Company Presentation. November 2015

Transcription

1 Company Presentation November 2015

2 Faroe overview Introduction Faroe s exploration-led and production-backed strategy is delivering exceptional results Material exposure to Norwegian exploration upside - benefiting from tax refund incentive Continuing exploration successes in Norway Substantial potential being realised across portfolio Material, well balanced, tax efficient production with low operating costs Strong balance sheet, with low gearing Faroe has built an outstanding diversified portfolio High quality large exploration acreage position in Norway Ongoing multi-well drilling programme funded from cash flow Balanced portfolio of assets Faroe s world class sub-surface competence is at the heart of its success Faroe is robust and well positioned for growth in a low oil price environment Faroe well capitalised and on track to become a leading E&P player in the North Sea 2

3 Faroe s growth model Building core value and scale 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 better than 1 in 3 success rate Grow 2P Reserves Progress discoveries to FDP sanction Participate selectively in development projects Swap 2C contingent for 2P reserves where appropriate Grow Production Exploit market opportunities through acquisitions & swaps Invest in our producing fields Prudent financial management Ensure balance sheet strength at all times Building core value and scale Faroe successfully executing its strategy 3

4 Faroe s growth model Prospective to 2C contingent to 2P reserves value realisation >1 bn boe* 109 mmboe* 30.6 mmboe* Prospective un-risked resource discoveries 2C resources Converting exploration success and transactions into value FDP and deals 2P reserves * 31 December

5 Robust company going forward Faroe well positioned to grow in lower oil price environment Financially robust Cash on the balance sheet ( 105m at 30 June 2015) Significant head-room in existing debt facilities Material cost reductions drilling, operations, G&A Production generating strong free cash-flow even at much lower oil price levels Production of 10,971 boepd in six moths to 30 June 2015 (H1 2014: 7,592 boepd) Full year guidance increased to 9,500 10,500 (from 8-10,000 boepd at start of the year) Opex down to $22/boe to 30 June 2015 reflecting higher throughput, cost efficiencies and weaker Norwegian krona Oil and gas hedges in place to underpin budget Production balanced between oil and gas and between Norway and the UK Modest near-term capital expenditure No significant development costs in 2015 Limited 2016 capital expenditure Development decisions on Njord and Butch expected end 2016 E&A programme continues with potential for significant value creation 5 wells in E&A programme for 2015, fully funded - 100m pre-tax and 26m post-tax (Norwegian incentives) Shango (small discovery) Bister & Portrush (dry wells) Boomerang ( discovery 13-31mmboe) Blink (dry well) 2016 E&A programme firming up with 3 expected wells - lower costs Faroe has strong balance sheet, good upside, financial headroom and real growth potential 5

6 Exploration and appraisal Drilling programme: E&A continuing - benefiting from lower costs in 2016 Prospect Equity Q3 Q4 Q1 Q2 Q3 Q4 Boomerang (Pil follow up well) *** 25,0% Portrush *** 20,0% Blink (Pil follow up well) *** 25,0% Kvalross * 40,0% Brasse + 50,0% Njord North Flank + 7.5% *** drilled * committed + expected All near term exploration wells are in Norway benefiting from 78% tax rebate incentive Several prospects identified for possible 2017 drilling, both operated and non-operated Screening work ongoing with emphasis on economic robustness ahead of drilling decisions Very active programme fully funded from cash flow with significant upside potential 6

7 Exploration and appraisal Significant Pil, Bue and Boomerang discoveries (Norway) 2014 Pil and Bue discoveries Faroe 25% Significant success - gross columns ca 135m oil & 91m gas Flowed at stable rate 6,710 bopd of 37 API oil, 56/64 choke Prolific reservoir - very high net to gross ratio Preliminary Pil and Bue estimated range of gross recoverable resource of mmboe¹ (before Boomerang results) Zircon Snilehorn 2015 Pil follow-up and Njord area exploration programme Portrush Rogn and Melke Upper Jurassic reservoir encountered No hydrocarbons Boomerang Main well bore drilled close to the Pil discovery 26m gross Upper Jurassic Rogn reservoir - preliminary resource estimate 13-31¹ mmboe Hydrocarbons confirmed above the Pil oil-water contact in 80m Melke gross interval Side-track encountered Jurassic sandstones 530m gross with poor reservoir quality and no moveable hydrocarbons Blink Rogn and Melke Upper Jurassic reservoir encountered No hydrocarbons Pil Bue Njord Boomerang Fjær Portrush Hyme 1 Estimate as per NPD 2 Faroe estimates 7

8 Exploration/appraisal Kvalross frontier exploration well scheduled for 2016 Faroe 40% - PL611 - Wintershall operator Awarded in May 2011 in the Norwegian 21st Licensing Round Located in the Barents Sea to the south of OMV s significant Wisting discovery The well is planned to test two targets: Lower Triassic Kvalross prospect with very significant oil and gas resources potential in Klappmyss clinoform reservoirs within a mega-closure the Early Triassic Kvaltann prospect, a Snadd Formation sandstone channel sitting directly above the Kvalross Prospect with substantial oil potential as proven in the Wisting shallow discovery to the north Scheduled to be drilled with the Transocean Arctic drilling rig in Q Targeting estimated unrisked prospective resources of 108-1,173 mmboe* (gross) * CPR 2015 (Senergy) 8

9 Exploration and appraisal Brasse near field exploration well - expected 2016 PL740 Brasse prospect near the Brage field The Brage area Very prospective area Contains the giant Oseberg field and large oil fields such as Brage and Veslefrikk Krafla is a recent exploration success 79 wildcat exploration wells since % technical success rate Brasse prospect 2013 APA licence Faroe 50% and operator, Core Energy 50% Undrilled structure located in close proximity to large oil fields Recent infill well A18C in Brage encountered good quality Fensfjord reservoir at the south end of the field may extend onto Brasse Multiple other levels are also prospective: Sognefjord, Statfjord, Brent and Cook Expect to drill in H Brasse 9

10 Exploration and appraisal Njord North Flank exploration well expected in Q PL107C Njord North Flank prospect north of the Njord field The Njord area Very prospective area Contains the Njord field and Draugen field Snilehorn, Pil, Bue and Boomerang are recent exploration successes Njord NF North Flank prospect (NF2) 2009 APA licence 107C Faroe 7.5%, Statoil operator Main plays; Ile and Tilje Formations 3-way down faulted structural trap, with crest of structure in PL

11 Producing assets Building production base and growing reserves Diversified production base with infill and near-field upside potential to boost production Brage (Faroe: 14.26%) Oil field in Norwegian Sea Wintershall-operated Infill programme two-well programme for 2015 underway 2P Reserves (1 Jan-15) Blane (UK) Others Blane (Faroe: 30.5%) Oilfield in Central Graben UK, Talisman-operated Low operating cost, stable production Ringhorne East (N) Snilehorn (N) Njord/Hyme (N) Ringhorne East (Faroe: 7.8%) Oilfield in Norwegian North Sea, Exxon-operated Low operating cost, stable production Brage (N) Total: 30.6 mmboe Schooner/Ketch (UK) Njord/Hyme (Faroe: 7.5%) Prolific oil and gas field in the Norwegian Sea Statoil-operated Hyme subsea satellite performing above expectations Schooner & Ketch (Faroe: 60%) Gas fields in the UK Southern Gas Basin Faroe-operated Stable gas production gas sold into the UK market Snilehorn (Faroe 7.5%) Undeveloped oil field in Norwegian Sea 2013 discovery Statoil-operated, tie-back candidate to Njord Strong balanced production, well performing assets, low opex per boe 11

12 Production Blane (UK) consolidated position Acquisition of Roc Oil UK announced on 1 September 2015 Faroe to hold 30.5% of Blane (pre-acquisition 18%) and 13.86% of Enoch (Pre-Acquisition interest 1.86%) Consideration of $17million, together with $3million contingent payment Completed on 5 November, based on an effective date of 1 January 2015, consideration reduced to $13.7m after working capital and other corporate adjustments Blane and Enoch Talisman operated fields Blane - oil field with considerable upside potential to increase production, grow reserves and extend field life Prolific Palaeocene Upper Forties sands reservoir, structural closure High quality 42 API oil Two horizontal producers and one water injection well - tieback to Ula Operating costs at ca 18 $/boe 1 Enoch suspended and planned to be brought back on stream - no value attributed - represents upside only Acquisition cost of between $8.3 and $9.8/boe - net 2P Reserves acquired at 1 Jan-15 (effective date) of mmboe (Blane) & mmboe (Enoch) Improved tax efficiency Utilisation of Faroe s carried forward tax losses accelerates payback Provides tax shelter for future investments in the UK sector Growing production and reserves through acquisition 1 Actual Company estimate 12

13 Greater Njord Area (Norway) Strategic position Njord and Hyme: Currently producing in excess of forecast Njord A facility needs lifetime extension to exploit existing and new resources in area - scenarios under assessment Suspension of production and tow-to-shore of the Njord A facility currently planned for Q Faroe very well positioned in one of Norway s most sought after new exploration, appraisal & development areas Njord, Hyme and Snilehorn 2P Reserves in excess of 170 mmboe (gross) Pil and Bue 2C Resources million boe (gross) Boomerang added further million boe (gross) Blink offers potential for significant further resource additions Significant infrastructure in the area Draugen and Njord large field developments Åsgard transportation gas trunk line to European gas market Hyme Snilehorn Rosapenna Njord Portrush Pil and Bue Slynge Blink and Boomerang Draugen Seychelles Draugen Shell operated Njord Statoil operated 13

14 Contingent Resources Converting 2C Contingent Resources to 2P Reserves Field WI Operator Faroe Observations 2C Resources (1 Jan-15) Butch (Norway) Pil (Norway) Fogelberg (Norway) Lowlander / Perth Dolphin (UK) Rodriguez / Solberg (Norway) 15% Centrica 2011 discovery Concept selection underway 25% VNG 2014 discovery Prolific reservoir Tie-back or stand-alone Significant additional prospectivity targeted 15% Centrica 2010 discovery Proximity to infrastructure Awaiting export capacity >50% Faroe / Parkmead 2011 / 2013 acquisitions Technical definition maturing Commercial framework for joint development being agreed ahead of FDP 20% Wintershall 2013 / 2014 discoveries Lower Cretaceous Lange Channel system extends across several licences Butch (N) Rodriguez/ Solberg (N) Fogelberg (N) Others Pil/Bue (N) Total: 109 mmboe Lowlander/Perth/Dolphin (UK) Maximise project values through low-cost pre-development activities 14

15 Butch (Norway) Excellent value creation opportunity Butch discovery (Faroe 15%) Southern North Sea; 66m water depth Close to infrastructure: Ula and Gyda Excellent quality reservoir, light oil Centrica operator Development project planning work ongoing Subsea and drilling costs major part of capex to benefit from reduced market rates Project has passed concept selection decision and Front End Engineering and Design will be initiated Option selected: Subsea tie-back to Ula via Oselvar Two production wells and one water injection well Expected on stream in plateau production of ca 35,000 boepd FDP submission planned for

16 2015 Interim results Financial highlights Interim results for six months ended 30 June 2015 (unaudited) Turnover 55.3m (1H 2014: 53.5m) adjusted revenue (post under lifts/over-lifts) 67.9m (1H 2014: 40.1m) Production of 10,971 boepd to 30 June 2015 (H1 2014: 7,592 boepd 1 ) EBITDAX1 39.8m (1H 2014: 15.6m) Good positive Cashflow with operating netback per boe $31 (2014: $39) Operating profit 5.6m (1H 2014: 15.4m loss) and profit before tax 0.4m (H1-20.1m loss) Exploration and appraisal capex 25.2m (1H 2014: 65.0m) equivalent to 6.3m post tax ( 16.7m 2014) Development and production investments 7.5m (1H 2014: 9.8m) Closing net cash 81.7m (31 December 2014: 69.6m) Reserve based lending facility 145 million of which 23 million is drawn (31 December 2014: 23 million) Outlook Fully year production increased to 9,500-10,500 boepd (8,000-10,000 boepd at start of the year) Production hedged, to underpin revenue Gas approximately 90% hedged in H2 2015, 70% in 2016 and 50% in 2017 (on a post-tax basis) at pence per therm Oil approximately 33% hedged in H and Q (on a post-tax basis) at $60-90 per barrel H opex $22 per boe. Average full year opex expected to be approximately $25-$28 per boe Fully funded exploration and appraisal programme continuing with Blink exploration well, followed by two Barents Sea wells Net exploration, development and production capital expenditure for 2015 forecast at approximately 100 million pre-tax (2014: 135 million), equivalent to 37 million on post-tax basis (2014: 71 million) Strong balance sheet, low gearing, good hedging, robust cash flow - headroom ¹ Economic production for 2014 includes Schooner and Ketch, where Faroe received the economic benefit from the associated production from 1 Jan-14 but can only account for it from the completion of the acquisition on 9 Oct-14. Accounting production for 2014 was 6,579 boepd 16

17 Summary and outlook Solid and proven business model delivering sustainable value growth, through drill-bit and transactions Exploration-led strategy continues to deliver material success, underpinned by strong cash flow Balanced portfolio and world-class technical team Financially robust and operationally strong at low commodity prices Robust balance sheet Strong cash flow Forward programme is material yet relatively low cost and benefits from Norwegian State refund Multi-well high impact E&A programme in Norway on track, fully funded Modest exploration, production and development capex in 2015 est. 37m post tax Planned growth Continuing strategy to progress 2C to 2P Strong balance sheet ensures we are well positioned to pursue multiple routes to create value Aim to grow significantly in the near term Strength at low oil price, high upside, funded 2015 programme, growth planned 17

18 Differentiators Excellent exploration track record - multi-well programme Experienced management & clear strategy Financial strength and prudence Production field operator Excellent asset monetisation track record Strong Norway position 18

19 Executive team Graham Stewart Chief Executive Officer Helge Hammer Chief Operating Officer Jonathan Cooper Chief Financial 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 ) 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) 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) 19

20 Disclaimer These materials do not constitute or form any part of any offer or invitation to sell or issue or purchase or subscribe for any shares in Faroe Petroleum plc (the Company ) nor shall they or any part of them, or the fact of their distribution, form the basis of, or be relied on in connection with, any contract with the Company relating to any securities. Any decision regarding any proposed acquisition of shares in the Company must be made solely on the basis of public information on the Company. These materials are not intended to be distributed or passed on, directly or indirectly, to any other persons. They are available to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any other purpose. No reliance may be placed for any purpose whatsoever on the information contained in these materials or on their completeness. Any reliance thereon could potentially expose you to a significant risk of losing all of the property invested by you or the incurring by you of additional liability. No representation or warranty, express or implied, is given by the Company, its directors or employees, or their professional advisers as to the accuracy, fairness, sufficiency or completeness of the information, opinions or beliefs contained in these materials. Save in the case of fraud, no liability is accepted for any loss, cost or damage suffered or incurred as a result of the reliance on such information, opinions or beliefs. Certain statements and graphs throughout these materials are forward-looking statements and represent the Company s expectations or beliefs concerning, among other things, future operating results and various components thereof, including financial condition, results of operations, plans, objectives and estimates (including resource estimates), the Company s anticipated future cash-flow and expenditure and the Company s future economic performance. These statements, which may contain the words anticipate, believe, intend, estimate, expect and words of similar meaning, reflect the directors beliefs and expectations and involve a number of risks and uncertainties as they relate to events and depend on circumstances that will occur in the future. Forward-looking statements speak only as at the date of these materials and no representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. The Company expressly disclaims any obligation to update or revise any forward-looking statements in these materials, whether as a result of new information or future events. If you are considering buying shares in the Company, you should consult a person authorised by the Financial Conduct Authority who specialises in advising on securities of companies such as Faroe Petroleum plc. 20