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Faroe braced for challenging year ahead

FAROE Petroleum has indicated it expected production to be flat at best this year but said it was making good progress and highlighted its belief in the exploration potential of the UK North Sea.

WELL-PLACED: Chief executive Graham Stewart said Faroe was maintaining momentum. Picture: Karen Murray
WELL-PLACED: Chief executive Graham Stewart said Faroe was maintaining momentum. Picture: Karen Murray

The Aberdeen-based oil and gas company is braced for a challenging year as it waits for production to be restored from two key fields in Norwegian waters.

In an update on trading in 2013, Faroe Petroleum said it expected the Njord and Hyme fields to come back onstream this summer if work to reinforce the relevant production facility is completed on time.

The timing of the restart of production from the fields will be an important factor in the company's performance this year.

"For production to be at the higher end of the 2014 guidance range (4000-6000 barrels oil equivalent per day), Njord and Hyme will need to recommence production in the summer as planned and the other assets perform in line with expectations," said Faroe Petroleum.

A delay in bringing the fields back onstream could result in average production being at the lower end of the expected range.

The problems on the Njord production platform weighed on Faroe's performance in the year to December.

The company produced an average of around 6000 boed, down 13% on the 6900 boed achieved in the preceding year. Faroe had expected to produce 7000-9000 boed in 2013 until September.

The company announced in that month that the operator of the Njord platform, Statoil, had decided to complete remedial work following a structural review of the facility.

Faroe and partners in the Njord and Hyme fields may have to complete a costly upgrade of the platform, or replace it, if they want to use it for work on other prospects in the area.

However, chief executive Graham Stewart said that the update "clearly demonstrates that Faroe is maintaining its forward momentum in building a strong and high potential value portfolio in its core areas of Norway and UK".

Faroe noted estimates that the Snilehorn and Novus discoveries it made off Norway recently contained up to around 116 million barrels of recoverable oil equivalent in total.

It increased reserves to 27.2m barrels oil equivalent at December 31, from 20.1m boe at the start of the year.

Faroe expects to finish drilling work on four exploration wells that it believes could be high-impact off Norway in the coming months.

Regarding the UK, the company said: "Faroe is actively preparing for the announced 28th licensing round, where several exciting exploration opportunities have been identified."

It has funding in place to increase spending on exploration, appraisal and development activity to around £170m this year, from £130m in 2013.

Shares in Faroe Petroleum closed up 1.75p at 109.75p.

Separately, Edinburgh-based Bowleven said it had submitted an application to the Cameroon authorities on January 6 for approval for its plans to commercialise finds made off the West African country.

The company would require an official Exploitation Authorisation before it could decide to sanction the hefty investment required to bring the fields onstream.

In November, Bowleven said that it expected to make a final investment decision by mid-2014, rather than by the end of 2013 previously. Directors said in the November announcement that a further delay to the decision may have implications for the Group's status as a going concern.

Bowleven has had no indication when the Government will decide on the application for an exploration authorisation.

In July, Bowleven said the Cameroon authorities had indicated an early grant of such an authorisation was a priority.

Shares in Aim-listed Bowleven closed up 1p at 36p.

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