Post on 19-Jun-2020
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Faroe has developed a geographically focussed exploration-led and
production-backed strategy which is delivering exceptional results
Outstanding, diversified full-cycle portfolio of assets High quality large exploration acreage position in Norway Ongoing fully-funded, multi-well, sustainable drilling programme Several significant discoveries maturing towards development Material, well balanced and tax efficient production – generating cash Strategically well positioned
Balance sheet strength Robust balance sheet, with strong cash position, low gearing and
significant debt facility
Benefiting significantly from 78% tax refund incentive for Norwegian
exploration
Faroe’s world class sub-surface competence is at the heart of our
success
Faroe is robust and well positioned for growth in a low commodity
price environment
Faroe is well capitalised and on track to become a leading independent E&P player in the North Sea
Faroe overviewIntroduction
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Faroe’s growth modelBuilding core value and scale
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Maintain significant portfolio of Prospective Resources Participate in Licence Rounds – excellent track record of awards Proactive approach to farm-ins/farm-outs
Grow 2C Contingent Resources High-graded, high-quality programme of E&A wells Optimum working interests and good success rate (1 in 3) Low finding costs of c$1.5/boe
Grow 2P Reserves Progress discoveries to FDP sanction Participate prudently in robust development projects Swap 2C contingent for 2P reserves where appropriate
Grow Profitable Production Exploit market opportunities through acquisitions & swaps Invest in our producing fields where appropriate
Prudent financial management Ensure balance sheet strength at all times
Production and Development assetsBuilding production base and growing reserves
Diversified production base (50:50 Norway/UK and 50:50 oil/gas) with infill and near-field upside potential to boost production
Lowered opex and long life assets
2P Reserves almost doubled since last year from 30.6 to 57.4mmboe
Strong balanced production, well performing assets, low opex per boe
Brage
(Faroe: 14.26%)
Oil field in Norwegian North Sea – Wintershall-operated
Two successful infill wells in 2015 – new programme being planned
Butch
(Faroe: 15%) Development project in Norwegian North Sea – Centrica-operated
FEED project ongoing - FDP submission planned for end of 2016
Njord/Hyme/ Snilehorn
(Faroe: 7.5%)
Oil and gas field in the Norwegian Sea – Statoil-operated
Production suspended in June - Njord Future project underway
Pil
(Faroe: 25%) Oil and gas field in the Norwegian Sea – VNG-operated
Feasibility confirmed for both subsea satellite and stand alone solutions
Ringhorne East
(Faroe: 7.8%) Oilfield in Norwegian North Sea - Exxon-operated
Low operating cost, stable production
Blane
(Faroe: 30.5%) Oilfield in Central Graben UK - Repsol-operated
Low operating cost, stable production
Schooner & Ketch
(Faroe: 60%)
Gas fields in the UK Southern Gas Basin – Faroe-operated
Stable gas production – gas sold into the UK market
Total: 57.4 mmboe
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Brage
NjordAreaPil
RinghorneEast
ButchBlane
Schooner& Ketch
Butch (Norway) – development plannedExcellent value creation opportunity
Butch oil field (Faroe 15%), operated by Centrica
Southern North Sea, 66m water depth
Close to infrastructure - Ula and Gyda
Excellent quality reservoir, light oil
Development project – planning work ongoing
Project passed concept selection in H2 2015
Selected concept:
Subsea tie-back to Ula via Oselvar
Two production wells and one water injection well
2P Reserves of 42 mmboe (gross)*
Expected on stream in 2019 - plateau production of approx. 35,000 boepd gross (5,250 boepd net to Faroe)
Front End Engineering and Design project on track
Subsea and drilling costs major part of capex – to benefit from reduced market rates
FDP submission currently planned for end 2016
5Exciting material sub-sea oil field development will benefit from significantly lower capex
* CPR Jan 2016 (Senergy)
Greater Njord Area Strategic position – material value potential in GNA
GNA has yet to be produced reserves in excess of 300mmboe
Njord/Hyme/Snilehorn over 200mmboe gross (Faroe over 15mmboe net)
Pil/Bue/Boomerang 80-200mmboe gross (Faroe 20-50mmboe net)
Njord Future Project: Njord, Hyme, Snilehorn
Njord facility to be refurbished and upgraded
‒ Production stopped June 2016
FDP scheduled for early 2017
First production targeted for 2020/21
Pil, Bue and Boomerang (Faroe 25%) – 2014 and 2015 Faroe discoveries
Reserve range from 80 to 200mmboe gross
Faroe 25% in area equates to 20 to 50mmboe net
Pil development maturing towards concept selection
‒ Njord and Draugen identified as possible export routes
‒ Competitive dynamic around export routes can be leveraged to achieve low cost development
Potential for significant further resource additions through follow-on exploration
Njord – Statoil operated Draugen – Shell operated
6Significant value creation opportunity with material reserves – benefits from reduced costs
CPR Jan 2016 (Senergy)
Recent Faroe transactionAcquisition of Norwegian production portfolio – creates new hub for Faroe
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Transaction overview:
Faroe has agreed to acquire a package of assets from DONG Energy for cash consideration of $70.21mm, effective 1 Jan-16 1
Package includes tax balances of $109mm with a tax value of $84mm (undiscounted)
2015 unit opex of $19/boe for the package 2
Investment programme in hub area being planned to realise material upside and extend field life
Ula Tambar Oselvar Trym Total
Faroe W.I. 20.0% 45.0% 55.0% 50.0%
Operator BP BP Faroe Faroe
2P Reserves*
8.3mmboe
6.4mmboe
1.3mmboe
3.8mmboe
19.8mmboe
2C Resources*
7mmboe
2mmboe
--2
mmboe11
mmboe
2016 4 mthsProduction
2,200 boepd
2,593boepd
1,125boepd
4,064boepd
9,982 boepd
$7,033per boe
2016 4 months production
$3.5per boe
2P Reserves
$2.3per boe
2P + 2C Resources
* CPR Jun 16
1 Acquisition subject to the waiver of pre-emption rights, governmental approvals and other third party consents2 Calculated by Faroe based on information made available by Dong. Excludes insurance costs
Very active programme – fully funded with significant upside potential
E&A Drilling activityHigh quality, flexible exploration, appraisal and infill programme
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All exploration wells are in Norway – benefiting from 78% tax rebate incentive
Further attractive exploration well opportunities are being matured like Rungne, Frisbee and Yoshi
Faroe continues to build its portfolio of exploration licences organically
‒ 5 APA exploration licences won in Norway in January 2015 and a further 6 in January 2016
Economic robustness is a crucial element of pre-commitment screening work
committed
expected
possible
Prospect Equity
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Brasse 50 %
Brasse sidetrack 50 %
Njord NF2 7.5%
Dazzler/Bonè 20 %
Oshun 20 %
Dobby 7.5%
Aerosmith/Iris 20 %
Fogelberg appraisal 25 %
Cassidy 15 %
South East Tor 85 %
2016 2017 2018
31/7-1 A
31/7-1
Brage
Oseberg
South
Located in Greater Brage area – Faroe core hub
Faroe-operated well (Faroe 50%)
Good quality Jurassic reservoir sandstones, analogues to the effective reservoir at the Brage producing field
Gas and Oil
Preliminary analysis indicate oil and gas in Brasse to be of similar quality to the oil and gas produced at the Brage field
33 deg API oil
Size of the Brasse discovery
In aggregate oil equivalents: 43-80 mmboe
Funded 78% by Norwegian State under tax incentive scheme
Well cost to Faroe under £3m (post tax)
Recent significant new oil field discovery by Faroe - BrasseMid-Norway
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Leverage in a low oil price environment
Many North Sea E&P players raised substantial amounts ofdebt prior to the decline in oil prices in mid-2014, capitalisingon a buoyant pricing environment to fund development andexpand production with minimal dilution
However, gearing up at $100+ pricing means many are nowover levered
Significant risk identified among North Sea players
Excessive debt levels have created significant issues for someof these companies, including:
- covenant breaches and covenant renegotiations with banks
- constrained access to equity and debt capital withadditional debt being unsustainable and declining marketcapitalisations meaning using equity to pay down debtbecomes unfeasible
- limited balance sheet flexibility to fund sanctioned projects
Leverage among North Sea E&P players
Source: Companies’ financial statements, Reuters Eikon
561%
502%
347%
189%
99%69%
-28%-60%-100%
0%
100%
200%
300%
400%
500%
600%
Net debt/equity value
11.7x
8.1x
4.6x
3.5x 3.3x2.3x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Net debt/ EBITDA
Leverage of comparable North Sea companies
Net debt to EBITDA multiples
Source: Companies’ financial statements, Reuters Eikon
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Leverage among North Sea E&P players
-100
200
500
800
1,100
1,400
1,700
2,000
2,300
2,600
2,900
USD m
Net Debt Equity Value
0.0
1.2
2.4
3.6
4.8
6.0
7.2
8.4
9.6
10.8
USD bn
Source: Companies’ financial statements, Reuters Eikon
Equity and enterprise value of comparable North Sea companies
Value curve for E&PSources of finance for each phase
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Exploration Appraisal Development Production
Value growth
Capital required
• Equity• Cashflow (if any)• Private Equity• Norwegian tax*• Seed Capital
• Equity• Cashflow (if any)• Private Equity• Norwegian tax*• Specialist finance• Contractor finance
• Equity• Cashflow (if any)• Private equity• Bank RBL• Bond• Contractor finance• Commodity finance
• Equity• Cashflow • Private Equity• Bank RBL• Bond• Contractor finance• Commodity finance
* Norway only (pre-development)
High risk Low riskLow riskMedium risk
Sources of financeIssues to consider
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Status of capital markets
Equity – currently somewhat challenging – waxes and wanes however – «good deals always get funded» - US needs bigger companies Debt – RBL banks «open», but less so for new clients and weaker portfolios; Bond market currently closed (unless >12-14% coupon)
Listed vs private
Different appeal to different sources Listed companies «may» offer liquidity, but regulated, AIM market not universally popular among investors – regarded as «spivvy» Private companies offer investors limit liquidity but greater control Challenge for equity investors of real equity growth potential and exit routes Risk of non payment/default for debt providers (RBL, bonds etc.) Many companies have performed badly and some have gone bust This impacts availability of finance to large degree (risk aversion)
Nature of opportunity
Geography » exploration » appraisal » development » production » late life » abandonment Different appeal to different sources
Current trends
Current reluctance for capital markets to fund development (with exception of PE), preferring (profitable) production, and even limited exploration New starts currently seem limited to PE backers
Risk appetite
Has become more challenging in recent times, except among counter-cyclical players (bargain hunters, seeking distress/corporate exit)
Commodity price
Massive impact on today’s capital markets; no let up in sight (yet)
Portfolio balance
Debt providers see portfolio balance and risk diversification Equity providers also seek this but in some cases prefer heavy exposure to single assets
Commerciality
Commerciality of assets becoming key – not only on opex basis but full cycle (to achieve real returns)
Summary and outlookStrategically well placed for growth - financially and operationally robust
Solid and proven business model delivering sustainable value growth, through drill-bit and transactions
Exploration-led strategy continues - underpinned by production and Norwegian tax rebate – recent Brasse discovery
Balanced and diversified portfolio - world-class technical team
Financially robust and operationally strong at low commodity prices
Robust balance sheet, prudent financial management
Production-generated cash flow – benefit from low unit opex
Forward programme is material yet relatively low cost and benefits from Norwegian State refund
Continuing high potential E&A programme in Norway on track, fully funded: Brasse ongoing and Njord North Flank to drill
Capex in 2016 est. £32m (post tax):
Progressing Butch and Pil towards development decisions
Progressing Njord Future Project
Planned growth
Strong balance sheet ensures we are positioned to pursue multiple routes to create value
Actively pursuing growth in 2P and value near term through potential acquisition/consolidation opportunities
Strength in new era, high upside, funded programme & exciting growth opportunities 15
Differentiators
Excellent asset monetisation track record
Production field operator
Financial strength and prudenceExcellent exploration track record -
multi-well programmeExperienced management
& clear strategy
Strong Norway position
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Graham StewartChief Executive Officer
• Instrumental in founding Faroe Petroleum in 1998
• Over 25 years’ experience in oil and gas technical and commercial affairs
• Previously finance director and commercial director at Dana Petroleum 1997 to 2002
• Experience with Schlumberger, DNV Technica, Petroleum Science & Technology Institute
• Offshore Engineering degree (Heriot-Watt University) and MBA (University of Edinburgh )
Helge Hammer Chief Operating Officer
• Joined Faroe Petroleum in 2006
• Over 25 years’ technical & business experience, incl. Shell (Norway, Oman, Australia and Holland)
• Managing Director of wholly owned Norwegian subsidiary, Faroe Petroleum Norge AS
• Previously Asset Manager and Deputy Managing Director at Paladin Resources
• Economics degree (Institut Français du Pétrole, Paris)
• Petroleum Engineering degree (NTH University of Trondheim)
Jonathan Cooper Chief Financial Officer
• Joined Faroe Petroleum as Chief Financial Officer in July 2013
• Former Finance Director of Gulf Keystone Petroleum and Sterling Energy and CFO of Lamprell plc
• Former Director of the Oil and Gas Corporate Finance Team of Dresdner Kleinwort Wasserstein
• Broad range of experience from mergers and acquisitions, public offerings and financing
• Chartered accountant by training having qualified with KPMG
• PhD Mechanical Engineering (University of Leeds)
Executive team
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Disclaimer
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