Faroe Petroleum Plc Regulatory News (FPM)

20 Sep 2005 07:02

Faroe Petroleum PLC20 September 2005 20th September 2005 FAROE PETROLEUM PLC ("Faroe Petroleum" or the "Group") Unaudited Interim Results for the six months ended 30 June 2005 Faroe Petroleum, the independent oil and gas group focused on the Atlanticmargin and the North Sea, with interests offshore the Faroe Islands and theUnited Kingdom, announces its Unaudited Interim Results for the six months ended30 June 2005. HIGHLIGHTS Corporate • Six new licences awarded: o 2nd Faroes Licensing Round: awards of two Faroese licences, one as 100% licencee and operator, and one in partnership with Statoil, DONG and Shell o 23rd UK Licensing Round: awards as operator of three UK Promote licences, two as 100% licencee and one in a 50/50 joint venture with Granby Oil & Gas• First North Sea acquisition: North Halibut exploration licence acquired from Shell and Esso• Faroes Licence 002 stake increased to 100% and operatorship in transaction with Eni Exploration activity • Very good technical progress being made on all licences• Seismic surveys successfully undertaken over six Atlantic margin licences• Considerable technical programme underway to evaluate newly acquired data Financial• Successful fund-raising of gross £13.4m, to finance exploration programme• Cash of £23.9m (30 June 2004: £13.6m) - sufficient funds to meet all firm commitments• Loss of £0.1m (30 June 2004: £0.3m) in line with expectation Outlook • Continuing focus on strengthening portfolio - many new opportunities being pursued• Several prospects being matured for drilling in 2006/7 Joe Darby, Chairman of Faroe Petroleum, commented "2005 is turning into anothervery important year for the Group. Our portfolio has strengthened considerablyfollowing successful awards in two licence rounds and two acquisitions.Excellent progress has been made in acquiring new state of the art seismic,including two surveys operated by Faroe Petroleum in the Atlantic margin, and welook forward to the start of our drilling programme in 2006." ENQUIRIES: Faroe Petroleum plc Financial Dynamics Graham Stewart Billy Clegg Tel: 01224 652 810 Tel: 0207 269 7157 gstewart@faroe-petroleum.com billy.clegg@fd.com CHAIRMAN'S and CHIEF EXECUTIVE'S REVIEW We are pleased to announce the Unaudited Interim Results to 30 June 2005 forFaroe Petroleum. The first half of the year has been very fruitful, increasingour number of assets considerably in both the Atlantic margin and the UK NorthSea and strengthening the Group's finances ahead of drilling. Substantial resources have been focused on progressing rapidly with the Group'soperated and non-operated work programmes, screening new opportunities,preparing and submitting new licence applications and concluding acquisitions.As we strive to balance the overall risk profile and further strengthen ourstrategic position, Faroe Petroleum has been rewarded for its efforts on severalfronts. Following this year's licence round and acquisition successes we nowhave an excellent spread of independent exploration and appraisal assets, inboth the Atlantic margin and the Central North Sea. Of the Group's 14 licences,seven are operated by Faroe Petroleum and our partners include the major oilcompanies BP, Chevron, DONG, ENI, OMV, Shell and Statoil. STRATEGY Faroe Petroleum is a niche independent oil and gas company with a clear andfocused strategy to create exceptional value from its high-potential portfolio,located principally in the Atlantic margin, but now also in the neighbouringNorth Sea. Building on the strengths of its Faroese heritage, significant portfolioposition and highly competent team, Faroe Petroleum's primary objective is tocreate value through the commercial exploitation of its growing asset base.Consistent with the Group's portfolio based strategy, the Faroe Petroleum isalso actively broadening its property profile, balancing the high upsideAtlantic margin with selective opportunities in the North Sea that arecomplementary both in terms of risk/reward profile and development timescale. As a highly prospective yet largely unexplored OECD region, with recent drillingsuccess, the Atlantic margin is experiencing greatly increased interest amongoil companies seeking to find and exploit significant reserves within closeproximity of markets and infrastructure. Together with the producingSchiehallion, Foinaven and Clair oil fields, and the pending development of theLaggan gas field, vital infrastructure now exists to enhance considerably theeconomic potential of discoveries in this region. In the relatively deep waters of the Atlantic margin Faroe Petroleum partnerswith major oil companies, each in minority joint ventures. In contrast, formost of the Group's new licences, where located in shallower waters, FaroePetroleum has sought to hold a majority stake and operatorship. This approachhas the advantage of giving Faroe Petroleum control over the timetable,technical programme and budget. Faroe Petroleum's strategic position in the Atlantic margin area and ability topartner major oil companies as well as to operate in its own right,distinguishes the Group from all other independents. This approach willcontinue to be applied as Faroe Petroleum seeks to build new positions. FINANCES Following the successful fund-raising in April, raising £13.4m before expenses,the Group had cash reserves of £23.9m (2004: £13.6m) at 30 June 2005. The fundsshould give Faroe Petroleum sufficient capital to invest in the first phase ofdrilling over the coming two years. The Group made a small loss of £0.1m in theperiod (30 June 2004: £0.3m) reflecting expensed overheads and has adequatefunds to meet all firm work programme commitments. The Board of Directors doesnot recommend the payment of a dividend. Adoption of New Long Term Incentive Plan 2005 Following a comprehensive review of the Group's long-term incentivearrangements, the Remuneration Committee has adopted the Faroe Petroleum 2005Long Term Incentive Plan (the "LTIP"), and a conditional award will be grantedfollowing the announcement of these interim results. Although not required underthe AIM Rules, shareholders will be asked to approve the LTIP at the nextgeneral meeting. Full details of the LTIP will be circulated to shareholders atthat time but, in summary, the LTIP will be structured as follows: annual awardsmay be made to executive directors and senior staff; ordinarily no participantwill be granted awards over shares worth more than 150% of base salary in anyfinancial year although, in exceptional circumstances, awards up to 300% of basesalary may be made; the vesting of an award will be subject to the satisfactionof challenging performance criteria (there will be no retesting of theperformance conditions). REVIEW OF ACTIVITIES Overview 2005 has been very successful for Faroe Petroleum resulting in the addition ofsix new licences in both the Faroes and the UK North Sea. In order to furtherenhance the portfolio's risk/reward profile, Faroe Petroleum has focused onidentifying North Sea opportunities to complement the Atlantic margin assetsthrough their ability to be drilled quickly and with scope for near-term cashgeneration through sub-sea tie-back to neighbouring infrastructure. To that endthe Group acquired from Shell U.K. Limited ("Shell") and Esso Exploration andProduction Limited ("Esso") its first North Sea position, the undrilled NorthHalibut licence in the Outer Moray Firth area of the Central North Sea.Further, in the UK 23rd Licensing Round, Faroe Petroleum focused exclusively onNorth Sea opportunities and did not apply for any licences in the Atlanticmargin. This application was rewarded with three neighbouring North Sealicences which give the Group an exciting new core area in the Outer MorayFirth. The Group now has important strategic positions in both the Atlantic margin andthe North Sea and as operator of seven of its 14 licences manages a substantialtechnical work programme. The Group has no firm drilling obligations and hasalready substantially completed its committed work programmes. Faroes Licence 002 (100%) - Operated by Foroya Kolvetni p/f In June 2005 Foroya Kolvetni p/f, Faroe Petroleum's Faroese subsidiary,acquired Eni's stake and operatorship in the deep water Licence 002, locatedclose to the major producing Foinaven and Schiehallion oil fields as well as theundeveloped Suilven discovery. In addition to the potential extension of theMarjun discovery from the adjacent Licence 001, Licence 002 contains a promisingstructural lead, Orodruin, with significant reserve potential. The licencebenefits from both 2D and 3D seismic coverage as well as considerable datagenerated from the 2003 well. Since taking over the licence the Group hascommenced a full technical review with the intention of maturing a prospect fordrilling. Licence 005 (25%) - Operated by Eni Denmark BV Positioned close to the Faroes/UK boundary line Ann Marie is one of severallarge structural prospects on Licence 005, located in a prominent structuraltrend offsetting the Corona Ridge. The work programme during 2005 continues tofocus on mapping and interpreting all available data, with a view to identifyinga suitable well location ahead of a drill or drop decision at the end of 2005. Sildrekin (10%) - Operated by Statoil Faeroyene AS Awarded in January under the Faroes 2nd Licensing Round, this licence contains avery large lead in 250 metres of water and is situated in an exciting newexploration province previously undrilled in the western edge of the Faroeplatform. The work programme consisting of seismic and other data acquisition ismaking good progress. Geological and geophysical studies will be undertaken todefine a drilling location. Rannva (Faroe 100%) - Operated by Foroya Kolvetni p/f Awarded in January under the Faroes 2nd Licensing Round this exciting licence islocated in 500m water depth some 170 kilometres west of the BP operatedSchiehallion Oilfield. The licence contains a giant lead along the axis of theWyville-Thomson Ridge - the largest un-drilled anticline in north west Europe.The work programme of seismic acquisition was successfully undertaken thissummer by Faroe Petroleum. The high quality seismic is intended to be used tomature a prospect and define a location for the licence's first well. United Kingdom Freya (100%) - Operated by Faroe Petroleum (U.K.) Limited This highly prospective Frontier licence located in 140 metres of water includesa discovery made in 1980 by Mobil. The work programme of high technologyseismic acquisition was successfully undertaken this summer by Faroe Petroleum.The new seismic data is currently being processed in advance of interpretationand geological analysis. Once this activity is completed a drilling locationwill be identified for the purpose of planning to drill the licence's first newwell. Seonaid (100%) - Operated by Faroe Petroleum (U.K.) Limited This Frontier licence located in 140 metres of water has an oil discovery madein 1974 by Elf and a number of very promising structural leads. Existingseismic data is currently being reprocessed for this licence to allow re-mappingof the prospects. The reprocessed data will be interpreted and prospectshigh-graded to allow planning of the licence's first new well. Tornado (20%) - Operated by OMV (U.K.) Limited This licence, awarded in 2004 in a location between the undeveloped Suilvendiscovery and Faroese Licence 002, has an attractive prospect within tie-backdistance of Suilven and Schiehallion. The work programme, consisting of seismicand other data acquisition, is making good progress, and geological andgeophysical studies will be undertaken to define a drilling location. Lagavulin (25%) - Operated by Chevron (U.K.) Limited Awarded in 2004, this licence has very substantial prospectivity. The operatorChevron successfully undertook an extensive new state of the art long offset 2Dseismic survey this summer, and this new data is intended to be used to identifya drilling location. Talisker (20%) - Operated by Chevron (U.K.) Limited Awarded in 2004, this licence also has very substantial prospectivity. Theoperator Chevron successfully undertook an extensive new state of the art longoffset 2D seismic survey this summer, and this new data is intended to be usedto identify a drilling location. Cardhu (10%) - Operated by Shell U.K. Limited This exciting licence, awarded in 2004, has very substantial prospectivity andis located on the same trend as Chevron's Rosebank/Lochnagar discovery in 2004.Good progress is being made by the operator which is focusing on reprocessing2,000 sq km of 3D seismic data and geological and geophysical studies, with theobjective of identifying a drilling location. North Halibut (90%) - Operated by Shell U.K. Limited Acquired from Shell and Esso this licence is located in 140 metres of water in aprolific area which has generated several very large fields including the giantproducing Piper and Claymore oil fields. The licence contains severalattractive large structures with significant potential and there is excellentscope for early and low cost development due to the close proximity of existinginfrastructure. All obligation work, which included 3D seismic acquisition andgeological interpretation, has been fulfilled with substantial new geologicalwork greatly enhancing the potential of the licence. Plans are currently beingprepared with a view to drilling in 2006. East Halibut (100%) - Operator Faroe Petroleum (U.K.) Limited Awarded in September under the UK 23rd Licensing Round, this Promote licencecontains several attractive large structures with significant potential. Itlies east of the Group's North Halibut licence, in 140 metres of water on theHalibut Horst, equidistant from the Claymore and Blake oil fields. The workprogramme consists of the acquisition of 3D seismic data, reprocessing andgeological modelling to identify a drilling location, in advance of a drill ordrop decision. West Halibut (50%) - Operator Faroe Petroleum (U.K.) Limited Awarded in September under the UK 23rd Licensing Round, this Promote licencecontains several attractive large structures with significant potential and issituated to the west of the Group's existing North Halibut licence. The licencewas awarded jointly to Granby Oil & Gas and Faroe Petroleum as the operator, andthe work programme consists of acquiring high technology 3D and 2D seismic,reprocessing and geological modeling to identify a drilling location, in advanceof a drill or drop decision. Olivia (100%) - 100% Operated by Faroe Petroleum (U.K.) Limited Awarded in September under the UK 23rd Licensing Round, this Promote licence hasgreat potential with a substantial lead situated in an exciting new explorationprovince in the under-explored southern part of the Inner Moray Firth. The workprogramme consists of high technology seismic acquisition and geological studiesin the first two years to identify a drilling location and to screen the entirearea for prospectivity in advance of a drill or drop decision. OUTLOOK Following the fund-raising in April, the Group plans to push forward drillingtimetables in order to maximise the opportunity to create shareholder value inthe near term. Buoyed by Chevron's discovery of the significant Rosebank/Lochnagar field in2004, several Atlantic margin wells are scheduled for drilling in 2006 andbeyond. With continuing high oil prices, demand to invest in attractiveexploration projects is growing, highlighted further by the significant numbersof new exploration licences awarded in the UK 23rd Licensing Round. Oilcompanies' increasing requirement to replace reserves or establish a position inthe Atlantic margin and North Sea, puts Faroe Petroleum in a strong position asour prospects are prepared for drilling. Faroe Petroleum will continue to seek out attractive exploration, appraisal andpossibly development opportunities with a good portfolio fit, through licenceapplications, acquisition and trade in the Atlantic margin, North Sea andadjacent areas. The Group will always aim to retain material equity stakes inits projects, to participate in as many of its targeted wells as feasible, andto bring forward the drilling date wherever possible. Our first class team continues to push out the boundaries and we believe we willcreate significant value for our shareholders. We hope to report on furtherprogress in the coming months. Graham D Stewart Joe DarbyChief Executive Chairman 20th September 2005 Unaudited interim results for the six months ended 30 June 2005 Consolidated Profit and Loss Account Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Administration expenses (537) (577) (758) Operating loss (537) (577) (758) Interest receivable 400 273 582Interest payable and similar charges (2) - (2) Loss on ordinary activities before taxation (139) (304) (178)Taxation - - (1) Loss on ordinary activities after taxationretained for the period (139) (304) (179) Basic and diluted loss per share (p) (0.3) (1.0) (0.4) Consolidated Balance Sheet Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Fixed assetsIntangible assets 10,905 7,903 9,398Tangible assets 105 35 57Investments 11 11 11 11,021 7,949 9,466 Current assetsDebtors 106 106 128Cash at bank and in hand 23,949 13,629 12,627 24,055 13,735 12,755Creditors (amounts falling due within one year) (1,456) (644) (623) Net current assets 22,599 13,091 12,132 Net assets 33,620 21,040 21,598 Capital and reserves Called-up share capital 5,518 4,297 4,299Share premium 30,113 18,751 18,751Merger reserve 1,086 916 1,086Profit and loss account (3,097) (2,924) (2,538) Equity shareholders' funds 33,620 21,040 21,598 Consolidated Cash Flow Statement Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Net cash outflow from operating activities (611) (576) (589) Returns on investments and servicing of finance 392 270 580 Taxation - - (1) Capital expenditure (1,040) (355) (1,655) Net cash outflow before financing (1,259) (661) (1,655) FinancingIssue of ordinary share capital 13,400 - -Issue costs (819) - - Increase/(decrease) in cash 11,322 (661) (1,655) Reconciliation of Net Cash Flows to Movement in Net Funds Unaudited Unaudited Audited Six months Six months Year to to 30 June to 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Increase/(decrease) in cash 11,322 (661) (1,665) Exchange movements - 15 17 Movement in net funds 11,322 (646) (1,648)Net funds at start of period 12,627 14,275 14,275 Net funds at end of period 23,949 13,629 12,627 Statement of Total Recognised Gains and Losses Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Loss for the period (139) (304) (179) Exchange (loss)/gains on foreign currency netinvestments (420) (358) 73 Total recognised losses for the period (559) (662) (106) Reconciliation of Movements in Shareholders' Funds Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 rLoss for the period (139) (304) (179)Exchange (loss)/gains on foreign currency net investments (420) (358) 73New share capital subscribed 12,581 - 2 Net change in shareholders' funds 12,022 (662) (104) Opening shareholders' funds 21,598 21,702 21,702 Closing shareholders' funds 33,620 21,040 21,598 Notes: (i) Basis of preparation These interim financial statements do not constitute statutory accounts of the Group within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2004 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain 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 of ordinary shares in issue during the period of 47,637,642 (30 June 2004: 42,966,945, 31 December 2004: 42,974,780). There is no difference between the diluted 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 Foroya Kolvetni p/f (the Faroese subsidiary) are translated at the closing exchange rates in accordance with the net investment/ closing rate method at the closing rates of £1:DKK11.0524 as at 30 June 2005 (31 December 2004: £1:DKK10.4939; 30 June 2004: £1:DKK 11.0810). Gains and losses arising on these translations are taken to reserves. The movement in intangible assets comprises capital expenditure in the period of £1,934,000 offset by foreign exchange losses of £427,000. (v) Reconciliation of loss on ordinary activities to net cash flow from operating activities Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Operating loss (538) (577) (758)Depreciation charges 8 7 18Decrease in debtors 22 34 11(Decrease)/increase in trade creditors (103) (40) 140 Net cash outflow from operatingactivities (611) (576) (589) 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 7 to 11 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 2005. KPMG Audit PlcChartered AccountantsLondon 20th September 2005 This information is provided by RNS The company news service from the London Stock Exchange