Faroe Petroleum reports good 2015, but muted outlook

Faroe Petroleum experienced a good year of production in 2015, though it was looking at a muted year ahead in its operational update on Friday.

The AIM-traded independent oil and gas firm with operations focused in the UK and Norway said its total average economic production for the full year was at the upper end of guidance, at approximately 10,530 barrels of oil equivalent per day.

Approximately 58% of that was liquids and 42% gas, with the main fields in Faroe's portfolio performing above expectations in 2015, leading to the upward adjustment of production guidance announced in November 2015.

"2015 was another year of growth and good progress for Faroe, despite a backdrop of significantly lower commodity prices", said chief executieve Graham Stewart.

He said the company delivered its exploration drilling programme safely and under budget, adding further 2C resources and doubling its 2P reserves in high quality assets.

"Our diverse North Sea production portfolio also outperformed expectation, averaging 10,530 boepd with low unit operating costs, and we ended the year with a significant cash position of over £90m and a largely undrawn debt facility", Stewart added.

During the year, two new infill wells were brought on stream in Brage, which contributed to the reduction in unit operating costs. The acquisition of interests in the Blane and Enoch fields was also completed in November.

The company also ended the year in what it described as a robust financial position, with £91m in reserves, up from £68m a year earlier.

It drew $33m (£22.7m) against its reserve based lending facility over the period, and made exploration and appraisal capex of around £61m pre-tax and £13m of production capex.

"Looking ahead at 2016, we are well-prepared to face the challenges of a continuing period of low commodity prices, while seeking to capitalise on our strong financial position ti pursue consolidation opportunities in our core areas on the UK and Norwegian continental shelves", Stewart concluded.

Faroe's board anticipated exploration capex in 2016 of approximately £50m pre-tax, and production capex around £20m. The company's 2016 hedging programme was in place, with 65% of gas production hedged on a post-tax basis at 45p-50p per therm.

It was looking at 2016 production in the range of 7,000-9,000 boepd from all fields, including production from the Njord and Hyme fields until the end of May 2016 in accordance with plans for the Njord Future Project.

Faroe said it also had a range of cost reduction measures underway, both internally and at its joint venture operations.