Faroe Petroleum Share Discussion Threads

[ed 123] 15/11/2016 11:10

Yes, I was thinking the same about Norway's tax rate. If they gave back another 5% that could boost sentiment and encourage further production. They'd still take 73% of profits, but for the producers, their net income would go up by 22%. After a settling in period, Norway's total tax take on production could be higher at 73% than it was at 78%.

Now that the oil price has slumped, countries need to compete for the much reduced amount of capital investment.

I don't know if they'll see it like that, though.

[rogerlin] 15/11/2016 08:35

"Norway both supports the oil industry by incentivizing exploration and development of new resources, while also heavily taxing any profits. On top of its 27 percent corporation income tax, Norway levies an additional 51 percent resource extraction tax on the exploration, development, and production of petroleum, a 78 percent total tax rate."

The Norwegian model has been greatly admired, but perhaps it is not working so well in this low oil price environment. In spite of the incentivisation of exploration there are only three ongoing wildcats on the shelf (for a while recently there was only one) and several of the majors are now looking to sell their production assets. In the end will only those linked to the state of Norway be left standing?

[ed 123] 14/11/2016 19:53

Ta, FSAwatcher. :-)

Yes, the Norwegian government wants to avoid being left like the BHS pensioners. Would the likes of Shell have "done a Philip Green"? I doubt it, but why should the Norwegian taxpayers bear the risk?

If anything, I'd read it as slightly positive for Faroe. Imo, Faroe would be a buyer rather than a seller. If the Major sellers have to be more careful about the financial viability of those to whom they sell, then the likes of net cash Faroe would perhaps have less competition for assets on the block?

I'd say Faroe's recent shareprice fall from the low 80's is due to the falling oil price, rather than decommissioning costs.

[fsawatcher] 14/11/2016 18:52

this might be problem for dong and faroe

[rogerlin] 14/11/2016 08:45

Thanks for listing those remaining Dong interests, Wbodger. None seem to fit well for Faroe and indeed you would think that had they been able to agree anything else it would have been added to the Ula package at that time.

About time we had a well permit announcement for Dazzler? We need something to lighten up the dark winter months.

[wbodger] 13/11/2016 23:13

I think this is quite interesting, given the posts about DONG:
hxxp://www.oilandgaspeople.com/news/11466/maersk-oil-turns-its-focus-to-north-sea/

I had a look at what production DONG might have for sale:
JV partners at Ormen Lange are Shell, Exxon, Statoil and Petoro. DONG's 14% share is out of Faroe's reach even if it fitted in some way but Maersk would be big enough to have a look.

Marulk is ENI Operated, Alve is Statoil. They are gas fields either side of Skarv in the north Haltenbank, but are not in the same range of resource as Skarv (which is a substantial field). Marulk should merit a look by FPM, because it is not far past plateau, and there are 26 mmboe left (NPD estimate), DONG has 30% of it. Alve has 17 mmboe left and is further into tail-end, and DONG only has 15%. But neither are very close to any other Faroe interests that far north.

"Operator of the Mjolner discovery" - that is Licence PL113, 100% DONG. Here's NPD: "Mjølner was discovered in 1987, close to the border between the Norwegian and Danish sectors in the North Sea. The water depth in the area is about 70 meters ... Oil has also been proven in the nearby Gert field in the Danish sector. The discovery is planned to be tied in to Valhall or the Danish field Hejre". FPM are obviously not a Developer, but Maersk might have a look? It looks very small.

Faroe has no JV interests with Maersk.

[ed 123] 13/11/2016 10:19

And it seems that Shell would like to exit Norway, too.

Shell is considering a sale of part or all of its $3 billion Norwegian business as Britain’s biggest company comes under growing investor pressure to pay down debt from its blockbuster takeover of rival BG.

(From Citywire/The Sunday Times today)

Debt and the expensive dividend are pressuring Shell.

I see Premier Oil is also under pressure, existential pressure possibly. I think the final decisions will come after this month's OPEC meeting. Quotas may save the equity.

Comforting that Faroe is solvent and in a net cash position. For anyone who can afford to wait ten years, Faroe may evolve into one of the big players, picking the meat from the bones of the dead and the dying.

[wbodger] 09/11/2016 18:27

In UK Tullow also have 40% of Schooner and Ketch. FPM 60% and Operator.

TLW also operate Wissey which is being decommissioned - no production since 2012. (Trouble is, the third partner is First Oil which from memory is insolvent.)

Re DONG in Norway, Gyda is logged for termination in 2018, DONG's share of under 2 mmboe remaining is 680,000 barrels. It uses Ula, and the export pipeline goes smack over FPM's Katie licence, which requires a D-or-D in 2017. They might have looked at a Oselvar/Oda type of solution to defer decommissioning, but there is nothing happening afaics. Probably inconvenient timing.

[rogerlin] 09/11/2016 08:42

The divestment of the Norway business has progressed well, with the sale of four licences, including the Wisting discoveries, to Statoil and eight licences, which include the Oda asset, to Aker BP ASA, expected to be complete by the end of year. Tullow expects to conclude the disposal of its remaining Norwegian assets by the first half of 2017.

Tullow also pulling out. Apart from Oda, the only other licence I can see that they held in common with Faroe is PL811 Gullaxy (FPM 20%).

Edit Gullaxy north of Butch/Oda in similar geological setting.

[rogerlin] 08/11/2016 19:29

Dong has announced that it is to exit the oil and gas business entirely. Trying to see what other Norwegian licences they have, in their original announcement of the divestment to Faroe is the line:

DONG Energy will continue as partner in the Norwegian fields Ormen Lange, Alve, Marulk and Gyda, and as operator of the Mjølner discovery.

Presumably Faroe has already bitten off as much as it can chew!

[wbodger] 08/11/2016 11:26

re#7812, Ed, Faroe borrowing against Reserves: Probably not without a substantial rebound in PoO. Enquest and now PMO (revisited) are the latest examples of over-indebtedness still stalking the oilies.

I keep hoping FPM might have ambitions by, say, 2020 to move to the FTSE250. I believe you have to have production for that, which they certainly will have for at least two years.

Your memory is not failing you the deal certainly was backdated to 1/1/16. Production from Ula and Tambar has been fairly good (just comparing 2016 data with 2015) but Oselvar is generally down this year and Trym consistently down. I assume FPM cannot include the DONG-deal-barrels in their boepd guidance if DONG was entitled to them.

I'm just surprised that since the heavyweights (Ula, Tambar) seem to have performed as expected, the final payment to DONG is less than originally projected. All I can think of is that although Ula and Tambar have confirmed projections perhaps Oselvar and Trym have not. But my own wild guess (subject to expert interpretation of Accountants' hieroglyphs) is that maybe DONG's decommissioning account for Trym and Oselvar came with the deal, and maybe that accounts for half the $70 million. I think if Faroe are taking on burdens of Operatorship they would expect DONG to transfer their own Decom reserve.
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(I agree with comments above on Ireland. I think Blarneyroe was not a goer in this climate.)

[ed 123] 07/11/2016 20:00

That's a relief, then. Only minimal damage done - licence costs plus some staff time.

Looking at Providence Resources, I didn't think Faroe should have taken up Celtic Sea licences. Providence have done the exploration bit successfully but can't seem to get a monied partner. That's the way it is in these lower oil price times. It's a different game from that in the good old days.

[rogerlin] 07/11/2016 19:01

At foot of page 9 says that licences 14/1-3 expired in September, think those were Faroe's Celtic sea licences. Only the one near Corrib left then.

[rogerlin] 07/11/2016 17:49

The payment at completion for the acquisition of producing assets from DONG is expected to be approximately US$35 million as a result of higher than expected production and commodity prices since the effective date (1 January 2016), as well as a deferral of planned capital expenditure.

That's what Faroe said in the recent analyst visit announcement.

[ed 123] 07/11/2016 16:48

Wasn't the deal backdated to 1st January 2016 (from memory only!)? So if DONG keeps the income for much of 2016 (up to completion), that would be a big chunk of $35M. Also, there were to be some adjustments for oil price, etc.

Oil price currently at c. $45/bbl while the market awaits the OPEC meeting. Up or down from here depending on any agreed output quotas. Faroe will move with the commodity. Sterling/dollar rate also matters. I've no crystal ball, unfortunately.

I liked the estimated operating cost (from memory $10.5/bbl) for the Pil field, btw. Will Faroe borrow against its reserves to fund Pil?

[wbodger] 07/11/2016 14:34

Faroe have applied to be Operator for Trym and Oselvar. August production was down y-o-y for both of them. (September has not been posted yet.)

Oselvar is the one which DONG announced was going to be shut down, and its facility into Ula would be recycled for Oda to use. Production data entered for it this year has been erratic. There is probably not much to be done to improve it as DONG said it would be turned off in 2018:
(hxxp://www.offshoreenergytoday.com/dong-to-abandon-oselvar-field/).

In July Oselvar did produce 63.7 kboe, 35kboe due to Faroe. The Offshore Energy article from February indicated DONG would submit a Decom proposal in Q3 (but nothing yet afaics). Under NPD rules the Operator has to submit a Decom plan two years before ceasing production, so perhaps they will keep it going through 2018?

Trym is the one on the Denmark median line where there are subsidence issues. The Operator will either have to propose a solution or supervise decommissioning. No news posted since the July announcement of the DONG/Faroe deal (hxxp://www.offshoreenergytoday.com/faroe-petroleum-buys-dong-energys-norwegian-fields-for-70m/)

The final price tag for Faroe was $35 million, which is half what was initially announced. (Not sure why so much less than negotiated.)

[rogerlin] 04/11/2016 18:40

This version lists the Njord partners. Pil is 30% VNG, Spike 30%, Pure 15%, FPM 25%. Spike and Pure are I think now merged into Point. These partnerships don't fit together very well, but they seem to manage these matters OK in Norway.

[rogerlin] 31/10/2016 18:58

"This transaction is also aligned with the OGA objective of “getting the right assets into the right hands”.

Noticed this comment by Verus on their recent sale of Vulcan satellites to IOG, helps to explain why FPM have parted with Perth/Lowlander at this juncture? They still have P2156 Fynn (25%) but all other UK licences are either producing or awaiting decommissioning. I see that the website now only lists one licence in Ireland, Edge, near Corrib. Have the Celtic Sea ones been given up? It isn't long since they got those.

[jumbo66] 28/10/2016 20:50

tgg hows it going ,well i hope re j hd

[rogerlin] 28/10/2016 15:22

Disaster at Bentley. At least we have not got too much debt, and all the more reason to avoid heavy/sour oil IMHO.

[harry rags] 28/10/2016 15:10

GE and Baker Hughes in talks, I think there will be more mergers and acquisitions the question is will Faroe be among them?

[rogerlin] 25/10/2016 19:58

Harry. Yes it would be good to reach 125p, fortunately we do seem to be climbing out of the abyss, but "soon" is not really a concept known to long term holders of Faroe. Still, we have had the chance of an elephant along the way, and for a moment it looked as if Pil might be the one.

[harry rags] 25/10/2016 13:20

RogerlinI like the following quote"a readily achievable target of at least 125p."Hopefully sooner than laterHarry

[rogerlin] 25/10/2016 11:45

Some comments on Faroe here.