Faroe Petroleum Plc Regulatory News (FPM)

27 Feb 2006 07:00

Faroe Petroleum PLC27 February 2006 PRESS RELEASE Embargoed for release at 07.00 hrs on 27 February 2006 FAROE PETROLEUM PLC ("Faroe Petroleum" or the "Company") Preliminary Unaudited Results for the Year Ended 31 December 2005 Faroe Petroleum, the AIM listed oil and gas company focusing on opportunities inthe Atlantic Margin and the North Sea, announces its full year results for the12 months ended 31 December 2005. HIGHLIGHTS Financial & Corporate • Loss of £0.3m (2004: £0.2m) in line with expectation • Placed 12,181,818 new ordinary shares in April 2005 to raise £13.4m (£12.55m net of expenses) • Cash of £22.9m (2004: £12.6m) - adequate funds to meet current commitments Strategy • Continuing portfolio approach to exploration and appraisal, in Atlantic Margin and North Sea • Entry to Norway as new area provides logical step to diversify and strengthen portfolio further • Strong new Norway team appointed and pre-qualification approval by authorities expected soon Portfolio Activity • Portfolio now consists of 15 licences: five in the Faroes and 10 in the UK • Five new licences awarded: - 2nd Faroes Licensing Round: awards of two Faroese licences, one as operator - 23rd UK Licensing Round: awards of three UK Promote licences, all as operator • Faroes Licence 002 stake increased to 100% and acquired operatorship in transaction with Eni • First North Sea exploration licence (North Halibut) acquired from Shell and Esso - farmed out 80% of 2006 well cost to Oilexco, with Company retaining 45% equity • Farm in to Faroes Licence 006 for first sub-basalt well, scheduled for summer 2006 • Very good technical progress being made on all licences to mature for drilling • Seismic surveys undertaken over six Atlantic Margin licences, two operated by Faroe Petroleum Outlook • Two exploration wells scheduled for drilling in 2006: - North Sea: North Halibut well 12/21a-A to be drilled by Oilexco - Faroes: Brugdan well Licence 006 to be drilled by Statoil • Preparations underway for licence round applications in both the UK and Norway Joe Darby, Chairman of Faroe Petroleum, commented: "We continue to strengthenour portfolio as we pursue a programme of licence round applications and farmins. Very good technical progress has been made on each of our licences. I amvery pleased that we are now preparing to start our drilling programme, with thefirst two of many wells in our forward programme, scheduled for summer of 2006.I am also delighted that we are off to a flying start with our new Norwayventure, with a highly experienced team in place to build a new portfolio in aregion noted for outstanding drilling success. " ENQUIRIES: Faroe Petroleum plcGraham Stewart (Chief Executive) Tel: +44 1224 652 810 Financial DynamicsBilly Clegg Tel: +44 207 831 3113 CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW We are pleased to announce the results for Faroe Petroleum plc, for the year2005. Substantial progress was made in 2005 strengthening the Company and building onits strategic position. In particular, considerable effort was applied inmaturing and de-risking the exploration portfolio, in advance of progressing tothe drilling phase. Faroe Petroleum has also successfully increased the numberof licences in its portfolio, taking it from 11 licences at the beginning of theyear to 15 licences by the year end, five of which are now in the Faroes, six inthe UK West of Shetlands and four in the UK North Sea. This was achievedthrough a combination of licence applications and acquisitions. Of the 15licences, eight are operated by Faroe Petroleum - six in the UK and two in theFaroes. In seeking opportunities to diversify the portfolio while maintainingfocus on high impact prospects, Faroe Petroleum now has substantial acreagepositions in two core areas, covering some 8,000 square kilometres, of theAtlantic Margin and the Halibut region of the North Sea. The work programmes undertaken on these licences during 2005 included theshooting of six seismic surveys, two of which were operated by Faroe Petroleum,together with considerable geological and geophysical work. Following the acquisition of our first North Sea position in February 2005, theundrilled Halibut Horst licence in the Outer Moray Firth area, the Company hassuccessfully agreed on 4 January 2006 terms for a farm-out with Oilexco wherebythe first Well 14/21a/A will be drilled by Oilexco who will bear 80% of the costand earn a 55% equity interest. The prospect lies in an exciting, un-drilledarea, in close proximity of a prolific oil producing area, near to the Claymoreoilfield. This first well, one of several required to test this new Outer MorayFirth play, is scheduled to be drilled in 2006. In the Faroes, the Company has consolidated its Licence 002 position throughacquiring Eni's 75% stake and operatorship. In addition, Faroe Petroleum agreedterms with Petro Canada to acquire their 4.04% working interest in FaroesLicence 006. This licence holds the Brugdan prospect, the first sub-basalt wellto be drilled in the Faroes, scheduled for 2006. STRATEGY Faroe Petroleum's strategy is on track: creating value for shareholders bybuilding a world-class oil and gas company through a high-potential drillingportfolio, located in the Atlantic Margin and North Sea. The Company's portfoliois now substantial and offers scope to create considerable returns forshareholders. The Atlantic Margin region is gaining much greater significanceas an important source of new oil and gas reserves. During the year the Clairfield was brought onto production to add to the other producing fields west ofthe Shetland Islands, namely the BP-operated Schiehallion and Foinaven oilfields, which collectively are estimated to produce approximately 200,000barrels of oil per day. With high oil prices being maintained, an outlook of continuing high oil prices,combined with increasing pressure to source more indigenous gas for the UK, morecompanies are looking to the Atlantic Margin for materiality and politicalstability in seeking to explore for new oil and gas fields. Faroe Petroleum'sdeliberate strategy of building an Atlantic Margin portfolio of quality acreageis likely to benefit from the increased interest in this important region. As regards west of Shetlands gas, it is understood that the Laggan gas field,successfully appraised by Total in 2004, is likely to proceed to earlydevelopment in the near term. This is a very important step for the AtlanticMargin, as it will introduce new gas processing and export infrastructure, whichmay assist the economics of developing existing discoveries as well as futurepotential gas discoveries. Following Chevron's Rosebank/Lochnagar discovery inthe west of Shetlands area in 2004, it is understood that there are plans todrill a number of appraisal wells during the summer of 2006. This significantdiscovery located in the former "white zone" is geologically on trend with theAmerada Hess Cambo field discovery, and importantly also the Company's FaroesLicence 005 and UK Cardhu licence, both on the Corona Ridge. Notably, everywell on this ridge has been either a discovery or has encountered hydrocarbons.Appraisal drilling on north Clair is also understood to be taking place during2006, as the Clair development is stepped up. Several new licences in theregion have also been awarded, some of which have drilling commitments. Thecoming period therefore looks set for a significant level of drilling activityin the region. In order to further grow and diversify our portfolio thus improving the risk andreward balance, the Company took the significant decision to enter Norway as animportant new geographic area for Faroe Petroleum. Norway has an outstandingtrack record of exploration success, and yet is a relatively unexploredprovince. This decision is a natural step for Faroe Petroleum due to Norway'sclose proximity and geological similarities, the shared Atlantic Margin, thecommon Nordic history and cultures of the Faroes and Norway. Norway is also acountry in which several of Faroe Petroleum's joint venture partners are veryactive. Norway as a nation has made exploration a political priority and has inthe past year established important new taxation incentives for explorationfocused companies such as ours, whereby 78% of exploration related expenditureis reimbursed to the company in the following tax year. This incentiveframework, under which the Norwegian State finances a substantial portion ofexploration related costs, is intended to increase exploration activity levelsin the region. This incentive clearly offers near-term advantages which willassist the Company in its establishment phase in Norway. In order to realise our goals in Norway, the Company is very fortunate to haveattracted a highly competent and established Norway based team, with anexceptional reputation and track record. Faroe Petroleum's new Norway team hasworked together for many years on the Norwegian Continental Shelf and has anoutstanding past performance built up with several oil companies in Norway,including Enterprise, Paladin, Shell and Statoil. The team was previouslyresponsible for creating a high value portfolio of exploration, development andproduction assets in Norway, and gives Faroe Petroleum an excellent opportunityto expand rapidly its portfolio into Norway. To that end, work has alreadybegun in preparation for applying in the Norwegian 2006 APA Licensing Round. Faroe Petroleum will continue its successful approach of energetically seekingout opportunities, through licence applications, by acquisition and farm in. RESULTS The Group reports a small loss on ordinary activities after taxation for theperiod of £0.3million (2004: £0.2million); this equates to a loss of 0.6 penceper share (2004: 0.4 pence per share). Interest income of £0.9 million (2004:£0.6m) has served to reduce considerably the reported loss for the period. The Group undertook a successful fund-raising in April, raising £13.4m (£12.55mnet of expenses). These funds were secured to give Faroe Petroleum sufficientcapital to invest in the first phase of drilling. Capital expenditure duringthe year was £3.2 million (2004: £1.6 million). The net assets of FaroePetroleum increased during the period to £33.6 million (2004: £21.6 million).The Group has adequate funds to meet all its current obligations. Cash reservesat the year end were £22.9 million (2004: £12.6 million). REVIEW OF ACTIVITIES Overview The Company always seeks out partners who share enthusiasm to drive forward adynamic programme leading to drilling. In some cases, where appropriate, FaroePetroleum will seek to take control of the work programme, budget and timetable,by securing licence operatorship. It remains a key characteristic of theCompany to hold fairly large equity interest positions in its licences,depending generally on risk, reward and capital exposure. This approach allowsFaroe Petroleum to optimise financial exposure to drilling through farm-out tothird parties. Focus has been on progressing the licence work programme commitments and inde-risking each licence in readiness for making drilling decisions. Thisactivity has been very productive and the Company is ahead of schedule in mostareas. In addition, an active role is played by Faroe Petroleum in monitoringand, where appropriate, contributing to technical progress in each of itsnon-operated joint ventures. Atlantic Margin - Faroes Licence 002 (Faroe 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 Marimas well. Since taking over the licence the Grouphas commenced a full technical review with the intention of maturing a prospectfor drilling. Licence 005 (Faroe 25%) - Operated by Eni Denmark BV This exciting undrilled licence, located close to the Faroes/UK territorialboundary offers considerable prospectivity. The licence is only 10 kilometreswest of the Amerada Hess-operated Cambo/Lindisfarne discovery well which wasdrilled in 2004 but the results of which remain unreported by the joint venture. This well lies some 45 kilometres south west of the Chevron operated Rosebank/Lochnagar discovery (2004) which is understood to have further appraisal wellsscheduled for 2006 on this potentially significant discovery. Ann Marie is one of several large structural prospects on Licence 005, locatedin a prominent structural trend offsetting the Corona Ridge, and in the former "white zone" area. The work programme during 2005 focused on the final mappingand interpreting of all available data, the outcome of which is very encouragingand a decision on the Group either moving into the drilling phase of thislicence and committing to a firm well, or dropping the licence, is expectedshortly. Licence 006 Brugdan (Faroe 4%) - Operated by Statoil Faeroyene AS The Company acquired Petro Canada's 4% working interest in the 006 licence, onattractive terms and will participate in a key well scheduled to be drilled inthe third quarter of 2006 by Statoil, to test a very significant prospect calledBrugdan. This is the first sub-basalt well to be drilled in a province, notedfor widespread presence of basalt, which due to its physical properties has madeseismic interpretation particularly challenging. The information from this wellis consequently very important to future Faroes exploration and in understandingthe sub-basalt geology. Licence 009 Sildrekin (Faroe 10%) - Operated by Statoil Faeroyene AS Awarded in January 2005 under the Faroes 2nd Licensing Round, this licencecontains a very large lead in 250 metres of water and is situated in an excitingnew exploration province previously undrilled in the western edge of the Faroeplatform. The 2005 work programme, consisting of new seismic acquisition andother data acquisition, was executed on time and under budget. Geological andgeophysical interpretation on these new data will be undertaken to define adrilling location. Licence 012 Rannva (Faroe 100%) - Operated by Foroya Kolvetni p/f Also awarded in January 2005 under the Faroes 2nd Licensing Round this excitinglicence is located in 500m water depth some 170 kilometres west of the BPoperated Schiehallion Oilfield. The licence contains a giant lead along the axisof the Wyville-Thomson Ridge - the largest un-drilled anticline in north westEurope. The work programme of seismic acquisition was successfully undertakenlast summer by Faroe Petroleum. The high quality seismic is intended to be usedto mature a prospect and define a location for the licence's first well. Atlantic Margin - United Kingdom Freya (Faroe 100%) - Operated by Faroe Petroleum (U.K.) Limited This highly prospective Frontier licence, awarded in 2004, and located in 140metres of water includes a discovery made in 1980 by Mobil. The work programmeof high technology seismic acquisition was successfully undertaken last summerby Faroe Petroleum. The new seismic data is currently undergoing interpretationand geological analysis in advance of a farm out programme. Once this activityis completed a drilling location will be identified for the purpose of planningthe licence's first appraisal well. Seonaid (Faroe 100%) - Operated by Faroe Petroleum (U.K.) Limited This Frontier licence, awarded in 2004, and located in 140 metres of water hasan oil discovery made in 1974 by Elf and a number of very promising structuralleads. Existing seismic data has been reprocessed for this licence to highgrade and re-map the prospects, and to start a farm down project to allowplanning of the licence's first new well. Tornado (Faroe 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 (Faroe 20%) - 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, over/underlong offset 2D seismic survey last summer, and this new data is intended to beused to identify a drilling location. Talisker (Faroe 25%) - Operated by Chevron (U.K.) Limited This 2004 licence, which is adjacent to Lagavulin, also has very substantialprospectivity. The operator Chevron successfully undertook an extensive newstate of the art over/under long offset 2D seismic survey last summer, and thisnew data is intended to be used to identify a drilling location. Cardhu (Faroe 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 made in2004. Good progress is being made by the operator which is focusing onreprocessing 2,000 square kilometres of 3D seismic data and geological andgeophysical studies, with the objective of identifying a drilling location. North Sea North Halibut (Faroe 45%) - Operated by Faroe Petroleum (U.K.) Limited Acquired from Shell and Esso in February 2005, this licence is located in 140metres of water near to a prolific area which has generated several very largefields including the giant producing Piper and Claymore oil fields. Theun-drilled licence contains several attractive large structures with significantpotential and, in the event of a commercial discovery, there is excellent scopefor early and low cost development due to the close proximity of existinginfrastructure. During the period Faroe Petroleum undertook all the requiredpreliminary obligation work, which included 3D seismic acquisition andgeological interpretation, with such new geological work greatly enhancing thepotential of the licence. In January 2006 the licence was farmed out to Oilexcowith the Company retaining a 45% equity interest and 20% cost interest, and adrilling location for the 14/21a-A well has been agreed. Oilexco has the roleof drilling operator and has secured a rig for a planned 2006 well. UK 23rd Round Licensing Awards In September the Group was awarded three Promote exploration Licences in theOuter Moray Firth of the North Sea covering three full blocks and one part blockand measuring 760 square kilometres. The Company is very pleased to havesecured North Sea Promote licences which help to balance the risk and reward ofthe overall Company portfolio. These new licence awards complement FaroePetroleum's exploration licences offshore the Faroes and establish the Companyas a significant player in the un-drilled Moray Firth area. The licences holdsignificant leads and prospects in shallow water and at shallow depths adjacentto the 14/21a-A well to be drilled by the Company in 2006 and operated byOilexco, which together form an exciting, under-explored core area for FaroePetroleum. The Promote licences, designed specifically for the North Sea area,have limited seismic work programme commitments and no firm well obligations,thereby affording the group considerable flexibility going forward. It isnevertheless intended that several wells will be drilled on the licences overthe coming years. East Halibut (Faroe 100%) - Operated by 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 is underway and consists of the acquisition of 3D seismic data,reprocessing and geological modeling to identify a drilling location, in advanceof a drill or drop decision. West Halibut (Faroe 50%) - Operated by 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 with the Company asthe operator, and the work programme is underway and 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%) - 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 is underway and consists of high technology seismic acquisition andgeological studies in the first two years to identify a drilling location and toscreen the entire area for prospectivity in advance of a drill or drop decision. Forward Drilling Programme As a result of Faroe Petroleum's 2005 asset additions, the execution ofextensive high technology seismic programmes, and the execution of successfulfarm-in activity, the Company has assembled a substantive and exciting portfolioof prospects with material equity stakes, lining up a compelling balance of riskand reward, with the commencement of its drilling programme in 2006. There is the potential for multiple wells to be drilled in the Company's 15licence portfolio over the next three years, with the first two wells of thatprogramme now firmly committed. In accordance with the Company's resolutegrowth strategy, any one of these portfolio wells on its own has the potentialto create substantial value for Faroe Petroleum's shareholders. The Company'sdrilling programme is financed from a combination of equity farm out to thirdparties, such as the Oilexco farm down, along with financing from internal fundsin order to achieve an acceptable retention of equity, whilst substantiallyreducing risk exposure. MANAGEMENT DEVELOPMENT We are very pleased to report three important new additions to the Company'smanagement team. Mr Mark MacLennan, formerly of Reach Exploration and First Oil,has joined as Group Business Development Manager based in Aberdeen, effective 1January 2006. Mr MacLennan will focus particularly on growth opportunities,including farm-outs and asset trades. Mr Helge Hammer has been appointedCountry Manager of our new subsidiary Faroe Petroleum Norway, based inStavanger. He joins Faroe Petroleum from Paladin Resources Norway where he wasDeputy Managing Director, after a very successful international career withShell. Mr Andrew Roberts also joins us from Paladin Resources Norway, and hasthe role of Exploration Manager for Faroe Petroleum Norge. Mr Roberts is ahighly regarded geophysicist with a specialisation in 4D seismic interpretation. Prior to Paladin, he worked for Enterprise Oil in UK and Norway. Mr Hammerand Mr Roberts will lead our very experienced Norway team, which will workclosely with the UK and Faroes sub-surface and commercial teams in building astrong and important business portfolio in Norway. OUTLOOK Oil and gas prices have remained high throughout 2005 and look set to continuethat way for the foreseeable future. While this environment is generallypositive for the sector, it also creates a number of significant challenges forour business, namely: increased competition for opportunities; increasedcompetition for drilling rigs, seismic vessels and related hardware, all ofwhich are commanding significantly increased day rates; and increasedcompetition for human resources. In simple terms, resources are becomingincreasingly scarce, and this creates challenges for Faroe Petroleum in pursuingis objectives in a cost effective manner. Despite this, Faroe Petroleum has continued to make good progress during 2005,and has laid the foundations for an important and exciting period ahead. Plansare in preparation to apply for licences in both the UK 24th Licensing Round andthe Norwegian APA Round in 2006, and the Company will continue to pursueacquisitions and trades to continuously improve portfolio balance and enhancethe forward work programme. The purpose of Faroe Petroleum's emphasis onportfolio building and geo-scientific work is to provide shareholders withexposure to the value-creating potential of portfolio drilling. The programmehas now progressed to the stage where two exploration wells are scheduled to bedrilled during 2006, one in the Faroes and one on the Halibut Horst of the NorthSea. These are only the first of several wells being prepared for drilling overthe coming three years and beyond, each of which offers the potential forsubstantial shareholder returns, yet each of which clearly carries the risk offailure. It is for this reason that the Company pursues exploration on aportfolio basis in order to balance out risk and reward over a large number ofdrilling prospects. The most prized of resources are undoubtedly value-creating drillingopportunities, such as those we are building into our portfolio, and with demandfor oil and gas continuing at an all time high, we look forward with optimism toan exciting period ahead. Joe Darby Graham StewartChairman Chief Executive Consolidated profit and loss account for the year ended 31 December 2005 2004 £000 £000 Administrative expenses (1,176) (758) Group operating loss (1,176) (758)Other interest receivable and similar income 907 582Interest payable and similar charges (17) (2) Loss on ordinary activities before taxation (286) (178)Tax on profit on ordinary activities - (1) Net loss (286) (179) Basic and diluted loss per share (p) (0.6) (0.4) All amounts relate to continuing operations. There is no difference between the historical cost profits and losses and theprofits and losses as presented in the profit and loss account above. Consolidated balance sheet at 31 December 2005 2004 £000 £000Fixed assetsIntangible assets 12,298 9,398Tangible assets 110 57Investments 11 11 12,419 9,466 Current assetsDebtors 398 128Cash at bank and in hand 22,851 12,627 23,249 12,755 Creditors: amounts falling due within one year (2,048) (623) Net current assets 21,201 12,132 Net Assets 33,620 21,598 Capital and reservesCalled up share capital 5,518 4,299Share premium account 30,113 18,751Merger reserve 1,086 1,086Profit and loss account (3,097) (2,538) Equity Shareholders' funds 33,620 21,598 Consolidated cash flow statement for the year ended 31 December 2005 2004 Note £000 £000 Cash flow statement Net cash outflow from operating activities 4 (567) (589)Returns on investments and servicing of finance 907 580Taxation - (1)Capital expenditure 4 (2,683) (1,655) Cash outflow before management of liquid resourcesand financing (2,343) (1,665) FinancingIssue of shares 13,400 -Issue costs (819) - Increase/(decrease) in cash in the period 10,238 (1,665) Consolidated statement of total recognised gains and losses for the year ended31 December 2005 2004 £000 £000 Loss for the financial year (286) (179)Net exchange (losses) / gains on foreign currency net investments (273) 73 Total recognised gains and losses relating to the financial year (559) (106) Reconciliation of movements in shareholders' funds for the year ended 31December 2005 2004 £000 £000 Loss for the financial year (286) (179)Exchange (losses) / gains on foreign currency net investments (273) 73New share capital issued 12,581 -New share capital issued for non-cash consideration / subscribed(net of issue costs) - 2 Net movement in shareholders' funds 12,022 (104)Opening shareholders' funds 21,598 21,702 Closing shareholders' funds 33,620 21,598 Notes: 1. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2005 or 2004. The financialinformation for 2004 is derived from the statutory accounts for 2004 which havebeen delivered to the Registrar of Companies. The auditors have reported on the2004 accounts; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The statutory accountsfor 2005 will be finalised on the basis of the financial information presentedby the Directors in this preliminary announcement and will be delivered to theRegistrar of Companies. 2. No dividend is proposed. 3. The calculation of loss per ordinary share is based on losses of £286,000 at31 December 2005 (2004: £179,000) and the weighted average number of ordinaryshares outstanding of 51,571,080 (2004: 42,974,780). There is no differencebetween the diluted loss per share and the loss per share presented. 4. Note on the cash flow statement Reconciliation of operating loss to net cashflow 2005 2004from operating activities £000 £000 Operating loss (1,176) (758)Depreciation charges 37 18(Increase) / decrease in debtors (270) 11Increase in creditors 842 140 Net cash outflow from operating activities (567) (589) 2005 2004Capital expenditure analysis £000 £000 Additions to fixed assets 3,734 1,655Amounts paid and received in respect of licence (1,051) -interests Net cash outflow from operating activities 2,683 1,655 5. On 4 January 2006 the Group entered into a farm-in agreement with OilexcoNorth Sea Limited on its Halibut Horst Blocks 14/21a and 14/22a (Licence P984)whereby Oilexco agreed to incur 80% of the costs associated with the workprogramme, including drilling, well-testing and evaluation work in return forthe right to an equity interest of 55% on satisfying the well obligation. TheGroup will retain 45% equity in the licence, paying a net 20% of the workprogramme costs. Oilexco will have the option on equivalent farm-in terms todrill up to three additional legs from the same wellbore. The well is likely tobe drilled in 2006, but in any event no later than April 2007. On 6 January 2006, the Group formed a new wholly owned subsidiary FaroePetroleum Norge AS (registered in Norway, company number 989399071) to undertakeoil and gas exploration and production activities in Norway. The company haspaid up share capital of NOK 5,050,000 represented by five shares of NOK1,000,000 each with a share premium of NOK 10,000 each. 6. Copies of the full accounts will be posted to all shareholders. Furthercopies will be available from the Company's head office at 24 Carden Place,Aberdeen AB10 1UQ, from the date of posting. Telephone +44 (0)1224 652810. This information is provided by RNS The company news service from the London Stock Exchange