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Independent oil and gas producer Faroe Petroleum plc (LSE:FPM) is giving up one acreage north of the UK in the West of Shetlands citing the licence no longer fits the company’s criteria of providing an attractive return for its shareholders.
In a statement today, Faroe said it is to cease operations on a block 31 kilometres north east of a 50-o00 barrels of oil per day oil field, even if the block does hold hydrocarbon deposits, including the Freya discovery in 1980 and more recently, the Fulla discovery last 2011.
However, a limited access to infrastructure coupled with the recent analysis of oil samples confirming “poor oil quality” and a “smaller resource size” makes investment irrational, following the company’s assessment.
“No economically viable solution has been found to bring these discoveries to development at this time, and consequently the licence will be relinquished,” Faroe stated.
Protecting Shareholder Interest
Graham Stewart, Chief Executive Officer of Faroe, reiterated that the company’s policy has always been to make “substantial investments” when there is good potential to provide shareholders with attractive return.
The disposal plan came a week after Faroe won four new licences in the West of Shetlands area, where the company says it has a considerable knowledge and experience.
Mr. Stewart continued, “the high potential West of Shetlands area continues to be a core element of Faroe Petroleum’s strategy.”
Faroe holds eight licences located in the West of Shetlands, five of which it operates, including the said licence to be disposed of.
Besides the Fulla oil discovery, two gas discoveries, the Glenlivet and the Tornado, were also made within the said region and are now being developed for production.
Faroe is awaiting results from another exploration well where it holds 6.25% interest, also in the West of Shetlands, and operated by BP (LSE:BP.)
Meanwhile, some shareholders, however, sold their stakes in the company resulting in a 9% drop of share price at 2:00 PM GMT, losing 14.75 pence to £1.49 on the London Stock Exchange.
