Faroe Petroleum is pleased to announce it has signed a binding agreement with Equinor Energy AS (a wholly owned subsidiary of Equinor ASA) (Equinor) to swap its interests in the Njord, Hyme redevelopment and Bauge development assets (the “Divested Assets”) in return for interests in four production assets on the Norwegian Continental Shelf: Alve, Marulk, Ringhorne East and Vilje (together the “Acquired Assets”) on a cashless basis (the “Transaction”). The Transaction has an effective date of 1 January 2019 and is subject only to consent from the Norwegian authorities.
Strategic Highlights
- Accelerates targeted production growth adding 7-8,000 boepd in 2019;
- Provides better portfolio balance between production and development with no material impact on reserves;
- Expands footprint through two new core areas (Alvheim and Norne), with near-term catalysts including a firm dual-target exploration well in the Alve licence and an approved development well on Marulk in 2019;
- Significantly reduces Faroe’s capital expenditure by eliminating expenditure on the Divested Assets from 2019;
- Materially reduces Faroe’s operating expenditure per barrel of oil equivalent;
- Creates material tax synergies by accelerating Faroe’s utilisation of its Norwegian tax loss position; and
- Intention to give careful consideration to the optimal mix of reinvestment in the existing portfolio, potential M&A opportunities and returning capital to shareholders following Transaction completion.
Graham Stewart, Chief Executive of Faroe commented:
“I am pleased to announce this significant swap transaction which is in line with our stated strategy of delivering shareholder value through active portfolio management. It immediately rebalances our asset mix towards production after a series of exploration successes and resultant development projects. The Transaction will accelerate delivery of our fully-funded production target, while strengthening further our financial position in advance of reaching investment decisions on our new Iris/Hades and Agar discoveries. We are now confident in our ability to deliver in excess of 50,000 boepd in the medium term.
“The increased cash flow, reduction in capital expenditure and reduction in unit operating cost resulting from the Transaction will further strengthen our already robust balance sheet. This will enable us to give careful consideration to a potential return of capital to our shareholders, as an additional element in our capital deployment mix.”
