Faroe Petroleum Plc Regulatory News (FPM)

30 Nov 2007 14:45

Faroe Petroleum PLC30 November 2007 30 November 2007 Faroe Petroleum plc ("Faroe Petroleum", "Faroe" or the "Company") Secures Further UK Development and Production Gas Interests and Norwegian Exploration Licence in Swap Transaction with E.ON Faroe Petroleum, the independent oil and gas company focusing principally onexploration in the Atlantic Margin, the North Sea and Norway, is pleased toannounce that it has agreed a cross-border swap transaction with E.ON Ruhrgas .The transaction, which is in line with the Company's stated strategy ofdiversifying the asset portfolio and enhancing capital efficiency, involves theadditions of a Norwegian exploration licence and two UK gas fields to complementthe Group's existing interests in the Wissey, Minke, Orca and Breagh gas fields. In exchange for half of Faroe's 30% stake in Norwegian licence PL433 Fogelberg(the Norwegian Licence won in the 2006 APA Round) together with cashconsideration and a well carry, E.On Ruhrgas will provide: • 4.83% unitised interest in the producing Schooner gas field (UK);• 7.5% pre-unitised interest in undeveloped Topaz gas field (UK); and• 10% interest in Licence PL376 (Norway) UK Schooner Gas Field (Faroe 4.83%) The field, operated by Tullow Oil SK Limited, is located predominantly in Block44/26a though extending into 43/30a approximately 34 kilometres South East ofthe Murdoch Field. Schooner has been in production since 1996 and is expectedto continue producing into 2019. Remaining gross reserves at 1 July 2007,assuming no field redevelopment, were estimated to be 64 billion cubic feet(bcf) (3.1bcf net to Faroe). The main reservoir is in the Carboniferous Ketch formation consisting ofcontinental, alluvial-fluvial channel sandstones and shales that thicken to thesouth east. Current gross production from Schooner is approximately 24 mmscf/day (net Faroe 1.16 mmscf/d equivalent to 190 boe/d). The current recoveryfactor is a relatively low 45%, and there is the potential for this to besignificantly improved through a field redevelopment programme which commencedin 2006. This programme involves drilling new wells and sidetracks andwork-overs of existing wells. To date 10 wells have been drilled from a 12 slottemplate from the Schooner platform. UK Topaz Gas Field (Faroe 7.5% pre-unitised interest) This undeveloped gas field straddles Blocks 49/1a and 49/2a and is located 14kilometres southeast of Schooner. The Company is acquiring E.ON Ruhrgas' 25%interest in Block 49/1a to derive a 7.5% field interest, through the unitisationagreement currently under negotiation. RWE DEA UK SNS Limited is the operator of the field and the planned developmentwill be a single well tieback to Schooner and the CMS system. The gross reservesare estimated to be 32bcf, with net reserves attributable to Faroe estimated tobe 2.4bcf. Faroe expects the field development plan to be submitted forapproval in the near future and for development drilling to take place in thefirst half of 2008. Production is expected to commence in early 2009 andcontinue until 2017. Norway Exploration Licence PL 376 (Faroe 10%) Licence PL376 (the "Licence") comprises Block 35/6 and Part Block 35/9, and islocated on the North East flank of the North Viking Graben. In addition to E.ONRuhrgas (10% retained interest), the partnership includes StatoilHydro (operatorwith 60%) and Gaz de France (20%). No wells have been drilled on the Licence,despite being located immediately north of the Jurassic gas/oil Gjoa Field andsouth of the undeveloped Cretaceous Agat gas discovery. Multiple prospects havebeen identified in the Licence, in both structural and stratigraphic closures,with Jurassic and Lower Cretaceous reservoir objectives. The Licence has a firmJurassic well commitment to be completed by January 2009 and the well istherefore scheduled to be drilled during the second half of 2008. Consideration and Completion. The total net consideration payable by Faroe to E.ON Ruhrgas under thesearrangements will be a 15% interest in the Company's Fogelberg (Faroe retains a15% interest), £6.8 million cash (which includes the assignment of significantPlant and Machinery Allowances) and a carry on certain costs associated withE.ON's share of the PL376 well The Company will finance the acquisition and work programme costs from acombination of its own cash resources and bank debt (Faroe has agreed terms witha leading oil and gas bank to provide a borrowing base facility to finance theacquisition and development of these and the Company's other SNS assets). Completion of the transaction is subject to the consent of both BERR in the UKand the MPE in Norway, all joint venture parties, (the waiver of pre-emptionrights) together with the provision of suitable decommissioning securityarrangements in connection with the Schooner Field. Graham Stewart, Chief Executive of Faroe Petroleum, commented: "This exciting cross-border swap transaction clearly demonstrates the benefit ofleveraging our existing assets in a highly competitive market place. The dealbrings us a further exciting near-term, Statoil-operated exploration well inNorway, and expands our portfolio of non-operated gas interests in producing-and near-producing fields in the UK Southern North Sea. "The Company now holds interests in a total of six gas fields, whichcollectively are expected to make a material and capital efficient contributiontowards Faroe's forward programme costs. We also look forward to the drillingof an exciting exploration well on the highly prospective PL376 licence during2008." Ends Enquiries: Faroe Petroleum plcGraham StewartTel: 01224 652 810gstewart@faroe-petroleum.com Panmure GordonKatherine RoeTel: 020 7459 3600kathernie.roe@panmure.com Financial DynamicsJonathon Brill/Billy Clegg/Edward WestroppTel: 0207 269 7157billy.clegg@fd.com Note David Ramsay, who is a Petroleum Engineer (MEng degree in Petroleum Engineeringfrom Heriot-Watt university (1991)), Asset Manager at Faroe Petroleum and whohas been involved in the energy industry for more than 18 years, has read andapproved the technical disclosure in this regulatory announcement. Notes to Editors The Company is actively building a balanced portfolio of operated andnon-operated exploration and appraisal properties, with significant stakes andan active work programme. Faroe Petroleum has through successive licenceapplications and acquisitions built a substantial portfolio of exploration andappraisal assets in the Atlantic Margin, the UK and Norwegian North Sea andNorwegian Sea. The 34 licence portfolio provides considerable spread of risk andreward, encompasses eight licences West of Shetlands, five licences offshore theFaroe Islands, seven licences in the Moray Firth area of the UK Central NorthSea, seven licences in the Southern gas basin and seven licences in theNorwegian North Sea and Norwegian Sea. The Company operates five of its AtlanticMargin licences and four of its North Sea licences. Faroe Petroleum jointventure partners include BP, Chevron, ConocoPhillips, DONG, DSM, Eni, E.ONRuhrgas, GDF, Oilexco, OMV, RWE, Shell and Statoil all of which have anoutstanding track record in oil and gas exploration and development. Faroe Petroleum is quoted on the Alternative Investment Market (AIM) of theLondon Stock Exchange and has its headquarters in Aberdeen, UK. Faroe Petroleumhas a highly experienced team of professionals focused on creating exceptionalvalue for its shareholders. The company recently enhanced its capability throughthe establishment of a new Norway based team in Stavanger, designed tocapitalise on the significant opportunities in that region; most of this newteam joined Faroe from Paladin Resources Norge following Paladin's acquisitionby Talisman in 2006. This information is provided by RNS The company news service from the London Stock Exchange