Faroe Petroleum said it failed to discover commercial volumes of hydrocarbons at its Rungne exploration well in the Norwegian North Sea. The well only encountered a water-bearing reservoir in the primary Oseberg formation target, though it did encounter a 17 meter net gas and condensate column in the secondary Ness formation.
Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway and the UK, announces the results of the Faroe-operated Rungne exploration well 30/6-30 in the Norwegian North Sea (Faroe 40% working interest).
The well encountered a 56 m gross (17 m net) gas/condensate column in good quality interbedded Middle Jurassic Ness formation sandstones and 86 m of gross water bearing reservoir in the primary Oseberg formation target.
A preliminary gas and condensate recoverable volume range for the Ness discovery was likely in the range of 12-75 billion standard cubic feet and 0.5m-to-3.9m barrels, respectively, and therefore unlikely to be commercial in isolation.
‘In a six well exploration programme some disappointing outcomes are inevitable,’ chief executive Graham Stewart said. The preliminary gas and condensate recoverable volume range for the discovery in the Ness formation is likely to be in the range of 12-75 Bc and 0.5-3.9 MMbbls respectively.
‘Although no hydrocarbons were present in the main Oseberg target we are pleased to have encountered hydrocarbons in the secondary Ness target which provides new data.’
‘In addition to the ongoing Agar/Plantain well, results from which are expected shortly, Faroe’s exploration programme will continue over the remainder of the year with two further committed exploration wells in Norway: the Brasse East and Cassidy wells.
Aberdeen-based Faroe Petroleum had a “constructive” meeting with Norwegian oil and gas company DNO last week, Faroe’s chief executive said on Tuesday, amid expectations that DNO will attempt a hostile takeover of Faroe in early October, according to a Reuters report.
“Our desire is to continue as an independent company,” Faroe CEO Graham Stewart told Reuters. Faroe operates in the UK North Sea and Norway’s North Sea. Another meeting is planned for next week with DNO.
Faroe shares were trading up 3.5% at around 159p to give Faroe a current stock market value of roughly £574 million, according to Reuters data. Faroe’s share price has soared roughly 66% over the past year.
DNO has built up a 28.22% stake in Faroe, becoming its largest shareholder. Other big shareholders in Faroe include Black Rock Investment Management with 8.71%, Aviva Investors with 6.89%, Invesco Perpetual with 3.59% and Legal & General Investment Management with 3.18%.
The report of a possible hostile takeover bid came as Faroe announced results for the six months ended June 30, 2018. Faroe reported adjusted revenue of £102.2 million (H1 2017: £95.5 million) “reflecting higher commodity prices, partially offset by lower production during period …”.
Profit after tax was £42.5 million (H1 2017: loss £2.9 million) “reflecting higher EBITDAX and £24.5 million post-tax gain on Fenja part-divestment …”. In its outlook, Faroe said: ” …
This outstanding growth programme comes as a result of many years of successful exploration, value accretive M&A and prudent financial management. “Looking ahead, we also expect to add further new organic projects to this already very significant growth plan through the maturing of a number of existing discoveries, including Iris Hades and infill wells.
“In addition, there is the real potential of making new discoveries through our sustained drilling campaign. “Furthermore, we aim to capitalise on our proven M&A track record together with our strong strategic and financial position, as we pursue value-accretive M&A opportunities in our focus areas to complement our organic growth …”.
Faroe CEO Stewart said: “I am pleased to announce the results for H1 2018 – a period of strong profitability, effective portfolio management and material exploration success.
“The significant Iris Hades discovery announced in April 2018 is our largest discovery to date and adds an estimated 42 mmboe of 2C oil equivalent net to the company, substantially increasing our resource base.
“We remain one of the most dynamic and successful explorers in the sector and have a very active drilling programme underway. “Seven E&A wells will be drilled over the coming months including appraisal of Iris Hades, the Agar/Plantain exploration well in the UK currently drilling and the Faroe-operated Rungne exploration well, due to spud soon.
“The unrisked resource potential net to Faroe targeted by the firm six well exploration campaign programme is estimated to be in the range of 80-150 mmboe.
“In the medium term we are targeting material increase in shareholder value and cashflow with our fully funded investment programme across the portfolio, encompassing exploration, appraisal, development and production.
“I remain confident in our ability to deliver our stated near to medium term production growth target of 35,000 boepd, and wish to express my sincere gratitude to all our stakeholders for their ongoing support and to our staff and colleagues for their hard work and commitment to delivering the best possible results for all of our shareholders.
In addition to the ongoing Agar/Plantain well, results from which are expected shortly, Faroe’s exploration program will continue over the remainder of the year with two further committed exploration wells in Norway: the Brasse East (Faroe-operated) and Cassidy wells.”