1. business and industrial
2. energy
3. oil

Company Presentation
October 2014
Disclaimer
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 or 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.
Faroe overview
 Faroe’s exploration-led and production-backed
strategy is delivering exceptional results

Significant recent exploration successes in Snilehorn
and Pil

Substantial potential being realised across portfolio
 Faroe has built an outstanding portfolio

Largest acreage position in Norway of any London
quoted independent

Balanced portfolio of assets

Ongoing drilling programme targeting up to 5 wells
per annum, funded from cash flow

Material, well balanced, tax efficient production
 Faroe’s world class sub-surface competence is at the
heart of its success
 Faroe is on track to become the preeminent E&P
player in Norway and the UK
Consistent and proven strategy
Exploration
 Target up to 5 material wells per year
 High Impact – near field and frontier
 Leverage competitive edge
Win licences, drill wells and make discoveries
Monetisation
 Realise value of exploration discoveries
 Exploit M&A skills and experience
Swap, divest, develop and acquire assets
Cash
 Consolidate value, grow reserves, production and cash
 Prudent financial management
Generate strong production/cash flow – fund exploration programme
Faroe’s growth model – building core value and scale
 Proven business model and a solid track record
 Significant growth delivered through combination of exploration and appraisal
activity and a series of acquisitions and swaps. Since 2010:

Four-fold increase in production

Eight-fold increase in reserves

Seven exploration discoveries adding estimated net 2C resources of between 50 and 136mmboe
 Faroe well positioned to build material core value and scale in the period ahead:

Grow prospective resources through licence awards and farm-ins

Deliver 4-5 high-potential wells per year in E&A drilling programme

Maintain high discovery rate and low finding costs to deliver substantial growth in 2C resources

Mature discoveries to FDP sanction and grow 2P reserves

Deliver significant production growth through investment in producing fields together with valueaccretive acquisitions and swaps
Exploration/appraisal
Pil and Bue: significant exploration success

Significant success - announced in March 2014 Faroe 25%

Initial Pil wellbore: gross columns ca 135m of oil
and 91m of gas

Well test flowed at a stable rate of 6,710 bopd
of 37° API oil, 56/64” choke - clear evidence of
prolific reservoir

Pil side-track: gross columns of ca 80m of oil

Pil reservoir sands with very high net:gross ratio
in both wellbores

Bue separate reservoir: gross columns ca 18 m

Preliminary Pil and Bue estimated range of
gross recoverable resource of 80-200 mmboe*

Faroe net estimated 20-50 mmboe recoverable
* Source: Operator / NPD
Exploration/appraisal
Pil – follow-up wells in 2015

Two follow up wells to the Pil
discovery planned for 2015

Programme allows for side-track
wells and production testing

Large site survey acquired

Transocean Arctic on contract for
drilling in H1 2015

The two wells are targeting
estimated unrisked prospective
resources of 93 - 490 mmboe
(gross) in the central and southern
prospects along the Vingleia fault,
which would be in addition to the
volumes already discovered in Pil
and Bue

The most northern prospect along
the Vingleia fault is likely to remain
untested by next years drilling
campaign
Pil discovery
2015 Pil follow-up target
Exploration/appraisal
Bister – 2015 well with excellent potential

PL348, Statoil operator, Faroe 7.5%

Building on Snilehorn success from late 2013, (Snilehorn
gross recoverable resource range estimate of 57-101
mmboe)

Bister prospect being planned for drilling in H1 2015

Evidence of a pressure barrier between Snilehorn and Hyme
contributes towards de-risking of the Bister prospect

Seismic amplitude anomaly on Bister of similar character to
the anomalies on Snilehorn and Hyme

Targeting estimated unrisked prospective
resources of 20 - 90 mmboe (gross)
Bister
Snilehorn
Hyme
Njord
Draugen
Exploration/appraisal
Shango: near-field exploration well in 2015

PL627, Total operator, Faroe 20%

Located on the northern part of prolific Utsira High

Large undrilled Jurassic structure

Shango prospect de-risked by Skirne production performance,
possible spill-over from Shango to Skirne

If successful, will be target for fast-track tie-back development

Leif Eiriksson drilling rig on contract for drilling in H1 2015

Targeting estimated unrisked prospective resources of 30 - 110
mmboe (gross)
HC Spillroute
Shango
Skirne
Exploration/appraisal
Kvalross - Barents Sea well in 2015

PL611, Wintershall operator, Faroe 40%

Awarded in May 2011 in the Norwegian 21st Licensing
Round

Located in the Barents Sea to the south of OMV’s
significant Wisting discovery

The well is planned to test two targets:

the Lower Triassic Kvalross prospect with very
significant gas resources potential in Klappmyss
clinoform reservoirs within a megaclosure

the Early Triassic Kvaltann prospect, a Snadd
Formation sandstone channel sitting directly above
the Kvalross Prospect with substantial oil potential
as proven in the Wisting shallow discovery to the
north

Scheduled to be drilled with the Transocean Arctic drilling
rig in H2 2015

Targeting estimated unrisked prospective resources of 50 580 mmboe (gross)
“Company-maker” opportunity
Expected drilling programme: current outlook
Prospect
Equity
Q2
Pil & Bue wells*
Butch - South West *
Pil - first follow up well *
Shango *
Pil - second follow up well *
Bister
Kvalross *
Dazzler *
Aileen
Milagro
2014
Q3
Q4
Q1
2015
Q2
Q3
Q4
2016
Q1
Q2
25.0%
15.0%
25.0%
20.0%
25.0%
7.5%
40.0%
20.0%
50.0%
30.0%
* committed
Very active programme ahead – fully funded with significant upside potential
Move 2C Contingent Resources to 2P Reserves
Perth and Lowlander – significant upside

HOA enabling future joint development of
Perth (Faroe 34.6%), Dolphin (34.6%) and
Lowlander (100%)

Lowlander, Dolphin and Perth estimated to
contain 270 mmboe of oil place, - ready
appraised, 80 mmboe recoverable (100%).

Previous barrier to development - no
existing facilities in area for production of
sour crude oil1

Rig and contracting markets offer
opportunity for improved economics

Work underway towards preparing the joint
FDP – scheduled for 2015/16.
1 Tartan
is able to handle only limited amount of low-H2S crude
Unlocking the assets has potential to generate exceptional return
Production
Schooner & Ketch acquisition

Accretive deal grows production and 2P reserves





Diversifies production portfolio




Use of carried forward losses allows rapid payback of consideration – est. 2016
Provides tax shelter for future investments in the UK sector
Acquisition financed from existing RBL debt facility


60% operated interests in two good quality producing gas fields developed by
Shell/Esso
Improved balance between oil and gas – approximately 50:50
Improves tax efficiency



Adds 3,000 – 4,000 boepd net
Adds 5.9 million boe of 2P reserves at 1/1/14 (increase to 33.1 million boe overall)
Significant potential to further boost production, grow reserves and extend field life
Initial consideration of £23.1m paid at completion
Introduces financial gearing at a prudent level
Faroe becomes a production operator in a measured way

Small increase in staff level

Operating model based on “duty holder” principle to continue
Plans to increase reserves and production through investment
programme


Phase 1: operational efficiencies, and
Phase 2: infill well drilling programme
Production
Njord and Hyme – back on production as planned

The project to strengthen Njord A facility deck structure completed on time

Njord and Hyme brought back on-stream in July 2014 as planned

Monitoring programme to assure Njord A hull integrity being implemented

Operator’s plan is for a two year production period until mid-2016 while
Draugen
Snilehorn
Hyme
Njord
planning as a base case to take Njord A facility back to shore for hull repair

Partnership focus on long-term value proposition from Greater Njord Area
which has seen considerable recent exploration success

Overall remaining 2P Reserves and 2C Resources in excess of 170
mmboe (gross) in Njord, Hyme and Snilehorn

Pil and Bue estimated 80-200 million boe

Bister and the Pil follow-up wells offer potential for significant further
exploration success

Faroe very well positioned across the area
Pil
Finances
2014 Financial highlights
2014 Interim results for six months ended 30 June 2014 (unaudited)

Turnover £53.5m (includes £13.4m of overlift) (1H 2013: £89.0m)

EBITDAX1 £15.6m (1H 2013: £56.9m)

Expensed exploration expenditure of £19.9m (1H 2013: £ 16.5m) includes pre-licence expenditure of £3.2m and write offs of £16.7m (Darwin)

Loss after tax of £3.7m (1H 2013: £12.2m Profit)

Pre- and post-tax exploration and appraisal investments £65.0m and £16.5m respectively (1H 2013: £49.6m and £15.5m)

Development and production investments £9.8m (1H 2013: £17.1m)

Closing net cash £96.9m (31 December 2013: £40.6m)
Outlook

Planned exploration drilling programme in 2014 of approx. £110m (£35m post-tax) and forecast a similar size exploration programme in 2015

Development capex in 2014 is expected to be approx. £30m and between £10m and £30m in 2015 (preliminary budget)

Opex ranges from $10 - $35 / boe (preliminary 2015 budgets)
Production

Average economic production January to September 2014: 8,518 boepd including Schooner and Ketch

Average economic production in August 2014: 12,259 boepd

Average 2014 economic production2 is anticipated to be in the range of 7,000 – 10,000 boepd (FY 2013 production 6,0592 boepd)
Bank facilities

Undrawn RBL provides significant capital for further investments

Norwegian exploration financing facility (EFF) renewed and upscaled to NOK1.5bn (approx. £150m) in September 2014
Tax efficiency

UK tax losses of £75.0m (June 14); production provides tax shield for UK exploration

Norway: utilisation of 78% exploration tax rebate; EFF funds 75% of net exploration expenditure
1
EBITDAX (earnings before interest, taxation, depreciation, and amortisation) is gross profit plus depreciation on producing assets
Summary
Solid and proven business model delivering sustainable value growth, principally through drill-bit

Exploration-led strategy continues to deliver material success

World-class technical team

Benefit significantly from Norwegian exploration incentives (78% tax refund)
Balanced and diversified portfolio - exploration programme fully financed from cash and cash flow

Outstanding track record in exploration and deals

Field investment programme under way across production portfolio to optimise output and cash flow

Strong production base with good potential for further targeted production acquisitions
Significant value creation potential

Continuing programme of high impact E&A wells, following recent successes

Exploration portfolio delivering steady flow of new exploration well opportunities to maintain momentum

On track to become the preeminent independent E&P player in UK and Norway
Differentiators
Excellent exploration
track record
Experienced management
& clear strategy
Financial strength
Sustainable multi-well
drilling programme
Excellent monetisation
track record
Strong Norway
position
Executive team
Graham Stewart – Chief Executive Officer

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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 from 1997 to 2002
Experience with Schlumberger, DNV Technica, Petroleum Science & Technology Institute
Offshore Engineering degree (Heriot-Watt University) and MBA (University of 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
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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 offerings and financing
Chartered accountant by training having qualified with KPMG
PhD Mechanical Engineering (University of Leeds)