Faroe in License Swap with E.ON
Faroe Petroleum has agreed to a cross-border swap transaction with E.ON Ruhrgas. The transaction, which is in line with the Company's stated strategy of diversifying the asset portfolio and enhancing capital efficiency, involves the additions of a Norwegian exploration license and two UK gas fields to complement the Group's existing interests in the Wissey, Minke, Orca and Breagh gas fields.
In exchange for half of Faroe's 30% stake in Norwegian license PL433 Fogelberg Fogelberg (the Norwegian License won in the 2006 APA Round) together with cash consideration and a well carry, E.On Ruhrgas will provide:
-4.83% unitized interest in the producing Schooner gas field (UK);
-7.5% pre-unitized interest in undeveloped Topaz gas field (UK); and
-10% interest in License PL376 (Norway)
The total net consideration payable by Faroe to E.ON Ruhrgas under these arrangements will be a 15% interest in the Company's Fogelberg (Faroe retains a 15% interest), £6.8 million cash (which includes the assignment of significant Plant and Machinery Allowances) and a carry on certain costs associated with E.ON's share of the PL376 well.
The Company will finance the acquisition and work program costs from a combination of its own cash resources and bank debt (Faroe has agreed terms with a leading oil and gas bank to provide a borrowing base facility to finance the acquisition 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 UK and the MPE in Norway, all joint venture parties, [the waiver of pre-emption rights] together with the provision of suitable decommissioning security arrangements in connection with the Schooner Field.
Graham Stewart, Chief Executive of Faroe Petroleum, commented:
"This exciting cross-border swap transaction clearly demonstrates the benefit of leveraging our existing assets in a highly competitive market place. The deal brings us a further exciting near-term, Statoil-operated exploration well in Norway, 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, which collectively are expected to make a material and capital efficient contribution towards Faroe's forward program costs. We also look forward to the drilling of an exciting exploration well on the highly prospective PL376 license during 2008."
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