Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in the Atlantic margin, the North Sea and Norway, announces that it has agreed to acquire a 10% non-operated interest in the East Foinaven Field and a 0.5% interest in the West of Shetland Pipeline System (the “Interests”) from Marubeni Oil & Gas (North Sea) Limited (“Marubeni”).
The headline consideration for the acquisition of the Interests (the “Acquisition”), calculated from the effective date of 1 January 2012 is US$32 million payable to Marubeni in cash (the “Consideration”). The actual sum payable at completion will be reduced to take account of working capital adjustments for net income payable to the Company from the sale of hydrocarbons from the field during the period.
The Consideration is to be funded from the Company’s existing cash resources. The Acquisition is also subject to joint venture partner consent and regulatory approval.
The BP operated East Foinaven Field is located in blocks 204/24a,25b in the Atlantic Margin 190 kilometres west of Shetland. The field lies 7 kilometres to the south east of the main Foinaven Field (also BP operated) and 10 kilometres to the south west of BP operated Schiehallion. The East Foinaven field was discovered in August 1995 and first oil from the field was in September 2001.
The field has been developed as a subsea tie-back to the main Foinaven Field and currently utilises three production wells and two water injectors from a single subsea production manifold. Two shuttle tankers offload Foinaven crude from the Foinaven floating, production, storage and offtake vessel (“FPSO”) which is then shipped directly to refineries. Gas is exported via a 10 inch pipeline to the West of Shetlands Pipeline System which transports gas to the Sullom Voe Terminal in the Shetland Islands. Gas is then transported to the Magnus Field via the East of Shetland Pipeline System for use in the Magnus Enhanced Oil Recovery scheme.
Remaining Proved and Probable reserves, as evaluated by Faroe Petroleum’s reserves auditors Senergy (GB) Limited, as at 1 January 2012 were 1.55 million barrels of oil equivalent net to Faroe Petroleum. The average 2012 projected gross production rate for the East Foinaven field is approximately 3,500 barrels of oil equivalent per day (boepd) (350 boepd net to Faroe Petroleum).
East Foinaven has a good quality reservoir with Palaeocene channel sands and Faroe Petroleum’s analysis indicates that in the medium to longer term reserves are expected to grow, with the potential to extend the life of field beyond 2022.
Graham Stewart, Chief Executive of Faroe Petroleum, commented:
“We are very pleased to further broaden our production portfolio through the acquisition of the East Foinaven interest which boosts and continues to diversify our oil and gas revenue.”
“East Foinaven is a good quality producing field which provides significant upside potential from one of our core areas. The transaction is very tax efficient for Faroe Petroleum, providing shelter for both past and future tax losses in the UK and is in line with our strategy to grow our production portfolio to continue the funding of our exploration programme.”
Press Release, September 21, 2012