Faroe announced the signing of two new banking credit facilities, which provide substantial additional finance to underpin the Company's growth plans.
The two facilities are:
- NOK 1 billion (approx. £110 million) Norway Exploration Financing Facility, of which NOK 500 million (approx. £55 million) is initially committed by the participating banks, and a further NOK 500 million is available on an uncommitted "accordion" basis. Faroe Petroleum currently has approximately 20 exploration licenses offshore Norway and expects to drill 12 exploration and appraisal wells in Norway by the end of 2013. This facility is designed to have the capability of financing the majority of Faroe's exploration and appraisal costs on the Norwegian Continental Shelf. The facility will mature on 31 December 2014.
- US $250 million (approx. £156 million) Reserve Base Lending Facility, of which US $125 million (approx. £78 million) is initially committed by the banks, and a further US $125 million is available on an uncommitted "accordion'' basis. This facility is available to finance approved capital expenditure, operating costs and acquisitions. The facility will mature on June 30, 2016, with an amortizing repayment profile from June 2013.
Six participating banks have been selected and brought together as one group to provide the two facilities pro rata. The participating banks are BNP Paribas and Lloyds TSB Bank plc, as Mandated Lead Arrangers, together with Commonwealth Bank of Australia, DnB NOR Bank ASA, Royal Bank of Scotland plc and SEB. BNP Paribas are also acting as Facility Agent and Security Trustee under both facilities, with Lloyds TSB Bank plc acting as Technical and Modelling Bank under the Reserve Base Lending facility.
At 1 July 2011 the Group had cash balances of approximately £84.2m and, together with the cash flow from its existing producing assets, which now include the Blane oil field, and the forthcoming production income from the Brage, Njord, Ringhorne East and Jotun fields in Norway, the Group is well financed.
Commenting on the new facilities, Iain Lanaghan, Finance Director, said, "We are delighted to have concluded this financing exercise, and to have received such strong support from our banks, all of whom took part in a competitive process to participate in these facilities. The new facilities provide us with substantial new funding to support the growth of the Group."
"With an exciting drilling program ahead, of which the majority of wells will be drilled in Norway, the new Norway Exploration Financing Facility provides us with a powerful and efficient means of maximizing our equity participation for minimum cost. The combination of our new Reserve Base Lending facility and strong cash flow from our significantly enhanced portfolio of producing assets ensures that Faroe Petroleum is well funded for investment growth in our core areas."