Faroe Makes Oil Discovery West of Shetlands

- Faroe Makes Oil Discovery West of Shetlands

Wednesday, August 24, 2011
Faroe Petroleum plc

Faroe announced an oil discovery in its first operated exploration well on the Fulla prospect in the west of Shetland (Faroe Petroleum 50% and operator).

Highlights

• The 206/5a-3 exploration well discovers oil in the Fulla prospect
• The well penetrated a gross oil column in the well of 133 feet and a net oil column of 45 ft. Reservoir quality is better than expected.
• The oil has been sampled and details of the oil quality will be confirmed by further analysis conducted in the onshore laboratory.
• Faroe’s first operated exploration well has been successfully drilled in accordance with UK's HSE guidelines.

Well 206/5a-3 on the Fulla prospect was spudded on July 6, 2011 and was drilled to a total depth of 7,711 feet total vertical depth sub-sea (TVDSS) in 407 feet water depth. This Atlantic Margin well, located 31 kilometers to the north east of the BP-operated Clair field platform, was targeting potentially oil-bearing Clair and Whiting reservoir sands with the primary objectives of confirming hydrocarbons within the structure and, if present, running a comprehensive suite of wireline logs and obtaining representative oil samples.

The targeted reservoirs were encountered close to prognosis. The well drilled through a gross oil column of 133 feet and a net oil column of 45 ft. The average porosity in the net interval has been estimated at 23%. Oil samples were successfully recovered to allow detailed fluid analysis to be conducted in the onshore laboratory. Detailed data analysis will now commence on interpreting the results of this well, and subsequently, we will work to identify development options that include the Freya discovery made in 1980, which is located immediately to the south in the adjoining Block 206/10a (Faroe 50% and operator).

The Awilco-owned WilPhoenix semi-submersible drilling rig, which was used for the drilling operation, is now actively engaged in operations to plug and abandon the well as planned, and is expected to move away from the location in the coming days.

In December 2010, Faroe farmed out a 50% interest in this license to Canadian Overseas Petroleum Limited on promoted terms.

Graham Stewart, Chief Executive of Faroe Petroleum plc, commented, "We are very pleased with the positive outcome of this frontier West of Shetlands exploration well. To announce a discovery in our first operated well is a significant achievement for Faroe Petroleum and is a realization of the team’s vision and ability. Further work will be conducted in the coming weeks to gain a deeper understanding of the structure and its contents. With better than expected reservoir quality and good indications of mobile oil, we believe there is potential for a commercial field development, most likely in combination with our nearby Freya discovery.

"Faroe Petroleum applied for and won this license, which also contains the Freya discovery to the south, in the 22nd UK Licensing Round in 2005, and has worked continuously to de-risk this opportunity. This important new Fulla discovery is a great testament to the diligence and skill of our technical team.

"We look forward to three further exploration wells to be drilled in Norway this year. The Butch well with Centrica as operator is currently drilling, and we have two further wells, T-Rex and Kalvklumpen planned to commence in the coming months."

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Faroe Notes Progress on Petoro Asset Swap

- Faroe Notes Progress on Petoro Asset Swap

Tuesday, July 12, 2011
Faroe Petroleum plc

Faroe provided an update on the Petoro asset swap deal as follows:

Highlights

• The transaction was passed by the Norwegian Parliament on June 17, 2011 and completion is expected in the Autumn
• Average net production from the Petoro Assets in the six month period January 1 to June 30, 2011 was approximately 8,400 boed
• 3.2 million boe of additional reserves net to Faroe's acquired interest in Njord since signing the Petoro Asset swap, expected to result from sanctioning of two new projects

On April 11, 2011, Faroe announced that it had signed an agreement with Petoro AS to swap its 30% interest in the significant Maria oil discovery for non‐operated interests in a number of good quality oil and gas production assets in Norway, namely in Brage, Njord, Ringhorne East and Jotun (the Petoro Assets).

Average net production from the Petoro Assets in the six month period January 1 to June 30, 2011 was approximately 8,400 boed. This high level of production has been achieved despite a technical problem with the riser system in Njord, which caused several production wells to be shut in for a period. Following the completed repairs, Njord is expected to be back on full production in 3Q 2011.

On May 12, 2011, a Field Development Plan (FDP) was submitted for the Hyme oil field, and this has already been approved by the Norwegian Ministry of Petroleum and Energy. Faroe will have a 7.5% net interest in the Hyme development (previously named Gygrid), located to the east of Njord. First oil from Hyme is expected in early 2013. The field will be developed with one dual‐lateral producer and a water injector sub‐sea tied back to the Njord field. In addition, the Njord partnership has sanctioned a project to allow continued production at lower pressure and extended field life. These two projects will add 3.2 million boe of 2P reserves and come as an addition to the 14 million boe of 2P reserves reported by the Company on April 11. Net Faroe capital expenditure on these projects is expected to be approximately £42 million, to be funded principally through a combination of cash flow from the Petoro Assets and bank debt.

The transaction was an asset for asset swap with no cash consideration from either party, and an effective date of January 1, 2011. Through this transaction, Faroe avoids the net capital investment of approximately £250 million required to appraise and develop Maria. Petoro retains the majority of decommissioning and abandonment liabilities in the Petoro Assets and have transferred a tax balance of NOK 400 million (approximately £46 million). The deal is conditional upon approval by the Norwegian authorities; the transaction was passed by the Norwegian Parliament on 17th June 2011 and completion is expected in the Autumn.

Graham Stewart, Chief Executive of Faroe Petroleum, commented, "We are very pleased with progress of the Petoro transaction. We are also encouraged by the higher than expected production rates of the fields we are acquiring during the first half of the year.

"We now look forward to a very exciting period of drilling ahead with four wells in the second half alone, starting with Fulla results, due in August 2011."

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Faroe Clinches Credit Facilities for Future Growth Plans

- Faroe Clinches Credit Facilities for Future Growth Plans

Friday, July 08, 201
Faroe Petroleum plc

Faroe announced the signing of two new banking credit facilities, which provide substantial additional finance to underpin the Company's growth plans.

The two facilities are:

• NOK 1 billion (approx. £110 million) Norway Exploration Financing Facility, of which NOK 500 million (approx. £55 million) is initially committed by the participating banks, and a further NOK 500 million is available on an uncommitted "accordion" basis. Faroe Petroleum currently has approximately 20 exploration licenses offshore Norway and expects to drill 12 exploration and appraisal wells in Norway by the end of 2013. This facility is designed to have the capability of financing the majority of Faroe's exploration and appraisal costs on the Norwegian Continental Shelf. The facility will mature on 31 December 2014.
• US $250 million (approx. £156 million) Reserve Base Lending Facility, of which US $125 million (approx. £78 million) is initially committed by the banks, and a further US $125 million is available on an uncommitted "accordion'' basis. This facility is available to finance approved capital expenditure, operating costs and acquisitions. The facility will mature on June 30, 2016, with an amortizing repayment profile from June 2013.

Six participating banks have been selected and brought together as one group to provide the two facilities pro rata. The participating banks are BNP Paribas and Lloyds TSB Bank plc, as Mandated Lead Arrangers, together with Commonwealth Bank of Australia, DnB NOR Bank ASA, Royal Bank of Scotland plc and SEB. BNP Paribas are also acting as Facility Agent and Security Trustee under both facilities, with Lloyds TSB Bank plc acting as Technical and Modelling Bank under the Reserve Base Lending facility.

At 1 July 2011 the Group had cash balances of approximately £84.2m and, together with the cash flow from its existing producing assets, which now include the Blane oil field, and the forthcoming production income from the Brage, Njord, Ringhorne East and Jotun fields in Norway, the Group is well financed.

Commenting on the new facilities, Iain Lanaghan, Finance Director, said, "We are delighted to have concluded this financing exercise, and to have received such strong support from our banks, all of whom took part in a competitive process to participate in these facilities. The new facilities provide us with substantial new funding to support the growth of the Group."

"With an exciting drilling program ahead, of which the majority of wells will be drilled in Norway, the new Norway Exploration Financing Facility provides us with a powerful and efficient means of maximizing our equity participation for minimum cost. The combination of our new Reserve Base Lending facility and strong cash flow from our significantly enhanced portfolio of producing assets ensures that Faroe Petroleum is well funded for investment growth in our core areas."

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Faroe Spins Bit at Fulla Well

- Faroe Spins Bit at Fulla Well

Thursday, July 07, 2011
Faroe Petroleum plc

Faroe announced that drilling operations have commenced on the Fulla exploration prospect (Faroe Petroleum 50%), located in the west of Shetland area of the Atlantic margin.

This west of Shetlands well, located to the north east of the producing Clair oil field, is targeting potentially oil-bearing Devonian Clair reservoir sands at a depth of 2,100 meters. Faroe is operator of the well which is being drilled by the WilPhoenix semisubmersible drilling rig under contract with Awilco Drilling in a water depth of 120 meters. Operations are expected to be completed well within the summer weather period.

UK License P.1161 contains both the Freya oil discovery and the nearby Fulla exploration prospect. The Freya discovery was drilled by Mobil in 1980 and encountered 140 meters of oil-bearing Devonian Clair reservoir sands. Similarly to a number of the Clair appraisal wells, a valid surface oil sample was not obtained in the Freya discovery well. Since Freya was drilled, horizontal well drilling on the Clair oil field has led to a very successful extended well test in 1997 which in turn led to development sanction. The BP operated Clair field is under phased development and has been on production since 2005, having to date produced in excess of 75 million barrels of oil with current rates at approximately 40,000 barrels per day.

The Fulla exploration prospect is located in the same Clair reservoir sands at a depth of approximately 2,100 meters and is situated along the same structural trend to the north east of both Clair and Freya, thereby de-risking the prospectivity of the target.

The objectives of the Fulla exploration well are to prove a significant column of oil-bearing Devonian Clair reservoir sands on the Fulla structure and, in that event, to obtain an oil sample using advanced wire-line technology. If these objectives are met, uncertainties related to a possible Freya and Fulla combined development project will be significantly reduced.

In December 2010 Faroe farmed out a 50% interest in License P.1161 to Canadian Overseas Petroleum Limited (COPL) on promoted terms, such that COPL will pay 60% of estimated well costs for the Fulla well.

Graham Stewart, Chief Executive of Faroe Petroleum plc, commented, "We are delighted to be drilling the Fulla prospect, as operator. Should the Fulla drilling operations be successful, this will present an excellent opportunity when combined with the already defined Freya discovery to prove up sufficient resources for a significant standalone field development.

"The next exploration wells scheduled after Fulla are all located on our Norwegian acreage and are the Butch well followed by the T-Rex and Kalvklumpen prospects, which are expected to spud in 3Q and 4Q. Faroe's ongoing multi-well exploration drilling program will carry on through 2011 and beyond as we push forward to test our substantial northern seas portfolio of over 40 significant licenses."

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Faroe Finalizes Acquisition of Blane Field

- Faroe Finalizes Acquisition of Blane Field

Tuesday, May 17, 2011
Faroe Petroleum plc

Faroe has completed the acquisition of the 18.0% interest in the Blane oil field from ENI UK Limited and ENI ULX Limited.

Graham Stewart, Chief Executive of Faroe Petroleum plc, commented, "The acquisition of a material interest in the high quality producing Blane oil field significantly boosts Faroe's oil and gas revenue generation capacity and is very tax efficient for the Company."

"The transaction which adds approximately 1,900 barrels of oil equivalent per day (boepd) to Faroe's production, is in line with our strategy to grow and strengthen the production base towards funding the ongoing exploration program."

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Faroe Snaps Up Second License in Barents Sea

Faroe Snaps Up Second License in Barents Sea

Friday, April 15, 2011
Faroe Petroleum plc
by SubseaIQ

Faroe announced the 21st Norwegian License Round award of its second license in the Norwegian Barents Sea, as announced by the Norwegian Ministry of Petroleum and Energy.

The new license covers an area of approximately 2100 square kilometers and is located within blocks 7223/3, 6 and 7224/1, 2, 3, 4 & 5. This is the largest single license awarded within the Barents Sea in this round. The main Kvalross Prospect consists of a wedge of clinoforms contained within a large structural closure. This new license area is located to the east of the recent significant Statoil discovery, Skrugard, and immediately adjacent to Faroe Petroleum's Samson Dome license, which has now completed the acquisition and processing of an extensive 3D seismic survey.

The new license partners are Faroe Petroleum (40%), together with Wintershall (40% and operator) and Petoro (20%). The license work program involves the acquisition of 3D seismic data, with a decision to drill to be taken within three years.

Graham Stewart, Chief Executive of Faroe, commented, "Faroe was awarded its first license in the Barents Sea in the 20th Norwegian Licensing Round. Since then, our team has continued its efforts to identify new high quality exploration prospects in the Barents Sea, and we are therefore delighted to have been awarded our second prestigious license in the highly competitive 21st Licensing Round. Our team has considerable experience in the Barents Sea, which is becoming an increasingly important oil province, with the Goliat oil field development now underway, and recently, a new large oil discovery by Statoil on the Skrugard prospect. The Barents Sea is an area which complements our strategic position in the Atlantic margin area of West of Shetlands and the Faroe Islands and secures further highly prospective exploration acreage for the Company. Of the 17 wells in the Company's exciting, fully funded 2011 to 2013 drilling program, 13 are planned to be drilled in Norway, clearly demonstrating Faroe's continuing commitment to create further value in Norway."