22nd Jan 2015 10:52
LONDON (Alliance News) - Faroe Petroleum PLC Thursday said production during 2014 hit the top end of its guidance and said it will use its strong financial position to capitalise on attractive acquisitions.
The oil and gas company said average production for 2014 is set to be at the upper end of its guidance of 9,100 barrels of oil equivalent per day. Of its total production, 53% was made up of oil and condensate whilst 47% consisted of gas.
Faroe said the acquisition of a 53.1% operated interest in the Schooner field and a 60% operated interest in the Ketch field, both in the North Sea, had boosted gas production in 2014.
"On an operational level, 2014 delivered excellent progress for the business with sustained production coming in at the upper end of expectations and guidance," said Chief Executive Graham Stewart.
For 2015, the company is expecting production to be between 8,000 and 10,000 barrels of oil equivalent per day, consisting of 58% oil and condensate and 42% gas.
Faroe is continuing to seek "value-enhancing" producing assets to acquire to "capitalise on market conditions to build value", said the company.
"Faroe is well placed to consider capitalising on potentially attractive asset opportunities which may become available in the period ahead," said Stewart.
At the end of 2014, Faroe is expecting its cash position to be around GBP92.5 million, GBP69.5 million of which is in cash. It has drawn down a total of USD35.7 million from its USD250 million reserve-based lending facility at the end of the year.
Capital expenditure on exploration and appraisal during 2014 was around GBP85 million before tax and GBP23 million after tax, with production and development expenditure also totalling GBP23 million.
For 2015, the company has increased exploration and appraisal expenditure, which has been given a budget of GBP95 million before tax and GBP25 million after tax, whilst expenditure on development and production has been slashed to around GBP16 million.
It said its average operating expenditure in 2015 is expected to be around USD30 per barrel.
"With the current low oil price environment, there is much focus on both cost and financial strength. Faroe is particularly robust despite low oil prices, due to a combination of factors," said Stewart.
Faroe has hedged 268,000 barrels of oil in 2015 at USD90 and 835,000 barrels of oil equivalent of gas, or 52.6 million therms of gas, at 50 pence per therm.
"Despite challenging market conditions, the company is set for 2015 to be another year of growth, with an exciting and fully-funded drilling programme of low cost, high-impact exploration wells," said Stewart.
In 2015, Faroe is planning on drilling four wells, including two wells on the Pil field in Norway which will benefit from the country's 78% exploration tax rebate, it said.
On Wednesday, Faroe had announced it had been awarded five offshore licenses in Norway, one of which it will operate.
"The company continues to high-grade its exploration portfolio, progressing selected licences for further work and leading to a drilling commitment, and relinquishing other licences which do not meet Faroe's stringent requirements for capital expenditure," said Faroe.
It said it relinquished 10 licenses during 2014, including one offshore Iceland and three licenses in the Shetland Islands.
Faroe shares were up 0.9% to 68.84 pence per share Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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