Update of the Technical Report
21 April 2009
Faroe Petroleum plc (the "Company")
Update of the Technical Report
Faroe Petroleum, the independent oil and gas company focusing
principally on exploration, appraisal and undeveloped field
opportunities in the Atlantic Margin, the North Sea and Norway, is
pleased to announce the results of an update of the technical report
by Senergy Limited ("Senergy").
The report was prepared for the first time in June last year in
connection with Faroe Petroleum's multi-currency borrowing base
facility with Société Générale Corporate & Investment Banking. An
update of the report has been conducted to reflect the changes to
Faroe Petroleum's portfolio and provide the directors and
shareholders of the Company with an up to date independent view of
the potential value of the assets.
Compared to last year's report, we are pleased to highlight the
following main changes:
* Net Faroe Reserves have increased from 4.0 to 5.5 million barrels
of oil equivalent (boe) following the addition of Trym
* Net Faroe Contingent Resources (risked) have increased from 22 to
32 million boe due to the successful appraisal of Breagh and the
Maria licence award in Norway
* The net present value (NPV) of the Net Reserves and Contingent
Resources have increased from £129m to £204m
* The NPV of the two year drilling programme has increased from
£168m to £189m and new awards in 2008 have more than compensated
for any reductions in the projected NPV associated with
unsuccessful exploration drilling since the last report.
The first table set out below presents the reserves and resources of
the asset portfolio by geographic location and by asset category. The
reserves and resources are reported in accordance with the joint
reserves/resources definitions of the Society of Petroleum Engineers,
the World Petroleum Congress and the American Association of
Petroleum Geologists.
Faroe Petroleum is participating in an active drilling programme.
The reserves and resources which will be targeted in the coming two
year drilling programme are labelled "Near Term Appraisal" and "Near
Term Exploration" in the first summary table below.
The category "Medium/Long Term" includes the resources which will be
targeted by additional exploration and appraisal wells, but which do
not yet have firm drilling plans. The summary tables below do not
include a number of additional exploration prospects in the Company's
portfolio where they have either no current drilling plans or need
additional work for them to be matured into drillable prospects.
Faroe Petroleum - Reserves and Resources, MMboe
P + P Contingent Near Term * Medium/Long
Area Reserves Resources Exploration Term Explo'n
Atlantic Margin Risked 7 19 32
Un-
risked 27 95 525
UK North Sea Risked NA 15
Un-
risked 2.0 42
Norway Risked NA 10 25 52
Un-
risked 3.48 50 103 268
Total, MMboe Risked NA 32 44 84
Un-
risked 5.48 119 198 793
* "Near Term" is defined as the Exploration and Appraisal wells that
Faroe plans to drill in the next 2 yrs
Notes:
Gas resources have been converted to oil equivalent using 5.6 mscf =
1 boe.
Breagh has been assessed by separate independent engineers appointed
by the operator Sterling Resources Ltd, further details of which are
noted below. Consequently, the numbers for Breagh have been added to
the Senergy numbers to get the total Faroe portfolio evaluation.
The technical report also includes an economic evaluation of Faroe
Petroleum's net reserves and resources. This is summarised in the
second table below showing net present values discounted at 10 per
cent (NPV10) and expressed in £s million.
Faroe Petroleum - Net Valuation at NPV 10%
Medium /
Producing / Near Term * Near Term * Long
Developing Appraisal Exploration Term
Atlantic Margin Risked 0 49 80 55
Un-
risked 0 197 390 896
UK North Sea Risked 15.9 75 0
Un-
risked 15.9 277 0
Norway Risked 5 58 109 88
Un-
risked 5 285 523 458
Total Risked 20.9 183 189 143
Un-
risked 20.9 759 913 1,354
* "Near Term" is defined as the Exploration and Appraisal wells Faroe
plans to drill in the next 2 years
Graham Stewart, Chief Executive of Faroe, commented:
"We are pleased to provide an update of the Senergy report to Faroe
Petroleum's shareholders. We feel this is an informative and
important third party verification of the inherent value contained in
our extensive portfolio. We are encouraged by the increase in value
that has been achieved, particularly in the Contingent Resources
category and we look forward to targeting the significant resource
potential and associated value uplift which could be realised for
shareholders in the near term".
- Ends -
Enquiries
Faroe Petroleum plc
Graham Stewart
Tel: +44 1224 650 920
Panmure Gordon
Katherine Roe/Ashton Clanfield
Tel: +44 20 7459 3600
Financial Dynamics
Billy Clegg/Edward Westropp
Tel: +44 20 7831 3113
Notice
Certain statements contained in this press release are
"forward-looking statements" and constitute the Company's
expectations or beliefs concerning, among other things, future
operations, financial and other results, and components thereof.
Forward looking statements inherently involve known and unknown risks
and uncertainties and are based on a number of material factors and
assumptions. Actual performance and results may vary from those in
the forward looking statements.
The assumptions made in these forward looking statements include
that: contracted parties provide goods or services at agreed
timeframes; equipment necessary to explore and drill the Atlantic
Margin, UK North Sea and Norwegian assets do not incur unforeseen
break downs; no workforce shortages or delays occur; plant and
equipment function as specified; no unusual technical or geological
problems occur; and on-going contractual negotiations are completed
in a successful and timely manner.
As is evident from the Company's portfolio of assets, Faroe does not
have direct control as operator of many of its interests. As a
result, the Company does not have direct control of the active
drilling programme and there can be no assurances that the targeted
Near Term Appraisal and Near Term Exploration will take place in the
exact time frames indicated or, given the nature of exploration, that
reserves will be realised.
Notes to Editors
The Company is actively building a balanced portfolio of operated and
non-operated exploration and appraisal properties, with significant
stakes and an active work programme. Faroe Petroleum has through
successive licence applications and acquisitions built a substantial
portfolio of exploration, appraisal and development assets across the
Atlantic Margin, the UK and Norwegian North Sea and the Norwegian
Sea. The licence portfolio provides considerable spread of risk and
reward, encompassing nearly fifty licences with eight licences West
of Shetlands, six licences offshore the Faroe Islands, two licences
in the Moray Firth area of the UK Central North Sea, eleven licences
in the Southern gas basin and twenty licences in the Norwegian North
Sea and Norwegian Sea. Faroe Petroleum joint venture partners
include BP, Chevron, ConocoPhillips, DONG, DSM, Eni, E.ON Ruhrgas,
GDF, OMV, RWE, Shell and Statoil all of which have an outstanding
track record in oil and gas exploration and development.
Faroe Petroleum is quoted on the AIM Market of the London Stock
Exchange with offices in Aberdeen, Stavanger and Torshavn. The
Company has a highly experienced team of professionals focused on
creating exceptional value for its shareholders.
Dr. Barry Squire is the Commercial Project Manager for Senergy and
was responsible for supervising this evaluation. He is a
professional petroleum geologist with over 25 years of oil industry
experience, the last 10 of which have been in the capacity of a
reserves auditor, and has read and approved the technical disclosure
in this regulatory announcement.
Glossary
Producing and Under Development: there are 6 fields either producing
or under development: Schooner, Minke, Wissey, Topaz, Orca and Trym.
Reserves quoted are Developed for Schooner, Minke and Wissey, and
Undeveloped for Topaz, Orca and Trym.
Reserves are those quantities of hydrocarbons which are anticipated
to be commercially recovered from known accumulations from a given
date forward.
Proved reserves are those quantities of petroleum which, by analysis
of geological and engineering data, can be estimated with reasonable
certainty to be commercially recoverable, from a given date forward,
from known reservoirs and under current economic conditions,
operating methods, and government regulations.
Probable reserves are those unproved reserves which analysis of
geological and engineering data suggests are more likely than not to
be recoverable. In this context, when probabilistic methods are used,
there should be at least a 50% probability that the quantities
actually recovered will equal or exceed the sum of estimated proved
plus probable reserves
Near Term Appraisal: there are 8 immediate development opportunities
including Breagh and S.E.Tor that require additional appraisal and/or
approval of development plans. Resource volumes quoted in the summary
tables are Best Estimate Recoverable Contingent Resources.
Near Term Exploration: there are 12 undrilled exploration prospects
which are represented in the drilling schedule. Resource volumes
quoted in the summary tables are Best Estimate Recoverable
Prospective Resources.
Medium/Long Term Opportunities: are a realistic selection of mainly
exploration opportunities that could become viable drilling
opportunities in a 2010 to 2015 timeframe. Resource volumes quoted in
the summary tables are Best Estimate Recoverable Prospective
Resources.
Contingent Resources: Those quantities of petroleum which are
estimated, on a given date, to be potentially recoverable from known
accumulations but which are not currently considered to be
commercially recoverable.
Prospective Resources: Those quantities of petroleum which are
estimated, on a given date, to be potentially recoverable from
undiscovered accumulations.
Risk: the probability of loss or failure. As "risk" is generally
associated with the negative outcome, the term "chance" is preferred
for general usage to describe the probability of a discrete event
occurring. The risk factor for contingent resources is the estimated
chance that the volumes will be commercially extracted. The risk
factor for prospective resources means the chance of discovering
hydrocarbons in sufficient quantity for them to be tested to the
surface.
Risk discounted resources have been assessed by multiplying the
assessed chance of appraisal success or the exploration chance of
success by the best estimate (base case or P50) resource volume.
Review of Breagh
The following reserve numbers (which represent the Company's net 10%
share) have been assessed by independent engineers appointed by
Sterling Resources Ltd ("Sterling") and extracted from the report
published by Sterling on 16 April 2009. It should be noted that due
to classification differences between Canada and the UK, the reserve
numbers quoted below are treated as Contingent Resources by the
Company and the net Present Value Figures are shown as post tax.
Reserves (MMboe) NPV 10% (post-tax) £m
Proved (P90), 6.1 18.0
Prove plus Probable (P50) 8.7 25.2
Prove plus Probable plus 11.9 38.0
Possible (P10)
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