Faroe makes Norwegian asset swap with Equinor

12/5/2018

ABERDEEN -- 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 it has signed a binding agreement with Equinor Energy AS (a wholly owned subsidiary of Equinor ASA) (“Equinor”) to swap its interests in the Njord, Hyme redevelopment and Bauge development assets (the “Divested Assets”) in return for interests in four production assets on the Norwegian Continental Shelf: Alve, Marulk, Ringhorne East and Vilje (together the “Acquired Assets”) on a cashless basis (the “Transaction”). The Transaction has an effective date of Jan. 1, 2019 and is subject only to consent from the Norwegian authorities.

Strategic Highlights

  • Accelerates targeted production growth adding 7,000 boepd to 8,000 boepd in 2019;
  • Provides better portfolio balance between production and development with no material impact on reserves;
  • Expands footprint through two new core areas (Alvheim and Norne), with near-term catalysts including a firm dual-target exploration well in the Alve license and an approved development well on Marulk in 2019;
  • Significantly reduces Faroe’s capital expenditure by eliminating expenditure on the Divested Assets from 2019;
  • Materially reduces Faroe’s operating expenditure per barrel of oil equivalent;
  • Creates material tax synergies by accelerating Faroe’s utilization of its Norwegian tax loss position; and
  • Intention to give careful consideration to the optimal mix of reinvestment in the existing portfolio, potential M&A opportunities and returning capital to shareholders following Transaction completion.

A conference call regarding the Transaction will be held for sell-side analysts at 8:30am today. Analysts should contact FTI Consulting at the details below to obtain the dial in details. An accompanying presentation to this press release will be available on the Company website (www.fp.fo) from 8:00 a.m. today.

Graham Stewart, chief executive of Faroe commented:

“I am pleased to announce this significant swap transaction which is in line with our stated strategy of delivering shareholder value through active portfolio management. It immediately rebalances our asset mix towards production after a series of exploration successes and resultant development projects. The Transaction will accelerate delivery of our fully-funded production target, while strengthening further our financial position in advance of reaching investment decisions on our new Iris/Hades and Agar discoveries.  We are now confident in our ability to deliver in excess of 50,000 boepd in the medium term.

“The increased cash flow, reduction in capital expenditure and reduction in unit operating cost resulting from the Transaction will further strengthen our already robust balance sheet.  This will enable us to give careful consideration to a potential return of capital to our shareholders, as an additional element in our capital deployment mix.”

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