Faroe Petroleum Share Discussion Threads

[wbodger] 15/7/2016 11:13

What matters is, has the enlargement of the pie compensated me for the thinner slice I now have?

This deal is about Ula, which dwarfs the other assets. Ula is 12-15 mmboe net to Faroe, accounting for most of the $70 million, with in-fill possibilities. I suspect Ula platform is strategic for FPM and (from memory) DONG was advised last year to exit North Sea, which might have been awkward for FPM.

The five fields have so far produced 10,000 boepd net to DONG in 2016, projected to 8,000 boepd for the whole year. Just for that (3 million barrels) $70 million is not outlandish, and net cost might be substantially less at completion. I take the $3.5/boe with caution, as these are mature fields with decommissioning costs, and unpredictable futures. Tambar and Trym both need investment, and Oselvar is to be canned and put in the 'Recycle' bin.

Ula has 60 mmboe left, according to NPD figures, and has produced quite well for the first four months of 2016, depleting the reserves at about 3-4 mmboe/year. Tambar has 7.5 mmboe left, depleting at about 1.8 mmboe/year (rough figures, DYOR).

I'm genuinely split. Faroe Norge will be dependent on Brage for at least two years, and if there are no problems this deal will alleviate that. I just wonder if it is a deal done for defensive reasons, because DONG wanted out? Hence the indication that if they are pre-empted FPM will invest (perhaps with relief) in something else?

I have estimated elsewhere the Rights Issue will be for 3% of pre-dilution shares-in-issue, so the opportunity at the 70 pence Placement Price will be trivial. Perhaps one-for-ten(?). Besides, if the shorters arrive (hi, whackford) you might do better trading in the market.

[blobby] 15/7/2016 11:08

I tend to find that the share price drops below a placing price within a day or so, even if it later motors away. That way investors not involved in the placing can't complain as much and I've often wondered if brokers are allocated a bunch of shares to make this happen.

[whackford] 15/7/2016 11:03

I suspect this will drop below the placing price if POO continues to fall. Not far from 70p as I write.

[ed 123] 15/7/2016 10:01

Looks to be heading down to the placing price - presumably as future recipients offload some current shares to make a quick margin.

The share price had been heading up until yesterday, when the word would have gone out about the placing. So, any buyers in the market yesterday (not me, thankfully) got mugged.

Yes, the 5M sterling/euro(?) amount is minimal. Hope it will be exclusively aimed at private shareholders, but that has not so far been stated.

I had a good moan at the directors the last time about these private placings. I told them the fund raisings should be via rights issues or open offers to all existing shareholders. Of course, they had their reasons, but it's all very cosy. At least this time we will get some sort of chance at the 70p offer price.

Without the placing I suspect yesterday would have been another up day. This morning, without the placing, my holding might have been worth 80-85p per share. Instead, it's worth 72p per share. My paper loss is a gain for someone in the circle. That's how existing private investors have been shafted.

[whackford] 15/7/2016 09:36

Hash - by which I mean the very small 5m Euro allocation in the Open Offer, assuming it will take place. EXISTING shareholders not given a pro-rata opportunity.

[hashertu] 15/7/2016 09:27

Could anyone help explain:

The effective transaction date is 1 Jan 2016. By how much could the headline purchase price of $70.2million be reduced?

How does the buy in price of $3.5/boe 2P reserves compare with the industry average cost to drill/explore the same?

Pretty much the only reason to list on a stock exchange is to be able to raise money, quickly and easily. Otherwise, you might as well do deals privately.
The number of bbls (boe) 2P reserves per share pre and post deal seems unchanged, and there will be more cash in the bank. OPEX is set to drop.
So unless I am missing something obvious, how have investors been shafted?

[spacecake] 15/7/2016 09:13

There's plenty of bad business models out there to invest in and plenty more to gamble money on. Who are the new shareholders and are they gamblers with other peoples money ?

[whackford] 15/7/2016 08:26

Usual business with loyal existing retail investors shafted.

[wbodger] 15/7/2016 07:42

Placing RNS, 7:00 AM:


Strike price 70 pence, 24.8% dilution. GS thanks 'new shareholders'.

[wbodger] 14/7/2016 20:43

Proposed Acquisition of Norwegian Licence Interests from DONG, Proposed Placing and Publication of Q1 Financial Information and CPR

4. Principal terms of the Placing

... Application has been made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will occur, and that dealings in the Placing Shares, fully paid, will commence on AIM at 8.00 a.m. on 19 July 2016


5. Open Offer

In order to allow all Shareholders an opportunity to subscribe for Ordinary Shares at the Placing Price, the Company intends to make an Open Offer to all qualifying Shareholders (excluding those in the US or Restricted Territories) shortly following Admission, to raise up to €5,000,000 through the offer for subscription of Ordinary Shares at the Placing Price. Any proceeds from the Open Offer will be used for general working capital purposes. It is not expected that the Open Offer will be underwritten. The Open Offer will be subject to Shareholder approval.

[jasper2712] 14/7/2016 19:59

Thee word placing could explain why we did not get a decent rise on the recent upgrade.

[ed 123] 14/7/2016 19:09

Thanks, CWA1. I would have missed that.

Thanks, Wbodger. Good info.

Notwithstanding Faroe's cash in the bank, I knew they did not have enough funds to pursue everything they were into (and that excludes Perth/Lowlander/Dolphin - which thankfully appears to have been kicked out into the very long grass).

I spoke at the agm about the changed climate for small oil companies and I suggested Faroe should put itself up for sale to test the market (ie. no commitment to sell if price was poor). Soon, with today's announcement, there will be around a third more shares issued, so it will be even harder to move the share price north.

I know Dana/KNOC will be unhappy with this. I guess the other big holders have nodded it through and will take up some of the new shares and sleepwalk towards the next discovery/placing iteration.

So, I guess the new production will be sufficient give Faroe maybe $22M post-tax cash per annum. There would be three years of that before the accelerated spend on developing Brasse steps up, so Faroe has an extra $66M to put towards a gross Brasse development cost of say $600M (net cost $300M to Faroe)? Once the heavy costs of Brasse development come in, Faroe would be able to set off the Brasse costs against its production income. Two years of Faroe gross income plus some of its cash could pay for the development of Brasse (but only if they don't go off on another adventure).

Soon after Brasse comes online, Njord A should open up again (another 6kboe/d to Faroe). So, at the end of 2019 Faroe should be producing 16kboe/day (existing and Dong assests) + 6kboe/day(Njord A) + 35kboe/day(Brasse) = 57kboe/day. At a $30/barrel margin, that would equate to about $130M post-tax income per annum. Assuming 370M shares in issue at that time, earnings might be 35 cents/annum or 27p per annum. Market value? 5 times earnings? Share price 135p? This assumes that the oil price stays at about $50/bbl. If the oil price moves to $60/bbl in 2019, then the share price target would rise (180p?).

There is execution risk, though.

I just hope I live long enough to get a good return on my Faroe investment. ;-/

[wbodger] 14/7/2016 17:41

Very interesting. Announced at 16:50 today (well spotted, thanks). (It's a big update, so they have given time for it to be read before the market tomorrow.)

8000 boepd for 2016, extra to the 7000-9000 previously guided for the year. (Not sure if Aker-BP will want to pre-empt though.)

RBC/Pareto doing the placing, perhaps explains why we haven't had a recent update from RBC? £61 million is just under 30% dilution, based on Market Value. Remains to be seen what the strike price will be.

-----------------------

Elsewhere the NPD bulletin on Brasse was put up today, interesting that NPD only mention Brage as likely tie-back. That suggests they might have a deal with PL185 (Brage).
hxxp://www.npd.no/en/news/Exploration-drilling-results/2016/317-1-og-317-1-A/

[cwa1] 14/7/2016 16:56

Acquisition, placing, update:-

[ed 123] 14/7/2016 13:03

Hi jumbo66.

I hope you don't mind my asking but I am confused by your post 7635. What is the meaning?

[jumbo66] 14/7/2016 09:38

[hd] go regards jumbo

[jasper2712] 13/7/2016 16:52

Unbelievable response to the news that they have 40m more barrels of oil and a paltry rise of 12p on the back of this.
They also have a reasonably easy route to market so the costs are relatively low at $5/barrel.
A share price rise of £1 should be on the cards.

[wbodger] 13/7/2016 12:05

Updated map of Irish Licences has now been posted for June 2016.
hxxp://www.dcenr.gov.ie/natural-resources/SiteCollectionDocuments/Oil-and-Gas-Exploration-and-Production/A0_Concession_Map_Jul2016.pdf

It shows Edge Licence northeast of Corrib, south of one new Europa O&G licence, and east of another. (Also see jusmasel's posts #7614 etc.)

[wbodger] 13/7/2016 11:22

If I could have chosen just one of Faroe's exploration prospects to come good, Brasse would have been the one.

Yes and no. Pil/Bue/Boomerang had great upside too. I also liked the Portrush licence, which could have added to Pil/Boomerang resources and possibly been developed through Draugen.

Where I agree is, Brasse is the easiest to monetise, and probably best for this macro environment.

Lesson: Keep it simple. ;-)

[rogerlin] 13/7/2016 08:18

Official NPD result. The word "recoverable" is repeated here, also more definite comment about potential tie-in to Brage.

[ed 123] 12/7/2016 21:20

... and RKH went back to 30p again, with the fall in the oil price. RKH is more sensitive to oil price than FPM.

I'd expect the Brage partners to agree a good (for Faroe and Core) deal (swapping for production?) to get hold of the Brasse field. Brage production today is around 12kboep/d (?), finishing in 2020(?). Brasse could come online at 35kboe/d and produce for 13(?)years. This extra production would enhance the economics of Brage; it would allow much more scavenging of the Brage oil in place.

If I could have chosen just one of Faroe's exploration prospects to come good, Brasse would have been the one. :-)

[jasper2712] 12/7/2016 21:00

I would have thought that with a discovery of 80m boe (net 40m to Faroe)that the share price would have moved more significantly than the 6.25p since the announcement of the upgrade. I can remember when Rockhopper discovered 300m their share price went from 30p to 300p and they had a lot more shares in circulation.