Company Presentation
22 January 2015
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.
2
Faroe overview
 Faroe’s exploration-led and production-backed
strategy is delivering exceptional results

Significant recent exploration successes in Norway:
Snilehorn and Pil

Substantial potential being realised across portfolio
 Faroe has built an outstanding portfolio

One of the largest acreage position in Norway of any
quoted independent

Balanced portfolio of assets

Ongoing multi-well drilling programme 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
3
Faroe’s growth model – building core value and scale
Maintain significant portfolio of Prospective Resources

Participate in Licence Rounds – excellent track record of awards

Proactive approach to farm-ins
Grow Contingent Resources (2C)

Emphasis on quality – drill up to 5 E&A wells per year

Optimum working interests and better than 1 in 3 success rate
Grow 2P Reserves

Progress discoveries to FDP sanction

Participate selectively in development projects

Swap contingent for 2P reserves where appropriate
Grow Production

Exploit market opportunities through acquisitions & swaps

Invest in our producing fields
Faroe on track to become preeminent E&P player in the wider North Sea
4
Faroe well positioned in lower oil price environment
 Financially robust

Uncommitted cash on the balance sheet (£92.5m at 31 Dec-14 unaudited)

Significant head-room in existing debt facilities


Low gearing level and low cost of debt
Complementary nature of the RBL and EFF
 Production generating strong free cash-flow even at much lower oil price levels




2015 forecast production 8-10,000 boepd (approx. 58% liquids and 42% gas)
2015 forecast opex of the producing fields averaging approximately US$30/boe
Oil hedges in place at $90/bbl to Q4’15, gas hedges to H2 2016 at 50p/therm
Production balanced between oil and gas and between Norway and the UK
 No large capital commitments ahead

No significant development costs in 2015 - expected capex £16m – mostly infill drilling

Glenlivet divested in a timely manner - £10m consideration (in part deferred) PLUS £55m capex saved
 E&A programme remains solid with potential for significant value creation

4 - 5 well E&A programme for 2015 is on track and fully funded - expected to be approximately £25m net
Faroe has strong balance sheet, near-term upside, real growth potential
5
Exploration and appraisal
Drilling programme: current outlook
Prospect
2015
Equity
Q1
Shango (Skirne East) *
Blink (Pil follow up well) *
Boomerang (Pil follow up well) *
Bister
Kvalross *
Dazzler *
Q2
Q3
2016
Q4
Q1
Q2
20.0%
25.0%
25.0%
7.5%
40.0%
20.0%
* committed
 All wells being drilled in Norway – benefiting from State tax incentives
 Several prospects identified for possible 2016 drilling, both operated and non-operated
 Screening work ongoing with emphasis on economic robustness ahead of drilling decisions
Very active programme ahead – fully funded with significant upside potential
6
Exploration and appraisal
Significant Pil discovery – 2 follow-up wells in 2015
2014 discovery

Significant success - March 2014 - Faroe 25%

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

Prolific reservoir - very high net:gross ratio

Preliminary Pil and Bue estimated range of
gross recoverable resource of 80-200
mmboe*
Blink
Boomerang
2015 follow-up programme

Draugen field
Two significant follow-up wells to the Pil
discovery: Blink and Boomerang

Transocean Arctic on contract

Targeting estimated additional unrisked
prospective resources of 93 - 490 mmboe
(gross)
Njord field
Pil discovery
* Source: Operator / NPD
7
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)
8
HC Spillroute
Shango well
Translate 2C Contingent Resources to 2P Reserves
Current 2C Contingent Resource Estimate summary
Maximise project values through relatively low-cost pre-development activities
Field
WI
Estimated Net
Resources 2C
Lowlander/Perth
(UK)
>50%
35 mmboe
Pil
(Norway)
25%
13-42 mmboe
Fogelberg
(Norway)
15%
9 mmboe
Butch
(Norway)
15%
7 mmboe
Snilehorn
(Norway)
7.5%
4 mmboe
Rodriguez /
Solberg (Norway)
20%
2-13 mmboe
2C Resources
(mid case est.)
Faroe Observations
Operator
Faroe/Parkmead
•
•
•
•
•
•
•
VNG
Centrica
2011 / 2013 acquisitions
Technical definition maturing
Commercial framework for
joint development being
agreed ahead of FDP
2014 discovery
Prolific reservoir
Tie-back or stand-alone
Significant additional
prospectivity targeted
•
•
•
2010 discovery
Proximity to infrastructure
Awaiting export capacity
Centrica
•
•
•
2011 discovery
Concept selection underway
Tie back development options
being assessed
Statoil
•
•
•
2013 discovery
Tie-back to Njord likely
Further prospectivity being
targeted: Bister
Wintershall
•
•
•
2013 / 2014 discoveries
Lower Cretaceous Lange
Channel system extends across
several licences
9
Snilehorn Other
5
4
Butch 7
Pil
28
Rodriguez /
Solberg
7
Fogelberg
9
Perth
14
Lowlander
21
Total: 95 mmboe
Build production base and grow reserves
Producing assets
Diversified production base with infill and near-field upside potential to boost production
Brage
(Faroe: 14.25%)
 Oil field in Norwegian Sea - Wintershall operated
 Infill programme – two-well programme for 2015 underway
 Further targets being matured
Blane
(Faroe: 18.0%)
 Oilfield in Central Graben UK, Talisman operated
 Low operating cost, stable production
Njord
(Faroe: 7.5%)
Glenlivet
(Dev)
5.2
Other
2.1
Njord Area
9.7
Blane
2.2
 Infill well in the planning phase
Ringhorne East
(Faroe: 7.8%)
2P Reserves (01/01/14)
 Oilfield in Norwegian North Sea, Exxon operated
 Low operating cost, stable production
 Prolific oil and gas field in the Norwegian Sea – Statoil-operated
 Possible hub for Greater Njord Area – Snilehorn and potentially Pil
 Hyme subsea satellite performing above expectations
Schooner &
Ketch
(Faroe: 60%)
 Acquired operated interest in Schooner (53.1%) and Ketch (60%) in April 2014
Other
Production
 Smaller interests in non-operated assets in the Norwegian and UK North Sea
 Completed transaction and took over as operator in October 2014
 Started planning possible investments for upside case
 Operators: Exxon, BP, Tullow and GdF Suez
Strong balanced production, low opex of $30/boe; low capex near-term
10
Ringhorne
East
3.7
Brage
4.3
Schooner &
Ketch
5.9
Production
Schooner & Ketch gas fields

Acquisition deal in 2014 grows production and 2P reserves





Diversifies production portfolio



Introduces financial gearing at a modest level
Faroe has successfully taken over operatorship



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



2014 average annual production 3,300 boepd
Added 5.9 million boe of 2P reserves at 1 Jan-14
Good potential to further boost production, grow reserves and extend field life
Initial consideration of £23.1m paid at completion
Small increase in staff level
Operating model based on “duty holder” principle continuing
Plans maturing to increase reserves and production through
investment programme


Phase 1: operational efficiencies, and
Phase 2: infill well drilling programme
Approximately half of Faroe’s production is now gas
11
Production
Njord and Hyme – on line and performing well

The project to strengthen Njord A facility deck structure completed on time


Njord and Hyme brought back on-stream in July 2014 as planned
Performing well
Draugen
Snilehorn
Hyme
Njord


Operator’s plan is for a two year production period until mid-2016 while
planning as a base case to take Njord A facility back to shore for hull repair
 Possible extension to production period to mid- 2017 being evaluated
Partnership focus on long-term value proposition from Greater Njord Area
which had considerable recent exploration success – Snilehorn and Pil/Bue
 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 (gross)
 Bister and the Pil follow-up wells offer potential for significant further
exploration success
 Faroe very well positioned across the area
Faroe has outstanding position in Greater Njord Area
12
Pil
Key financials
 Revenues



2014 economic production* approximately 9,100 boepd
2015 production expected to be 8-10,000 boepd (approx 58% liquids and 42% gas)
2015 hedging: 268,000 bbls of oil, $90 puts and 52.6 mm therms (approx 835,000 boe) 50p/therm puts
 Liquidity



Cash at 31 Dec-14 of £92.5m (unaudited)
$250m Reserve Based Lending facility (RBL) – approx. $35.7m drawn at 31 Dec-14
Exploration Financing Facility (EFF) of approx £150m (NOK 1.5 bn) (plus NOK 500 million accordion)
 Capex



2014 exploration and appraisal programme of approx. £85m or £23m post-tax (actual Faroe cost)
2015 expected exploration and appraisal programme of approx. £95m or £25m post-tax
2015 expected development and production capex approx. £16m (2014 £23m)
 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
Strong balance sheet, low gearing, good hedging, robust cash flow - headroom
13
* Economic production for 2014 includes Schooner and Ketch, where Faroe received the economic benefit from the associated production from 1 Jan-14 but can only account for it from the completion
Summary and outlook
Solid and proven business model delivering sustainable value growth, through drill-bit and transactions
 Exploration-led strategy continues to deliver material success, underpinned by strong cash flow
 Balanced portfolio
 World-class technical team
Financially robust and operationally strong - even at low oil prices
 Strong balance sheet


Uncommitted cash on the balance sheet; significant head-room in existing debt facilities
Low gearing level and low cost of debt ; complementary nature of the RBL and EFF facilities
 Strong cash flow




Production guidance for 2015 is 8–10,000 boe/d*
2015 forecast opex of the producing fields averaging approximately US$30/boe
Revenue supported by hedging programme
Production balanced between oil and gas and between Norway and the UK
Forward programme is material yet relatively low cost and benefits from Norwegian State refund
 4-5 well high impact E&A programme in Norway for 2015 on track, fully funded - net post-tax cost estimated at around £25m
 Modest production and development capex in 2015 - expected £16m
Planned growth in fundamentals is on track
 Progressing 2C to 2P transitions positively, with limited capex commitments
 Actively focused on growth through deals - constantly monitoring UK/Norwegian assets markets for opportunities
* Economic production for 2014 includes Schooner and Ketch, where Faroe received the economic benefit from the associated production from 1 Jan-14 but can only account
for it from the completion of the acquisition on 9 Oct-14
Strength at low oil price, high upside, funded 2015 programme, growth planned
14
Differentiators
Excellent exploration
track record
Experienced management
& clear strategy
Financial strength
Sustainable multi-well
drilling programme
Excellent monetisation
track record
Strong Norway
position
15
Executive team
Graham Stewart – Chief Executive Officer





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






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)
16
Appendices
Exploration/appraisal
Bister – near field exploration well in 2015

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
Draugen
Njord
Important opportunity to add further reserves for development in Greater Njord Area
18
Exploration/appraisal
Kvalross – Frontier exploration 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)
Kvalross/Kvaltann
well
Very significant opportunity, as Barents Sea is shaping up well
19
Move 2C Contingent Resources to 2P Reserves
Perth, Dolphin & 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.
1 Tartan
is able to handle only limited amount of low-H2S crude
Unlocking the assets has potential to generate exceptional return
20