Faroe Petroleum Acquires Near Term Production in the North Sea
Faroe Petroleum has agreed, subject to approval by the UK and Dutch regulatory authorities, to the acquisition from ConocoPhillips of its equity stake (5.89%) in a package of pre-development assets in the Southern North Sea. The acquisition is in line with the Company's stated group portfolio strategy of enhancing diversity and reducing overall risk profile.
The package consists of three undeveloped gas field discoveries: Minke Main field, which is scheduled for near term development, together with the nearby Minke Graben and Orca gas fields upon which development decisions are anticipated in 2007. The assets are situated in UK Blocks 44/24a, 29b and 30 (Faroe's interest 5.89%), approximately 25 kilometers east of the producing Caister-Murdoch gas fields and 13 kilometers south west of the D15 platform in the Dutch sector. In addition, there is the potential for the undeveloped fields to extend over the UK border into Dutch waters with the possibility of additional reserves within Dutch Block D15b (Faroe 5%). Exploration potential also exists within Dutch Block D18a (Faroe 2.5%).
Field partners in the UK are the European utility companies E.ON Ruhrgas (42.67%), RWE Dea (35.84%), Gaz de France (15.6% and Operator in the UK and Holland) together with Wintershall on the Dutch side. The development plan for the first of these fields, Minke Main, is for a single sub-sea well, tied-back to the existing D15 platform facilities offshore Holland, operated by Gaz de France, with first gas expected in the first half of 2007. Assuming the field development plan is approved by the relevant authorities, net reserves attributable to Faroe Petroleum in respect of Minke Main are estimated to be 2.45 billion cubic feet of gas. Gross development costs for Minke Main are estimated at £45 million with a net cost to Faroe of £2.65 million over two years. The nearby Minke Graben and Orca gas fields offer considerable additional reserve potential and value to Faroe Petroleum as and when decisions are taken to proceed to development.
Faroe Petroleum's North Sea portfolio, which now numbers ten licenses, is designed to complement the Company's significant and strategic 11 license Atlantic Margin portfolio, by focusing on opportunities close to existing production infrastructure, with potential to generate early cash flow. These SNS assets complement Faroe Petroleum's recently announced acquisition from Sterling Resources of an interest in UK SNS Licenses 42/13 and 42/12, thereby providing the foundations for a new core area in the UK Southern North Sea Gas Basin focused on creating value through early cash flow.
Graham Stewart, Chief Executive of Faroe Petroleum, commented:
"This transaction is our second Southern North Sea acquisition in recent months, and secures Faroe Petroleum its first development assets which are expected to achieve production in early 2007. Cash flow from these gas fields will, in addition to making a significant contribution towards our operating costs, also provide a tax-efficient route to capitalizing on the Company's carried forward exploration losses, thereby adding further near term value. In the highly competitive market we operate in, by acquiring such assets at the pre-development stage, Faroe has been able to reduce its exposure to competition and high prices."
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