Faroe Petroleum Corporate Presentation March 2017 Faroe - - PowerPoint PPT Presentation

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Faroe Petroleum Corporate Presentation March 2017 Faroe - - PowerPoint PPT Presentation

Faroe Petroleum Corporate Presentation March 2017 Faroe Petroleum plc Company Presentation September 2016 Building the leading pan-North Sea independent Faroe Petroleum: strong recovery play in E&P sector Faroe in unique strategic


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SLIDE 1

Faroe Petroleum plc

Company Presentation

September 2016

Faroe Petroleum

Corporate Presentation March 2017

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SLIDE 2

Building the leading pan-North Sea independent

Faroe Petroleum: strong recovery play in E&P sector

Cash + Increasing Cashflow + Unused Debt = Opportunity to deliver accelerated growth

Faroe in unique strategic position for material value growth

  • Excellent diversified portfolio, full-cycle, approved operator (Norway & UK)
  • Greatest exposure to Norway of any UK-quoted E&P company

Existing assets capable of trebling production in the next five years

  • Strong investment plan underway with considerable upside

Development and financing flexibility

  • Diversified asset base & strong balance sheet provide flexibility for the future

Strong balance sheet

  • Currently approximately £100m cash (no debt under RBL)
  • Undrawn $250m (£200m) RBL facility
  • Increased operating cash-flow – ave. unit opex lowered post-DONG asset deal
  • Raised £66m in July/August in oversubscribed placing for DONG asset acquisition and to advance 2016 Brasse discovery

Taking advantage of the downturn

  • DONG asset acquisition in 2016 was highly value accretive
  • Significant cost reduction - Brasse among cheapest recent wells in North Sea; development costs on Oda substantially reduced

Exploration and business development remain key

  • Outstanding Brasse discovery continues Faroe’s strong exploration track record - Faroe historic finding costs <$1.5/boe
  • In prime position to exploit further M&A opportunities

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SLIDE 3

Continuing our track record of delivery

2P Reserves (mmboe)1 W.I. Production (mboepd)2

4x increase

between 2012-2016

2.5x increase

between 2012-2016

1.

Company estimates for year end reserves

2.

Economic production 3

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SLIDE 4

Taking Faroe to the next level – on track

Supported by 2P reserves of 81mmboe plus Brasse

Note: this chart relates to existing, defined projects; it is illustrative and not forward guidance

Average 2016 Actual Oda Njord Future Project Brasse Pil and Bue

Sources: Management estimates

17.4 kboepd 40 - 50 kboepd

5 year

  • utlook

Tambar / Brage

Tambar / Brage

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SLIDE 5

Brage (Faroe 14.3%)

Incremental project to deliver 2018 production growth

Overview

  • Large STOOIP (1,000 mmbbls)
  • Net 2P Reserves at 5.5 mmboe at 1 Jan 2016
  • Net 2016 production c. 2,400 boe/d
  • Wintershall 35.2% and operator
  • Opex reductions through improvement projects

Brage infill wells underway

  • Drilling rig warm-stacked until Q2 2017
  • Portfolio of new infill targets
  • 4D seismic technology and modelling to improve

infills

  • Three new targets to be sanctioned in Q2 - to

increase production from H2 2017

A-18 C A-7 B Outstanding performance of the last two infill wells in Brage, A-18C and A-7B

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SLIDE 6

Brasse (Faroe 50% and operator)

Robust, simple development project with excellent address

  • PL740 Brasse oil and gas discovery July 2016
  • Simple structure – similar quality to Brage
  • Good reservoir communication
  • Preliminary estimates of 43-80 mmboe recoverable

volumes:

  • recoverable oil: 28-54 mmbbl
  • recoverable gas: 89-158 bcf
  • Close to 3 potential hosts - approximately 13 kilometres

south of Brage and equidistant to Oseberg platforms

  • Brasse appraisal well confirmed for mid 2017
  • Planning for Concept Selection by year end 2017
  • First oil anticipated 2019/2020

Oseberg A Oseberg South

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SLIDE 7

Brasse Extension (Faroe 50% and operator)

Possible 2017/18 exploration well

3D map showing Top Sognefjord

31/7-1 31/7-1 A 31/7-1 31/7-1 A

Brasse

Bra rage Tro roll ll Eas ast

Brasse Extension - New acreage Jan 2017

Tro roll ll Wes est

  • The Brasse exploration wells 31/7-1 & 31/7-1 A were also an
  • perational success
  • delivered in the Top Decile Performance for Dry Hole

Cost/Meter

  • without HSE incident in 55 days
  • In January 2017, Faroe was awarded PL740B Brasse extension
  • the possible northward extension of the Brasse Discovery on

the eastern side of the Brage Field is an attractive exploration target

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SLIDE 8

Core Ula hub (Faroe 20%)

Significant upside from further infill drilling and WAG reinjection scheme

Field development

  • Net 2P Reserves at 8.3 mmboe at 1 Jan 2016
  • AkerBP 80% and operator
  • Three bridge-linked steel jacket platforms, seven producing

wells, four Water Alternating Gas (“WAG”) wells

  • Host facility for the Blane, Oselvar and Tambar fields and the

future host of the Oda (Butch) development

  • Oil exported via Ekofisk to Teesside
  • Gas used in WAG injection for increased oil recovery
  • Operatorship has been transferred to Aker BP following the

merger of DetNorske with BP Norway

  • Renewed exploitation drive underway led by AkerBP

Upside potential

  • Additional associated gas from Tambar and Oda will allow

increased WAG injection scheme

  • Several infill targets to be matured to project execution
  • Triassic reservoir underexploited, only 1 well drilled to date
  • Satellite production, infill drilling and increased WAG scheme is

expected to result in a significant reduction in Ula unit opex

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SLIDE 9

Tambar (Faroe 45%)

Gas lift and new infill wells

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Overview

  • AkerBP 55% and operator
  • Net 2P Reserves at 6.4 mmboe at 1 January 2016
  • Net 2016 production c. 2,200 boe/d

Artificial lift

  • Retrofit gas lift system (straddle) in K-1, K-3 and K-6
  • Conversion of existing pipeline to gas lift service

Potentially significant production increase

  • K-3 and K-6 wells ceased producing at approx. 4,000 bopd each
  • New gas lift installation to restore production from K-3 and K-6 wells
  • Will prolong field life and provide additional gas for WAG on Ula

K3 K5 K6

8” Production 10” UGIP pipeline Umbilical w/ power & control

Tambar

16 km

Ula P-D-Q

K1

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SLIDE 10

Oda (formerly Butch) (Faroe 15%)

Simple, high-return oil development via Ula hub infrastructure

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 submission lodged November 2016
  • All major contracts awarded
  • Gross capex expected at c.$645m
  • Plateau production of c.35,000 boepd gross (c.5,250 boepd

net to Faroe)1

  • 2P Reserves of 42 mmboe (6.3 mm boe net to Faroe)2
  • First oil expected in 2019

Extracting synergies in the Ula hub

  • Faroe to capture
  • Oda compensation payment to Oselvar (Faroe 55%)
  • Oda tariff payment to Ula (Faroe 20% vs 15% of tariff)

1 Based on 100% uptime 2 CPR Jan 2016 (Senergy) 10

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SLIDE 11

Njord Future Project (Faroe 7.5%) + Pil & Bue (Faroe 25%)

Attractive projects with excellent upside

Njord Future Project on track for project sanction H1 2017

  • Njord A successfully towed to Aker Stord yard
  • Dry dock period in H1 2017 to install new transverse pontoons
  • Topside modifications and life extension thereafter
  • Bauge (formerly Snilehorn) to be developed as a subsea tie-back

exploiting synergy with Hyme

  • Planned to come back on stream in 2020

Pil & Bue - Njord chosen as host facility

  • Subsea tie-back development to Njord
  • Three horizontal producers supported by water and gas injectors
  • Three competing concepts were considered leading to the

selection of a subsea installation tied back to the Njord platform

  • The solution will be matured through the Front End Engineering

Design (FEED) stage towards a formal field development plan

The Njord A facility at the Aker Stord yard

Njord Snilehorn & Hyme Pil & Bue

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SLIDE 12

Njord, Hyme, Bauge, Pil, Bue and exploration

Material 2P reserves and future production

  • Faroe has material position in the prolific Halten

Terrace area

  • Material reserves estimated to be more than 300

mmboe (gross)1 in Faroe’s portfolio in the area

  • Net 2P reserves at 34.9 mmboe
  • Net 2C resources at 13.7 mmboe
  • Significant exploration position
  • Highly prospective area with good success rate
  • Faroe discoveries include Maria, Fogelberg, Bauge

(Snilehorn), Pil and Bue

  • Additional new Njord NF2 and NF3 discoveries

announced in October 2016: potential tie-back developments (c 6km) to Njord field

  • Added key new licence PL888 Canela in January 2017

from APA round

  • Faroe established and well regarded player

1 CPR Jun 16 (incl Fogelberg)

PL644 Aerosmith

Faroe 20%

PL586 Pil

Faroe 25%

PL749 Seychelles

Faroe 20%

PL794 Rosapenna

Faroe 20%

PL793 Portrush

Faroe 20%

PL107C NF2

Faroe 7.5%

PL753 Zircon

Faroe 30%

PL384C Bister / Dobby

Faroe 7.5%

PL888 Canela

Faroe 40%

PL836 Yoshi

Faroe 30%

Njord

Faroe 7.50%

Hyme & Snilehorn

Faroe 7.50%

PL433 Fogelberg

Faroe 25% 12

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SLIDE 13

Exploration and appraisal activity continues

Outstanding low-cost opportunities in world class exploration region

Excellent exploration performance

  • 2 discoveries in 3 wells in 2016 (Brasse & Njord North Flank)
  • Brasse (2016) latest example of best in class exploration record
  • All planned exploration wells are in Norway – benefiting from

low rig rates and 78% tax rebate incentive

  • Four new licences awarded in Norwegian APA January 2017
  • Further attractive E&A well opportunities are being matured:

Aerosmith, Goanna, Yoshi, Rungne, Oshun, Cassidy, SE Tor, Canela

Boné/Dazzler

Faroe 20%

Aerosmith

Faroe 20%

Cassidy

Faroe 20%

SE Tor

Faroe 20%

Rungne

Faroe 30%

Yoshi

Faroe 30%

Oshun

Faroe 30%

Njord Core Area Brage Core Area Ula Core Area Schooner and Ketch Core Area Kvalross

Goanna

Faroe 30%

Canela

Faroe 40%

Pabow

Faroe 20%

Brasse extension

Faroe 50% 13

Prospect Equity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Boné *

20.0%

Brasse appraisal **

50.0%

Brasse extension ***

50.0%

Aerosmith **

20.0%

Goanna ***

30.0%

Oshun ***

20.0% * ongoing ** committed *** possible

2017 2018

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SLIDE 14

Boné/Dazzler (Faroe 20%)

High impact exploration well ongoing

  • Boné and Castberg are found in similar settings relative to the deep Bjørnøya Basin
  • Abundant source rocks in Jurassic and Cretaceous are located adjacent to the prospect
  • Reservoir and seal are the main risks
  • Boné well ongoing – Eni operator

Frontier exploration with exciting potential

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SLIDE 15

A diversified portfolio – with hub focus

Delivering growth from material North Sea asset base

Focus on value growth in core areas

Active full cycle investment programme ahead with exploration, appraisal, infill wells and development

  • Ula core area
  • Commitment to Tambar gas lift and infill wells
  • Brage core area
  • Commitment to Brage in-fill wells
  • Brasse appraisal well confirmed for mid 2017
  • Possible exploration well on Brasse extension
  • Completion of Brasse feasibility studies
  • Greater Njord core area
  • Njord Future FDP including Bauge (formerly Snilehorn)
  • Pil and Bue final concept select and FEED early 2017
  • Exploration - low rig rates - strong prospect inventory
  • Well programme continues with Boné/Dazzler well in Barents

Sea, well spudded early 2017

  • Further 2017/2018 wells committed & maturing

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SLIDE 16

Robust financial position

  • Currently approximately £100m cash (no debt under RBL)
  • New seven year $250million Reserve Based Lending facility (plus $100million accordion) in December 2016 with existing and

new lenders – the seven year facility was undrawn at 2016 year-end

  • New NOK1,000m revolving credit facility (plus NOK500m accordion) arranged in December 2016 - maturity 31 December 2019

Capex

  • 2016 exploration and appraisal capex was approximately £46million pre-tax (£11million post-tax), development and production

capex was approximately £12million (unaudited)

  • 2017 exploration and appraisal capex is estimated to be approximately £45million pre-tax (£10million post-tax), development

and production capex approximately £90million, split as follows:

  • Njord Area:

£30million

  • Ula Area:

£49million

  • Brage Area:

£11million

Hedging - hedging programme in place to underpin value

  • Approximately 90% of 2017 gas production hedged on a post-tax basis at average price of 40p/therm predominantly with puts

(5.9million therms sold forward in Q1 at an average price of 55p/therm)

  • Approximately 30% of 2017 post-tax oil production hedged at $54/bbl with puts

Production

  • 2017 production range expected 12,000-15,000 boepd reflecting temporary loss of Njord and Hyme, shutdowns for investment

projects and risk of capacity constraints at Trym

  • Unit opex expected in 25-29 $/boe range in 2017 – should come down as new production is brought on stream

Financials

Financial discipline and strong balance sheet

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SLIDE 17

Summary

Strong recovery play in E&P sector - well placed for growth

Solid and proven business model delivering sustainable value growth, through drill-bit and transactions

  • Exploration-led strategy continues - underpinned by production and Norwegian tax rebate – recent material Brasse discovery
  • Balanced and diversified portfolio - world-class technical team

Asset base delivering solid value

  • 2P reserves of 81.3mmboe plus 2C resources of 90.9mmboe, one of largest on AIM
  • The portfolio has potential to deliver 40-50,000 boe/d within 5 years: at $60/barrel (and equivalent gas price) 50,000 boe/d

generates revenues >$1bn

Financially robust and operationally strong at low commodity prices

  • Robust balance sheet, prudent financial management, excellent debt headroom
  • Production-generated, tax efficient cash flow – benefit from low unit opex

Forward programme is material and benefits from significantly lower costs and Norwegian State tax incentives

  • Continuing high impact E&A programme in Norway on track, fully funded: Boné frontier well ongoing, more to come
  • Continuing D&P programme focussed

Planned growth

  • Strong balance sheet ensures we are positioned to pursue multiple routes to achieve value growth
  • All committed programme investments fully funded
  • Actively pursuing growth in 2P and value near term through potential further acquisition/consolidation opportunities

Diversified portfolio, high upside, funded programme - material value growth opportunities

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SLIDE 18

Graham Stewart Chief Executive 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

  • f Edinburgh )

Helge Hammer Chief Operating Officer

  • 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) Jonathan Cooper Chief Financial Officer

  • 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

  • fferings and financing
  • Chartered accountant by training

having qualified with KPMG

  • PhD Mechanical Engineering

(University of Leeds)

Executive team

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SLIDE 19

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

  • r 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.

Disclaimer

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