Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway and the UK, is pleased to announce the conditional acquisition of Roc Oil (GB Holdings) Limited (“Roc GB”), which holds a 12.5006% interest in the Blane Unit in the UK North Sea (“Blane Interest”) and a 12.00% interest in the Enoch Unit in the UK North Sea (“Enoch Interest”) from Roc Oil (Europe) Limited (“Roc”) a subsidiary of Roc Oil Company Limited for a total consideration of $17m plus a deferred payment of up to $3m depending on certain performance targets being met (the “Acquisition”).
Highlights
Post-Acquisition Faroe will hold in aggregate a 30.5% non-operated interest in the Blane Unit (Pre-Acquisition interest 18.0041%) and a 13.86% non-operated interest in the Enoch Unit (Pre-Acquisition interest 1.86%) Initial consideration of $17million, based on an effective date of 1 January 2015 The Blane Oil Field (P111-Block 30/3a (Upper), UK North Sea) (“Blane”) is an established oil field with considerable upside potential to increase production, grow reserves and extend field life In 2014, gross production from Blane was 4,070 boepd and average operating costs were approximately $17.7/boe Roc GB’s pre-tax profits in 2014 were $10.68 million Gross production from Blane in H1 2015 averaged at the lower rate of 2,892 boepd, caused largely by unplanned shut-downs, and the field has been producing at approximately 4,100 boepd since it came back on full production on 22 August 2015 The Enoch field is currently suspended and is planned to be brought back on stream, pending resolution of certain technical and commercial matters 2P Reserves at the effective date of 1 January 2015 as estimated by the Company, were 1.60 mmboe and 0.45 mmboe for the Blane Interest and the Enoch Interest respectively, which correspond to an acquisition cost between $8.3/boe and $9.8/boe
Blane was discovered in 1989, and is located on the Central Graben of the UK continental shelf, extending into the Norwegian sector. Production commenced in September 2007 from a Tertiary Palaeocene Forties sands reservoir with a structural closure. The oil is of high quality with 42° API. The field has been developed as a sub-sea tie-back to the BP-operated Ula platform located in the Norwegian continental shelf (34 kilometres to the north east) and currently comprises two horizontal production wells with gas lift and one water injection well. Blane is a low operating cost producing field with upside potential in the existing reserves and the potential for further in-fill drilling.
The Enoch field has been developed as a single well subsea tie-back to the Marathon operated Brae field. The field was closed in due to a leak at the subsea well-head, which has since been repaired, and the field is currently planned to be brought back on production during H2 2015.
The Acquisition is expected to complete before the year-end and is subject to UK regulatory approval and a waiver of certain conditions by the Blane Unit joint venture partners. The Acquisition consideration is made up of $17 million, plus up to a further $3 million payment deferred contingent upon certain Blane field performance targets being met in the second half of 2015; the consideration is to be funded from cash and bank debt drawn against the Company’s borrowing base facility. Graham Stewart, Chief Executive of Faroe Petroleum, commented:
“We are very pleased to announce this acquisition, which increases our stake in the low cost, high quality and long field life Blane asset. Blane offers significant upside potential in the form of increasing reserves and production as well as in extending field life. The transaction is also very tax efficient for us, providing shelter for both past and future tax losses in the UK. We have at this stage chosen not to amend our production guidance for the year but will review this at the time of our Interim Results in September.
“Meantime, drilling operations on the Boomerang and Portrush prospects continue as scheduled, and the Company will announce these results when drilling operations are complete, expected in September 2015.”
John Wood, UK Asset Manager of the Company with over fifteen years experience of the oil and gas industry and who holds an MSc in Petroleum Engineering from Imperial College, has read and approved the production and development disclosure in this regulatory announcement. Reserves Assessment
To assess the reserves, the Company has used the definitions and guidelines set out in the 2007 Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE) and reviewed and jointly sponsored by the World Petroleum Council (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE).