Faroe Petroleum Plc Regulatory News (FPM)

24 Mar 2005 12:41

Faroe Petroleum PLC24 March 2005 For immediate release 24 March 2005 Faroe Petroleum plc ("Faroe Petroleum", "the Group" or "the Company") Proposed Placing of 12,181,818 new Ordinary Shares at 110p per share to raise £13.4m Highlights • Placing of 12,181,818 ordinary shares of 10p each at 110p per share, raising £13.4m before expenses: o In addition, up to 6,000,000 existing Ordinary Shares have been conditionally placed with institutional investors at the Placing Price on behalf of Faroe Petroleum Investments Ltd which has until Thursday, 14th April 2005 to confirm the number of Ordinary Shares, if any, that it wishes to sell. • Faroe Petroleum has had significant success in building its portfolio, with the potential to drill several significant exploration and appraisal wells over the coming years: o In the 22nd UK Licensing Round, the Company was, in September 2004, awarded six high potential UK west of Shetlands licences, two as sole licencee and operator and four in partnership with BP, ChevronTexaco, OMV and Shell. Importantly the Company won 100% ownership of the Freya and Seonaid discoveries close to the giant Clair oil field o The Company was also successful in the 2nd Faroes Licensing Round with the awards in January 2005 of two Faroese licences, one as operator and sole licencee and one in partnership with Statoil, DONG and Shell, including 100% ownership of the Rannva lead in the largest un-drilled anticline in Europe o In February 2005 the Company executed its first UK North Sea exploration licence acquisition in the Outer Moray Firth, acquired from Shell and Esso. The 90% equity stake in two part blocks is equidistant from the Claymore and Blake oilfields. • Funds are to be used to generate shareholder value from the Company's asset portfolio through an active drilling programme, and to enable the Group to further enhance its portfolio through selective asset additions. Graham Stewart, Chief Executive of Faroe Petroleum said: "We are pleased to announce this important step forward for the Company. Thesefunds will enable Faroe Petroleum to participate with a material stake in ourfuture drilling programme, giving us the potential to create significant valuefor shareholders from our exciting portfolio of assets." "Faroe Petroleum offers a direct route for investors to gain considerableexposure to the value potential of the Atlantic margin region." Enquiries: Graham Stewart, Chief Executive, Faroe Petroleum plc01224 652 810 Billy Clegg/Jonathon Brill, Financial Dynamics020 7831 3113 Proposed Placing of 12,181,818 new Ordinary Shares Introduction The board of Faroe Petroleum today announces that the Company has conditionallyraised approximately £13.4 million gross (approximately £12.55 million net ofexpenses) through a placing with institutional and other investors of 12,181,818new Ordinary Shares in the Company at 110 p per Ordinary Share. Recent developments On 28 February 2005, the Board announced Faroe Petroleum's preliminary resultsfor the year ended 31 December 2004. These stated that during the fourteenmonth period to the end of February 2005 the Company increased the number oflicences in its portfolio more than five fold, from just two licences in theFaroes at the beginning of the period to the current total of 11 licences. Fourof these are now in the Faroes, six in the UK West of Shetlands area and one inthe UK North Sea. This success was achieved through a combination of licenceapplications and property acquisition. Our partners now include BP,ChevronTexaco, DONG, Eni, OMV, Shell and Statoil, all of which have anoutstanding track record in oil and gas exploration and exploitation in theAtlantic margin. For the first time, on two UK licences and one Faroes licence,Faroe Petroleum is now also an operator in its own right, in each case with 100per cent. licence equity. The Group's Licence Portfolio now consists of a variety of projects in differentgeological plays, encompassing both exploration and appraisal opportunities, allof which hold significant hydrocarbon potential with a range of risk factors.The continued development of the Group and the delivery of long-term value toShareholders will now depend on the successful management and exploitation ofthis Licence Portfolio. Business strategy The Company's exploration and appraisal activities are focused principally onthe Atlantic margin, with a complementary, secondary focus on selectiveopportunities in the North Sea. The Atlantic margin region is emerging as aparticularly exciting and highly prospective province for finding and exploitingoil and gas reserves, with three major oil fields currently in production andthree successful wells drilled in 2004. Faroe Petroleum offers a direct routefor investors to gain significant exposure to the value potential of theAtlantic margin region. In order to create value for shareholders, the Group is pursuing the followingstrategy: • exploring and exploiting the Licence Portfolio, in partnership with proven operators and as an operator in its own right; • active portfolio management through the exploitation, sale or trade of fractional or whole interests in any oil and gas assets; and • selective additions of further suitable properties to the portfolio. Reasons for the Placing The Group now has interests in 35 blocks and 16 part-blocks in the Faroes, Westof Shetlands and North Sea areas covering, in aggregate, some 7,300 sq km gross,with a significant number of leads, prospects and unappraised discoveries.Importantly, in the West of Shetlands, the Company won 100 per cent. ownershipand operatorship of the Freya and Seonaid discoveries adjacent to the giantproducing Clair oil field, and of the Rannva lead in the largest undrilledanticline in Europe. Faroe Petroleum also holds a 90 per cent. equity stake inthe North Halibut licence in a prolific oil-producing region of the UK NorthSea, equidistant from the producing Claymore and Blake oilfields. Faroe Petroleum has built a balanced portfolio of exciting drillingopportunities. The Group has sufficient funds in place to meet its share of thecurrent financial and other obligations including seismic data acquisition andgeological work in respect of the Licence Portfolio, with the exclusion of anydrilling commitments. In order to deliver material shareholder value, theDirectors believe the Company must now commit to drilling this portfolio. The Group plans to maximise the drilling potential of the portfolio through acombination of self-financing and farm-outs to third parties, on a licence bylicence basis. Through the Placing, the Group will have sufficient funds to avoid excessivedilution of its Licence Portfolio equity and thus maximise opportunities tocreate shareholder value. The Directors have therefore decided to proceed with the Placing under which theCompany has conditionally raised from institutional and other investors netproceeds of approximately £12.55 million which will be used to: • finance the Group's planned technical work and drilling programme; • enable the Group to continue to enhance its asset portfolio through selective asset additions; and • provide the Group with additional necessary working capital. Details of the Placing Subject to the passing of the Resolutions at the EGM, the Company is proposingto raise approximately £13.4 million gross (approximately £12.55 million net ofexpenses) by the issue of the 12,181,818 new Ordinary Shares (the "PlacingShares") pursuant to the Placing. The Placing Shares will representapproximately 22 per cent of the enlarged issued share capital of the Company.Williams de Broe has conditionally placed the Placing Shares with institutionaland other investors at the Placing Price. The Placing Shares will when allotted and fully paid, rank pari passu in allrespects with the existing Ordinary Shares. Admission is expected to take place and dealings in the Placing Shares tocommence on AIM on 22 April 2005. Share certificates in respect of PlacingShares to be held in certificated form are expected to be despatched by no laterthan 29 April 2005. Placing Shares to be held in uncertificated form areexpected to be delivered in CREST by no later than 29 April 2005. In addition to the Placing, up to 6,000,000 existing Ordinary Shares have beenconditionally placed with institutional investors at the Placing Price on behalfof Faroe Petroleum Investments Ltd which has until Thursday, 14th April 2005 toconfirm the number of Ordinary Shares, if any, that it wishes to sell under thisarrangement. Current Trading and Prospects On 28 February 2005, the Company reported a small loss on ordinary activities,after taxation of under £0.2 million for the year ended to 31 December 2004(2003: loss of £0.7 million). This equates to a loss of 0.4 pence per share(2003: loss of 2.0 pence per share). Interest income of £0.6 million served toreduce the reported loss for the period (2003: £0.3 million). Capitalexpenditure during the year was £1.7 million (2003: £4.6 million). The netassets of the Company decreased slightly during the period to £21.6 million(2004: £21.7 million). To date, the Group's activities have been those of an oil and gas explorationbusiness with no revenues being generated and the focus being upon licenceapplications, acquisitions and adding value to the Licence Portfolio. The proceeds of the Placing should enable the Company to accelerate its drillingprogramme across a wider portfolio of exploration and appraisal activities, thusproviding Shareholders with the opportunity for greater potential explorationsuccess and a more significant stake in such success. Extraordinary General Meeting An Extraordinary General Meeting is to be held on 18 April 2005 at 11.00 a.m. atthe offices of Financial Dynamics, 26 Southampton Buildings, London WC2A 1PB.At this meeting special resolutions will be proposed, inter alia, to increasethe authorised share capital of the Company, authorise the Directors to allotshares and disapply statutory pre-emption rights in order to effect the Placing. Recommendation The Board believes that the Placing is in the best interests of the Company andShareholders as a whole. The Directors have recommended that Shareholders votein favour of the resolutions to be proposed at the EGM, as they intend to do inthe respect of their own beneficial holdings, which amount in aggregate to311,461 Ordinary Shares (representing approximately 0.72 per cent of the currentissued share capital of the Company). This information is provided by RNS The company news service from the London Stock Exchange