Energy Voice | Faroe to ‘keep drilling’ as acquisitions prove elusive in ‘tricky’ market

Faroe Petroleum’s existing portfolio can deliver the oil firm’s medium-term growth targets, as acquisitions prove to be elusive, its boss said yesterday.

Chief executive Graham Stewart said hot competition for a shrinking shortlist of available assets meant securing deals had been tricky.

But Mr Stewart said Faroe was fully-funded to meet its objective of more than doubling production − to 35,000 barrels of oil per day, from 12-14,000 at present – all from its existing assets.

He said: “Some people think there are lots of acquisition opportunities, but there really aren’t.

“There has been an assumption that there are lots of players leaving the North Sea.

“That’s not the case. Some are pruning their portfolios and selling off less important assets.

“Quite a lot of bigger portfolios are going to hit the market. Those are less likely to be an option for us, unless companies are prepared to sell parts of those portfolios individually.”

Mr Stewart said Faroe’s track record for exploration success was above average, and bodes well for the future.

The Aberdeen-headquartered firm will participate in seven exploration and appraisal wells over the coming months. Drilling on the Agar-Plaintain prospect – operated by Azinor Catalyst − is under way, and will be followed by Faroe’s Rungne well.

He said: “If we keep drilling, we can keep delivering new discoveries and resources. And we will keep applying for licences to fill the exploration well hopper.”

The company hopes to secure a Norwegian licence for its Edinburgh field, regarded as one of the central North Sea’s largest undeveloped prospects.

The field straddles the border between the UK and Norwegian sectors. Faroe was awarded the UK licence in the 30th bidding round in May.

Interim results showed London-listed Faroe was back in the black in the first half of 2018, posting pre-tax profits of £73 million, compared to a deficit of £6m a year ago.

Revenues dropped to £68m from £80m, as income from “produced but not lifted hydrocarbons” was not included.

Highlights for the period included a discovery at the Iris-Hades field in Norway, 20%-owned by Faroe, which added 42m barrels net to the firm’s resources base.

An appraisal well is slated for the first half of 2019.

Faroe also fended off shareholder DNO’s attempts to place its own nominees on the company’s board.

Mr Stewart said a recent meeting with the Norwegian company had gone “very well”.

He said: “DNO had raised some concerns about our corporate governance and we sought to address those concerns.

“That all went very well. They understand what we’re doing and we do not see any reason to change, but we will always listen to our shareholders.

“We think our corporate governance is exactly what shareholders want.”

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