Faroe
Petroleum
Corporate
Presentation
July 2017
1
Slide 1
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
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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
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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.
Slide 2
Faroe’s executive team
Graham Stewart
Chief Executive Officer
Helge Hammer
Chief Operating Officer
•
Instrumental in founding Faroe
Petroleum in 1998
•
Over 30 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 (HeriotWatt University) and MBA (University
of Edinburgh )
•
•
•
Jonathan Cooper
Chief Financial Officer
•
Joined Faroe Petroleum in 2006
•
•
Over 30 years’ technical & business
experience, incl. Shell (Norway, Oman,
Australia and Holland)
Joined Faroe Petroleum as Chief
Financial Officer in July 2013
•
Managing Director of wholly owned
Norwegian subsidiary, Faroe
Petroleum Norge AS
Former Finance Director of Gulf
Keystone Petroleum and Sterling
Energy and CFO of Lamprell plc
•
Previously Asset Manager and Deputy
Managing Director at Paladin
Resources
Former Director of the Oil and Gas
Corporate Finance Team of Dresdner
Kleinwort Wasserstein
•
Economics degree (Institut Français du
Pétrole, Paris)
Broad range of experience from
mergers and acquisitions, public
offerings and financing
•
Petroleum Engineering degree (NTH
University of Trondheim)
Chartered accountant by training
having qualified with KPMG
•
PhD Mechanical Engineering
(University of Leeds)
•
Slide 3
Faroe Petroleum overview
Building the leading pan-North Sea independent E&P company
A high quality, diversified North Sea asset base
Hub-focused strategy to unlock synergies
Material growth from existing portfolio
Potential to more than treble production in next 5 years
Accelerating growth through acquisition
DONG asset acquisition in 2016 increased production 65%
Exploration remains a core value creator
Brasse discovery largest in Norway in 2016
Strong balance sheet
Total average production1) 2016
17,395 boepd
(2015: 10,530 boepd)
Balanced product mix
58% liquids
42% gas
Average 2016 operating cost per boe
$25
Set to decrease
Mid Year 2017 cash £117.52), undrawn $250m debt facility
1) Economic
2)
production which includes actual production acquired during a period - accounting production reflects production acquired only from the acquisition completion date
Unaudited
Slide 4
Strategic summary
Positioned for organic & inorganic growth
Strategically well
positioned
Diversified pan North
Sea portfolio
Outstanding Norwegian
position
Focus on full cycle with
hub and spoke synergies
Long track record of
delivery
Financial flexibility
Growth
focused
Robust
balance sheet
Strong growth
from existing portfolio
Prudent financial
management
Exploration
potential to deliver
significant upside
Committed forward
programme fully
financed
Actively pursuing
growth-acceleration
opportunities
Very experienced team
Slide 5
Track record of delivery
Combining full cycle projects with M&A to create significant value
Year end 2016 2P Reserves
2016 Average Production
81
17,395
mmboe
increase
boepd
increase
between
2012-2016
between
2012-2016
57.4
10.5
9.1
27.2
7.2
30.6
6.1
18.9
2012
2013
2014
2015
5 Year Reserve Growth
2016
2016
2012
2013
2014
2015
2016
2016
5 Year Production Growth
Slide 6
Delivering material organic growth in production & cashflow
Visible growth route over coming 5 years
60
30
50
25
Fogelberg (33%)
Production boe/d
40
Fenja (25%)
30
Njord Future and
Bauge (7.5%)
Current fields
10
15
Brasse (50%)
20
20
10
Oda (15%)
Tambar (45%)
Brage (14%)
5
0
0
Developments committed
Developments to be sanctioned
Development contingent on appraisal
Note: this chart relates to existing , defined projects; it is illustrative and not forward guidance
Slide 7
Nimble value creator - focused on the spokes and the hubs
Focused strategy delivering value through synergistic approach
hub strategy
delivers…
…spoke focus
brings…
•
enhanced technical insight
• Compressed timelines
•
multiple synergies
• ‘Simple’ developments
•
lower unit costs
• Leverage to supply chain
Slide 8
Transformational 2016 acquisition in Norway
Significant value creation + rapid payback
July 2016: Announced deal to acquire 20 mmboe (2P reserves) from
DONG for $70.2m
December 2016: Acquisition completes with $27m payment, reflecting
production outperformance (FY16 = 9,810 boepd)
June 2017: Full pay back
Outlook:
•
Transfer of 2C Resources into 2P Reserves
•
Infill drilling on Tambar in 2018 to increase production markedly
•
Extension of Trym production
•
Further compensation receipts scheduled to Oselvar
Ula
Tambar
Oselvar
Trym
Total
Faroe W.I.
20%
45%
55%
50%
Operator
BP
BP
Faroe
Faroe
2P
Reserves*
8.3
mmboe
6.4
mmboe
1.3
mmboe
3.8
mmboe
19.8
mmboe
2C
Resources*
7
mmboe
2
mmboe
--
2
mmboe
11
mmboe
2016
Production
1,637
boepd
2,017
boepd
1,241
boepd
4,915
boepd
9,810
boepd
Trym
* CPR Jun 16
Slide 9
Exploration drive – benefiting from much lower costs
Tax-efficient exploration offers material value uplift
Prospect
2017
Equity
Q1
Brasse appraisal *
Brasse appraisal II ***
Goanna **
Fogelberg Appraisal **
Iris / Aerosmith **
Brasse Extension***
SE Tor ***
Rungne ***
Oshun ***
Q2
Q3
2018
Q4
Q1
Q2
Q3
Q4
50%
50%
30%
33%
20%
50%
85%
30%
20%
* ongoing
** committed
*** possible
More than 1.0 bn boe unrisked prospective resource in portfolio1)
•
Strong in-house team with excellent track record
•
High success rate - focus on monetisation
1) Company
estimate
Exploration 2016: an award-winning year for Faroe
Slide 10
Asset summary
Core hub areas
Attractive projects with excellent upside
Focus on value growth to realise synergies
Greater NJORD hub area
• Njord Future Project (including new Bauge) on track for 2020
• Fenja (Pil & Bue) FEED underway – FDP expected late 2017/18
• Further exploration upside
BRAGE hub area
• Brasse 2017 appraisal campaign ongoing
• Brasse development feasibility studies underway
• Drilling of Brage in-fill wells
ULA hub area
• Tambar gas lift and infill wells projects underway
• Further upside to exploit – infill, Triassic Ula, exploration
Slide 12
Brage hub area: BRAGE
Incremental project to deliver 2018 production growth
Brage: (Faroe 14.3%)
Overview
•
Large STOOIP (1,000 mmbbls)
•
Net 2P Reserves at 5.0 mmboe at 1 Jan 2017
•
Wintershall 35.2% and operator
•
Opex reductions through improvement projects
MAP
Brage infill wells underway
•
Three new targets sanctioned
•
Portfolio of new infill targets
•
4D seismic to improve infills
Outstanding performance of the last two infill wells in Brage, A-18C and A-7B
A-18 C
A-7 B
Slide 13
Brage hub area: BRASSE
Robust, simple subsea development project with excellent address
Brasse: (Faroe 50% and operator)
PL740 Brasse oil and gas discovery July 2016 – similar to Brage
Preliminary estimates of 43-80 mmboe recoverable volumes:
•
recoverable oil: 28-54 mmbbl; recoverable gas: 89-158 bcf
2 potential hosts - 13 km to Brage & Oseberg Central platforms
Brasse 2017 appraisal campaign ongoing:
•
Already proves southern extent of discovery, and commerciality of field
•
Very good reservoir properties and in communication with discovery
•
DST flowed at a maximum stable rate of 6,187 bopd
•
Side track underway to appraise reservoir distribution
Concept Selection planned for 2018; first oil anticipated 2020/21
Subsea development schematic
Brasse
extension
Host
Brasse
Brasse
Slide 14
Brage hub area: BRASSE
Attractive projects with excellent upside
Brasse: (Faroe 50% and operator)
Troll East
31/7-1
Troll East
31/7-1 A
Brasse Extension:
New acreage Jan-17
3D map showing Top Sognefjord
Slide 15
Ula hub area: ULA
Significant upside from further infill drilling and WAG reinjection scheme
Ula: (Faroe 20%)
Overview
•
AkerBP 55% and operator
•
Net 2P Reserves at 6.5 mmboe at 1 January 2017
Field development
•
Net 2P Reserves at 6.5 mmboe at 1 Jan 2017 (Ula only)
•
Host facility for the Blane, Oselvar/Oda and Tambar fields
•
Oil exported to Teesside, gas used for IOR
•
Renewed exploitation drive underway led
by AkerBP
Oda
Upside potential
•
Additional gas from Tambar & Oda
•
4D seismic project being planned
•
Several infill targets maturing
•
Triassic reservoir underexploited
•
Significant reduction in unit opex planned
(15%)
Ula
Hub
(20%)
Tambar
(45%)
Oselvar
(55%)
Blane (30.5%)
Slide 16
Ula hub area: TAMBAR
Gas lift and new infill wells
Tambar: (Faroe 45%)
Overview
• AkerBP 55% and operator
• Net 2P Reserves 9.8 mmboe at 1 January 2017
Installing artificial lift
• Retrofit gas lift system (straddle) in existing wells
• Conversion of existing pipeline to gas lift service
Potential for significant production increase
• Gas lift Installation to increase reserves
• Prolonged Tambar field life will provide
additional gas for WAG on Ula
Slide 17
Ula hub area: ODA
1
Simple, high-return oil development via Ula hub infrastructure
Oda: (Faroe 15%)
High value project
•
Centrica 40% and operator, AkerBP 15% and Suncor 30%
•
66m water depth - excellent quality reservoir, light oil
•
Subsea tie-back to the Ula platform via Oselvar infrastructure
•
Two production wells and one water injection well
•
FDP approved May 2017
-
All major contracts awarded
-
Gross capex expected at c.$645m
•
Plateau production of c.35,000 boepd gross (c.5,250 boepd net)
•
Net 2P Reserves at 6.9 mmboe at 1 January 2017
•
First oil expected in 2019
Subsea tieback of Oda to Ula platform
Extracting synergies in the Ula hub
•
Oda
Faroe to capture
-
Oda compensation payment to Oselvar (Faroe 55%)
-
Oda tariff payment to Ula (Faroe 20% vs 15% of tariff)
(15%)
Ula
Hub
(20%)
Tambar
(45%)
Oselvar
1
(55%)
Former field name ‘Butch’
Blane
(30.5%)
Slide 18
Njord hub area: NJORD + HYME + BAUGE + FENJA
Attractive projects with excellent upside
Njord: (Faroe 7.5%) + Fenja (Pil & Bue): (Faroe 25%)
Njord Future Project
•
FDP approved June 2017
•
In dry dock for hull reinforcements and modifications
•
Bauge to be developed as a subsea tie-back to Njord
•
Planned to come back on stream in 2020
Fenja - Njord chosen as host facility
•
Fenja (previously Pil & Bue) - subsea tie-back development to Njord
•
Three horizontal producers supported by water and gas injectors
•
Front End Engineering Design (FEED) ongoing
•
FDP planned for end 2017/ early 2018
Njord
Hub
(7.5%)
Bauge
(7.5%)
Hyme
(7.5%)
Fenja (Pil &
Bue) (25%)
Njord (Faroe 7.5%)
Fenja (Pil & Bue) (Faroe 25%)
Njord ‘A’ facility at the
Aker Stord yard
Slide 19
Njord hub area: SIGNIFICANT RESOURCE BASE
Material 2P reserves, future production and significant prospect inventory
Faroe has material position in prolific Halten Terrace area
Gross reserves on Faroe licences estimated to be more than
340 mmboe (gross) via Njord hub
Net 2P reserves at 42.3 mmboe
Significant exploration position
• Highly prospective area with good success rate
• Faroe discoveries include Maria, Fogelberg, Bauge (Snilehorn),
Fenja (Pil & Bue),
NF2 and NF3
Faroe established and
well regarded player
Slide 20
Finances
Financial summary – highlights and outlook
Strong balance sheet, undrawn RBL, good hedging, production cash flow
Healthy cash
balance
o £117.5 at 30 Jun-17 (unaudited)
o mainly PUTs
o 87% 2017 gas production at
40p/therm
o 34% 2017 Oil at $54 bbl
Hedging
Tax efficient
Strong cash
flow
Significant
debt
headroom
o 78% tax rebate for Norwegian
E&A
o over 90% cost recovery for
developments in Norway
% of production on a Post tax basis
o £26m (2016) EBITDAX
Fully funded
investment
prog. 2017
o zero RBL Facility drawn
o $250m 7 year RBL ($100m
accordion)
o NOK1bn Exploration Financing
Facility
o E&A £45m (£11m after tax)
o CAPEX £90m
Prudent financial management – strong balance sheet, financial flexibility
Slide 22
Summary
Diversified portfolio, high upside, funded programme - material value growth
Solid and proven pan North Sea model with world class team delivering sustainable value growth
 Greatest exposure to Norway of all London quoted E&Ps
 Strong exploration programme continues - underpinned by production and Norwegian tax rebate
 Recent material Brasse discovery under appraisal – more Norwegian exploration wells scheduled
Asset base delivering solid value
 2P reserves of 81.3mmboe plus 2C resources of 90.9mmboe, one of largest on AIM
 Portfolio has potential to deliver over 40,000 boepd organically
Robust balance sheet (with no debt) and operationally strong at low commodity prices
 Robust balance sheet, prudent financial management, excellent undrawn debt headroom
 Tax efficient cash flow from production
 Profitable at low commodity prices - low unit opex (mid-20s $/boe), set to fall further as new wells and fields brought on stream
Material forward programme locks in significantly lower costs and Norwegian State tax incentives
 Active programme ahead with significant investment focused on adding and growing reserves and production
 78% of E&A costs in Norway recovered from State; tax credits shield 90% of Norwegian investments
Planned growth pushing ahead – capturing low costs
 Strong balance sheet ensures all committed programme investments are fully funded
 Actively pursuing growth in 2P and value near term through potential further M&A/consolidation opportunities
Strong recovery play in E&P sector – very well placed for growth
Slide 23
Share price
Slide 24
Faroe Petroleum’s shares
Shareholder structure
Aviva: 7%
Number of
shares in issue
Average traded
volume per day in 2016
Other
institutional
45%
Blackrock: 8%
JP Morgan:
8%
Fidelity: 9%
366.5m
1.3m
Quoted on AIM,
London
Shares in free
float approx.
Retail: 8%
Delek: 15%
Geographically
Rest of the
World: 16%
87%*
United
Kingdom
76%
US: 2%
Nordic/
Europe: 6%
*Source: RDIR
Blue chip shareholder base
Slide 25