianauthorities' pre-qualification requirements. As an addition to our existingfocus areas, Norway offers considerable potential across a spread ofopportunities from low risk appraisal to high impact exploration. We are alsovery pleased to have added a further seven licences to our portfolio, taking itfrom 15 licences at the beginning of the year to 22 licences today. This wasachieved through acquisitions in the UK Southern Gas Basin, as we seek to addlow risk appraisal and development opportunities to our numerous high impactlicences in the Atlantic Margin. We have continued to focus on advancing our operated licences and also inpositively influencing progress on our non-operated licences. In addition, wehave increased the level of resource focused on identifying new opportunities inour core areas. This has included work in respect of new licence applications,such as the UK 24th Licensing Round and the Norwegian APA 2006 Licensing Roundas well as in pursuing potential acquisitions. STRATEGY Faroe Petroleum has over several years successfully built a strong AtlanticMargin portfolio with material stakes and in partnership with some of the mostsuccessful major oil companies in the world, including BP, Chevron, DONG, Eni,OMV, Shell and Statoil. The Atlantic Margin is experiencing something of a "renaissance" following successful discoveries by Chevron and Amerada Hess inrecent years, the successful appraisal of the Laggan gas field and thelong-awaited development of the giant Clair oil field. Faroe Petroleum'sprimary objective is to create value through the commercial exploitation of itsasset base. This involves building upon and leveraging the strengths of theCompany's relationships, reputation, portfolio position, financial position andits highly competent team. Faroe Petroleum prioritises the management of its portfolio in order toconstantly improve the balance among risk, reward and timetable, across itsassets. The Company aims to ensure participation in a highly material anddynamic drilling programme of quality opportunities, and in a timely manner. Faroe Petroleum's recent strategic entry into Norway puts it in an excellentposition to build a new portfolio in Norway to complement the Atlantic Marginand North Sea properties through basin diversification. The Company's decisionto enter Norway relates principally to Norway's vast potential for finding newresources, its outstanding exploration success rate and the fact that it remainsvery much an under-explored province. Norway has also recently implemented afavourable tax structure designed to encourage new exploration. We believe thecombination of our extensive knowledge of Norway, our good relationships withthe authorities there and with many significant Norway-focused oil companiesgreatly enhances our potential to achieve success in this country. With the UK's demand for indigenous gas continuing to grow, the Board decided toacquire a small number of gas interests in the UK Southern Gas Basin in order tointroduce gas plays into the portfolio, as part of our strategy of selectiverisk diversification. In each of the Breagh, Orca and Minke fields, FaroePetroleum has secured interests in low risk appraisal and developmentopportunities with modest cost exposure from Sterling Resources andConocoPhillips respectively. These opportunities are intended to lead to nearterm value generation including cash-flow, in addition to providing furtherexploration upside. Participation in appraising the Breagh gas discovery provides relatively lowrisk scope to move to a near-term gas field development. The Orca and Minkepackage consists of three undeveloped discoveries, the Minke Main, Minke Grabenand Orca gas fields, all of which are expected to be sanctioned for developmentin the near future. Any cash flow from these gas fields will contribute towardsoperating costs and provide tax-efficiencies in respect of the Company's carriedforward exploration losses. Faroe Petroleum has also been very active in building a strong knowledge-baseand understanding of sub-basalt exploration through the many ground-breakingactivities on its 11 licences in the Atlantic Margin, including the applicationof long-offset, "over-under" seismic, electromagnetic survey techniques andsub-basalt drilling. Sub-basalt exploration is becoming an increasinglyimportant area for deeper water exploration, involving the use of newtechnologies to identify and probe prospects beneath the basalt (a dense igneousrock type found across the Atlantic Margin). Our new Norway team alsocontributes significant technological know-how and expertise, notably in theemerging area of 4D seismic interpretation. The Company intends to use itstechnical edge and commercial strengths progressively across its portfolio andalso, where possible, to open up new opportunities for value creation. On 6 September it was announced that Faroe Petroleum had formed an exclusivestrategic joint venture with a UK subsidiary of Liberty Energy Holdings LLC('LEH'), which is a subsidiary of Liberty Mutual Group, to consider and,potentially, acquire and exploit proven undeveloped discoveries in the UK NorthSea. LEH, which is a significant insurance company based in Boston, USA, has anestablished track record of investment in upstream oil and gas assets in NorthAmerica, and through this joint venture intends to expand its operations to theUK North Sea. Faroe Petroleum will play a lead role in bringing suitableopportunities to the joint venture. LEH will initially invest the majority ofthe joint venture's capital requirements in acquiring any such opportunities.The investment model allows for Faroe to participate with no less than 20% inany selected investment opportunities, and with an entitlement to increase itsparticipation to 50% through a pre-agreed option arrangement with LEH. FINANCES Following the successful equity-placing in April, raising £25.0 million beforeexpenses, the Group had cash reserves of £42.4 million at 30 June 2006 (2005:£23.9 million) and has adequate funds to meet all firm work programmecommitments. The Company placed 18,382,353 new ordinary shares at 136 pence pershare (£23.5 million net of expenses). The funds are expected to give FaroePetroleum sufficient capital to invest in the first phase of drilling over thecoming period. The Group made a loss of £1.0 million in the period (30 June2005: £0.3 million reflecting increased activity and unrealised foreign exchangelosses of £0.5 million. The Board of Directors does not recommend the paymentof a dividend. REVIEW OF ACTIVITIES Overview 2006 has so far been successful for Faroe Petroleum in growing and maturing theportfolio, with the addition of seven new licences in the UK and Dutch NorthSea, and the prospect of securing further licences in both the UK and Norwayover coming months. The Group now has important strategic positions in the Atlantic Margin, notablywith four licences on the highly prospective Corona Ridge, and the North Sea.As operator with significant stakes in seven of its 22 licences, the Company isresponsible for a substantial technical work programme. Faroes Licence 002 (Faroe 100%) - Operated by Foroya Kolvetni p/f Located close to the major producing Foinaven and Schiehallion oil fields aswell as the undeveloped Suilven discovery, Licence 002 contains a promisingstructural lead, Orodruin, with significant reserve potential. The licencebenefits from both 2D and 3D seismic coverage as well as considerable data fromthe 2003 Marimas wildcat well. The Group has commenced a full technical reviewwith the intention of maturing a prospect for drilling and has been granted atwo-year extension by the Faroese Government effective 17 August 2006. Licence 005 (Faroe 25%) - Operated by Eni Denmark BV Positioned close to the Faroes/UK boundary line Anne Marie is one of severallarge structural prospects on Licence 005, located in a prominent structuraltrend offsetting the Corona Ridge. The Corona Ridge also contains the recentRosebank/Lochnagar (Chevron) and the Cambo/Lindisfarne (Amerada Hess)discoveries, as well as several other discoveries. Considerable drillingactivity is scheduled to take place on surrounding acreage in both the Faroesand the neighbouring west of Shetlands area during 2006 and 2007. The Group hasentered the next phase of the licence and has made a firm well commitment onAnne Marie to be drilled before 2009. The work programme during 2006 willcontinue to focus on mapping and interpreting all available data, with a view toidentifying a suitable location for the Anne Marie well. Licence 006 Brugdan (Faroe 4%) - Operated by Statoil The Licence 006 Brugdan interest acquired last year from Petrocanada iscurrently being drilled by operator Statoil offshore the Faroes. The Brugdanwildcat well is significant for exploration of this area, as it is the firstsub-basalt well to be drilled in the Faroes. A number of the Company's Faroeseprospects have been mapped beneath the basalt, and hence the Brugdan well issignificant for those plays. Through participation in this well, the Companyhas access to important new geological data. Licence 009 Sildrekin (Faroe 10%) - Operated by Statoil Faeroyene AS This licence contains a very large lead in around 250 metres water depth and issituated in an exciting new exploration province previously undrilled in thewestern edge of the Faroe platform, adjacent to Licence 006. The work programmeconsisting of seismic and other data acquisition is making good progress, andgeological and geophysical studies will be undertaken to define a drillinglocation. Licence 012 Rannva (Faroe 100%) - Operated by Foroya Kolvetni p/f This large licence is located in 500 metres water depth some 170 kilometres westof the BP operated Schiehallion Oilfield. The licence contains a giant leadalong the axis of the Wyville-Thomson Ridge - the largest un-drilled anticlinein north-west Europe. The work programme of seismic acquisition was successfullyundertaken last summer by Faroe Petroleum and the high quality data is intendedto be used to mature a prospect and define a location for the licence's firstwell. United Kingdom Freya (Faroe 100%) - Operated by Faroe Petroleum (U.K.) Limited This Frontier licence located in 140 metres of water includes an oil discoverymade in 1980 by Mobil and an exciting exploration prospect in the North. Thework programme of high technology seismic acquisition was successfullyundertaken last summer by Faroe Petroleum. The new seismic data has beenprocessed and interpreted. A further seismic survey and a site survey have alsobeen undertaken this year ahead of farming out the Company's intended first wellon the licence. Seonaid (Faroe 100%) - Operated by Faroe Petroleum (U.K.) Limited This Frontier licence located in 140 metres of water includes the oil discoverymade by Elf in 1974 as well as a number of structural leads. Existing seismicdata has been reprocessed to allow re-mapping of the prospects. The reprocesseddata is being interpreted and prospects high-graded to allow the Company to farmout an intended well. Tornado (Faroe 20%) - Operated by OMV (U.K.) Limited This licence lies between the undeveloped Suilven discovery and Faroese Licence002, and has an attractive prospect within tie-back distance of Suilven andSchiehallion. The work programme consists of seismic and other data acquisition. This year operator OMV undertook an electromagnetic (EM) survey over thelicence. The new EM data will be integrated with the existing reprocessedseismic in order to define a suitable drilling location. Cardhu (Faroe 10%) - Operator Shell U.K. Limited This Corona Ridge licence has substantial prospectivity and is located on thesame trend as Chevron's 2004 Rosebank/Lochnagar discovery. Good progress isbeing made by the operator which is focusing on reprocessing 2,000 sq km of 3Dseismic data and geological and geophysical studies, with the objective ofidentifying a drilling location. Lagavulin (Faroe 20%) - Operator Chevron (U.K.) Limited This Corona Ridge licence has very substantial prospectivity. The operatorChevron successfully undertook an extensive new state-of-the-art long offset 2Dseismic survey in summer 2005, and this new data is intended to be used toidentify a drilling location. Talisker (Faroe 25%) - Operator Chevron (U.K.) Limited Operated by Chevron together with the Lagavulin licence, this licence, which isalso on the Corona Ridge, similarly has very substantial prospectivity. Theoperator successfully undertook an extensive new state-of-the-art long offset 2Dseismic survey in summer 2005, and this new data is intended to be used toidentify a drilling location. North Halibut (Faroe 45%) - Operator Faroe Petroleum (U.K.) Limited This licence is located in 140 metres of water in a prolific area which hasgenerated several very large fields including the giant producing Piper andClaymore oil fields. The licence contains several attractive large structuresin close proximity of existing infrastructure. All obligation work has beenfulfilled including the licence's first well on the licence, drilled in May2006. The well encountered traces of hydrocarbons, but not in commercialquantities. The substantial data from the well is being analysed to high gradethe remaining prospectivity on the licence. East Halibut (Faroe 100%) - Operator Faroe Petroleum (U.K.) Limited This Promote licence contains several attractive large structures withsignificant potential. It lies east of the Group's North Halibut licence, in140 metres of water on the Halibut Horst, equidistant from the Claymore andBlake oil fields. The ongoing work programme is progressing well, consisting ofthe acquisition of 3D seismic data, reprocessing and geological modelling toidentify a drilling location, in advance of a drill or drop decision. West Halibut (Faroe 50%) - Operator Faroe Petroleum (U.K.) Limited This Promote licence contains several attractive large structures withsignificant potential and is situated to the west of the Group's existing NorthHalibut licence. The licence was awarded jointly to Granby Oil & Gas and FaroePetroleum as the operator and the work programme consists of acquiring hightechnology 3D and 2D seismic, reprocessing and geological modeling to identify adrilling location, in advance of a drill or drop decision. Olivia (Faroe 100%) - Operator Faroe Petroleum (U.K.) Limited This Promote licence has good potential with a substantial lead situated in anexciting new exploration province in the under-explored southern part of theInner Moray Firth. The work programme is progressing well, consisting of hightechnology seismic acquisition and geological studies to identify a drillableprospect in advance of a drill or drop decision. Breagh (Faroe 10%) - Operator Sterling Resources A 10% interest in this significant gas discovery was acquired in June 2006 fromSterling Resources (UK) Limited. In addition to the Breagh gas discovery thisacreage contains un-drilled leads with good upside potential. An appraisal wellis planned to be drilled adjacent to the discovery well 43/13-2, in order toestablish commercial reserves which if successful would lead to earlydevelopment. Orca Minke (Faroe 6%) - Operator Gaz de France In August 2006 Faroe Petroleum acquired from ConocoPhillips an equity stake in apackage of three undeveloped gas field discoveries: Minke Main field, scheduledfor near term development, together with the nearby Minke Graben and Orca gasfields. The assets are situated approximately 25 kilometres east of theproducing Caister-Murdoch gas fields and 13 kilometres south west of the D15platform in the Dutch sector. In addition, there is the potential for theundeveloped fields to extend over the UK border into Dutch waters with thepossibility of additional reserves within Dutch Block D15b. The development plan for the first of these fields, Minke Main, is to tie backto the existing D15 platform facilities offshore Holland, operated by Gaz deFrance. The nearby Minke Graben and Orca gas fields offer considerableadditional value to Faroe Petroleum as and when development decisions are taken. OUTLOOK The outlook for Faroe Petroleum is exciting. We await news on our applicationfor licences in the UK 24th Licensing Round, results of the Brugdan wildcat wellin Faroe, and expect to apply for a number of licences in partnership with anumber of major oil and gas companies in the Norwegian APA 2006 Licensing Round,with awards expected to be announced early in 2007. In October we expect to drill the first development well on the recentlyacquired Minke gas field with first production anticipated in the first half of2007. Development decisions on Minke Graben and Orca are also expected in 2007. Drilling decisions on further West of Shetlands licences will be considered bythe various joint ventures in the near future. Many opportunities are beingpursued to further enhance the portfolio by acquisition and/or trade, and it ishoped that further progress will be reported later this year. In the Atlantic Margin, North Sea and Norway, Faroe Petroleum will continue,through licence applications, acquisition and trade, to seek out attractiveexploration, appraisal and development opportunities with a good portfolio fitand where entry cost, risk and reward balance are acceptable. Having raised further capital earlier this year, we believe the Company is wellpositioned to pursue its strategy and to take advantage of any opportunitieswhich may emerge over coming months. Furthermore, the Group is seeking to pushforward drilling timetables in order to maximise the opportunity to createshareholder value in the short term. We have an outstanding technical team, respected for its technical competence,supported by a strong commercial and financial team. This cross-disciplinaryresource is highly committed and focused on delivering success for FaroePetroleum's shareholders. We look forward to reporting on our continuedprogress towards participation at a material level in a growing programme ofwells over the coming years. Graham D Stewart Joe DarbyChief Executive Chairman 11th September 2006 Unaudited interim results for the six months ended 30 June 2006 FAROE PETROLEUM PLC Consolidated Profit and Loss Account Restated Restated Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Administration expenses (1,172) (670) (1,442) Operating loss (1,172) (670) (1,442) Interest receivable 617 400 907Interest payable and similar charges (493) (2) (17) Loss on ordinary activities before taxation (1,048) (272) (552)Taxation - - - Loss on ordinary activities after taxation retainedfor the period (1,048) (272) (552) Basic and diluted loss per share (p) (1.7) (0.6) (1.1) FAROE PETROLEUM PLC Consolidated Balance Sheet Restated Restated Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Fixed assetsIntangible assets 15,660 10,905 12,298Tangible assets 529 105 110Investments 11 11 11 16,200 11,021 12,419Current assetsCash at bank and in hand 42,435 23,949 22,851Debtors 395 106 398 42,830 24,055 23,249Creditors (amounts falling due within one year) (2,526) (1,456) (2,048) Net current assets 40,304 22,599 21,201 Net assets 56,504 33,620 33,620 Capital and reservesCalled-up share capital 7,382 5,518 5,518Share premium 51,816 30,113 30,113Merger reserve 1,086 1,086 1,086Profit and loss account (3,780) (3,097) (3,097) Shareholders' funds 56,504 33,620 33,620 These interim results were approved by the Board of directors on 11 September2006 and were signed on its behalf by: Graham D StewartDirector FAROE PETROLEUM PLC Consolidated Cash Flow Statement Restated Restated Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Net cash outflow from operating activities (1,226) (611) (567)Returns on investments and 569 392 907servicing of financeCapital expenditure (2,830) (1,040) (2,683)Net cash outflow before financing (3,487) (1,259) (2,343) FinancingIssue of ordinary share capital 25,085 13,400 13,400Issue costs (1,518) (819) (819) Increase in cash 20,080 11,322 10,238 Reconciliation of Net Cash Flows to Movement in Net Funds Restated Restated Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Increase in cash 20,080 11,322 10,238Exchange movements (496) - (14) Movement in net funds 19,584 11,322 10,224Net funds at start of period 22,851 12,627 12,627 Net funds at end of period 42,435 23,949 22,851 FAROE PETROLEUM PLC Statement of Total Recognised Gains and Losses Restated Restated Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Loss for the period (1,048) (272) (552)Exchange gains/(loss) on foreign currency net investments 76 (420) (273)Fair value of share options 289 133 266Total recognised losses for the period (683) (559) (559) Reconciliation of Movements in Shareholders' Funds Restated Restated Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Loss for the period (1,048) (272) (552)Exchange gains/(loss) on foreigncurrency net investments 76 (420) (273)Fair value of share options 289 133 266New share capital subscribed 23,567 12,581 12,581 Net change in shareholders' funds 22,884 12,022 12,022Opening shareholders' funds 33,620 21,598 21,598Closing shareholders' funds 56,504 33,620 33,620 Notes: (i) Basis of preparation The interim financial information in this announcement has been prepared on thesame basis and using the same accounting policies as were applied in the Group'sannual accounts for the year ending 31 December 2005 with the exception of theaccounting for share based payments. Effective 1 January 2006 the Group has adopted FRS 20 Share Based Payments asits policy for accounting for share based payments. Under FRS 20, an expense isrecognised in the profit and loss account for all share-based paymentscalculated based on the fair value at the date of grant using the Black-Scholespricing model. Compliance with FRS 20 has reduced 2005 interim shareholders'funds by £nil and increased the 2005 interim loss in by £133,000. The net lossfor 30 June 2006 has been increased by £289,000. The financial information for the six months ended 30 June 2006 is unaudited. Inthe opinion of the directors the financial information for this period fairlypresents the financial position, results of operations and cash flows for theprior in compliance with UK Companies law and UK generally accepted accountingprinciples. These interim financial statements do not constitute statutory accounts of theGroup within the meaning of Section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 December 2005 have been filed with the Registrarof Companies. The auditor's report on those accounts was unqualified and did notcontain any statement under Section 237 of the Companies Act 1985. (ii) Loss per share The calculation of loss per share is based on the weighted average number ofordinary shares in issue during the period of 62,303,532 (30 June 2005:47,637,642, 31 December 2005: 51,571,080). There is no difference between thediluted loss per share and the loss per share presented. (iii) Dividend The Directors do not recommend payment of a dividend. (iv) Foreign currencies The assets and liabilities and profit and loss accounts of foreign subsidiariesare translated at the closing exchange rates in accordance with the netinvestment/closing rate method at the closing rates of £1:DKK10.7885 as at 30June 2006 (31 December 2005: £1:DKK10.8545; 30 June 2005: £1:DKK 11.0524).Gains and losses arising on these translations are taken to reserves. (v) Reconciliation of loss on ordinary activities to net cash flow fromoperating activities Restated Restated Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Operating loss (1,172) (670) (1,442)Depreciation charges 52 9 37Fair value of share options 289 133 266(Increase)/decrease in operating debtors 41 22 (270)(Decrease)/increase in operating creditors (436) (103) 842Net cash outflow from operating activities (1,226) (611) (567) (vi) Contingent liabilities On 27 June 2006 the Company reached an agreement with Sagex Group AS ("Sagex")to issue 140,000 ordinary shares of 10 pence each to Sagex at a price of 32pence per share in full and final settlement of all disputes between Sagex andForoya Kolvetni p/f ("FK"). The share issue price of 32 pence was calculatedwith reference to the December 2002 40:1 share for share exchange as between theCompany and FK, the option by Sagex to acquire 3,500 FK shares at 140 Kronereach. (vii) Subsequent events On 6 June 2006 Faroe Petroleum announced that it had entered into a conditionalsale and purchase agreement to acquire from Sterling Resources (UK) Limited a10.0% equity stake in Blocks 42/13 and 42/12 (operated by Sterling), whichcontain the Breagh gas discovery as well as various un-drilled. The deal wascompleted in September 2006. An appraisal well is planned to be drilledadjacent to the discovery well 43/13-2. On 4 August 2006 the Company announced that it had entered into a sale andpurchase agreement to acquire from ConocoPhillips an equity stake in threeundeveloped gas field discoveries: Minke Main, Minke Graben and Orca. The assetsare situated in UK Blocks 44/24a,29b and 30 (Faroe's interest 5.89%),approximately 25 kilometres east of the producing Caister-Murdoch gas fields and13 kilometres south west of the D15 platform in the Dutch sector. In addition,there is the potential for the undeveloped fields to extend over the UK borderinto Dutch waters with the possibility of additional reserves within Dutch BlockD15b (Faroe 5%). Exploration potential also exists within Dutch Block D18a(Faroe 2.5%). The development plan for the first of these fields, Minke Main, isfor a single sub-sea well, tied-back to the existing D15 platform facilitiesoffshore Holland, operated by Gaz de France, with first gas expected in thefirst half of 2007. On 6 September it was announced that Faroe Petroleum had formed an exclusivestrategic joint venture with a UK subsidiary of Liberty Energy Holdings LLC('LEH'), which is a subsidiary of Liberty Mutual Group, to consider and,potentially, acquire and exploit proven undeveloped discoveries in the UK NorthSea. LEH has an established track record of investment in upstream oil and gasassets in North America, and through this joint venture intends to expand itsoperations to the UK North Sea. Independent Review Report by KPMG Audit Plc to Faroe Petroleum plc Introduction We have been engaged by the company to review the financial information set outon pages 9 to 14 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the company's annual accountshaving regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review is substantially lessin scope than an audit performed in accordance with Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG Audit Plc Chartered Accountants London 11 September 2006 This information is provided by RNS The company news service from the London Stock Exchange