• Text size      
  • Send this article to a friend
  • Print this article

Faroe Petroleum pays initial £35m for majority stakes in gas fields

FAROE Petroleum is increasing its exposure to the UK North Sea by acquiring stakes in two gas fields for £35m with a further £100m potentially payable in future.

The Aberdeen-based firm is buying majority stakes in the Ketch and Schooner fields off the Lincolnshire coast from Tullow Oil in a deal that will result in a big increase in its production.

The deal reflects Faroe's enthusiasm for a core area in which it has amassed a big portfolio of exploration and production assets through acquisitions and success in licensing rounds.

Chief executive Graham Stewart noted Faroe will be able to use losses it has built up as result of its UK activity to reduce any tax payable on the output from Ketch and Schooner.

He previously flagged up Faroe's desire to buy UK production to utilise tax losses. The losses totalled £78m at 31 December.

Faroe expects its share of production from Ketch and Schooner to average 3,000 to 4,000 barrels oil equivalent daily.

Mr Stewart noted: "Both assets offer numerous possibilities and options to grow."

In its 2013 annual results announcement in March, the company said it expected production to average 4,000 to 6,000 boepd in 2014.

Tullow, which has made big finds in Ghana and Uganda, has decided to focus on light oil assets.

In December 2012 Tullow said it planned to sell its gas assets in the UK and Netherlands.

Chief executive Aidan Heavy yesterday said Schooner and Ketch "provided important, stable, cash flows" which have helped fund successful frontier exploration.

He said efforts to sell stakes in assets were taking longer than initially expected but market conditions are improving.

Faroe will pay an initial £35m with a further £10m payable if production from a recently developed area of Schooneer meets targets. It will pay up to £92m royalties depending on the output from two as yet undeveloped areas of Schooner.

Separately, Trinity Exploration & Production, the Trinidad focused business with an office in Edinburgh, grew underyling operating profits to $21.6m (£12.8m) in 2013 from $16.4m in 2012.

Trinity, chaired by North Sea veteran Bruce Dingwall, expects production to average 3,800 to 4,500 barrels oil equivalent daily in 2014.

Contextual targeting label: 
Business

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

230323