Faroe Petroleum Share Discussion Threads

[hashertu] 29/3/2017 11:13

Ed. So is tax rebate project specific? Or can it be utilised against all profit generated in the Norwegian area?

Probably. But there is often a clash of AGMs around this time of year (June).

[ed 123] 29/3/2017 10:41

The cost of the upgrade is tax deductable. I've assumed nil tax paid on the first two and a half years of income from the restarted Njord facility. After that (taking Njord in isolation from other Group incomes and expenditures) tax would be paid at 78% on the post operating cost profit of the field.

Btw, are you planning attending this year's agm?

[hashertu] 29/3/2017 10:36

Isn't the cost of Njord upgrade offset against 78% tax rebate?

[ed 123] 28/3/2017 23:10

I do agree with you, that Faroe would not have sought out a share in a development project of this size. Is it likely that Statoil did not squeeze the best possible prices out of their suppliers?

Wbodger, you wrote,

I just did not expect the Njord platform structural repairs to cost £2 billion.

Yes, at first there were to be structural repairs only to Njord A. However, the partnership will have looked at all the options and finally opted for a more comprehensive re-development of the whole of the Njord infrastructure.

The Njord part of the works will cost NOK 15.7 billion or £1.475 billion at today's exchange rate, making Faroe's slice £110 million. For that they get both Njord A and Njord B upgraded, new subsea facilities and new wells, plus the capacity to take the ouput from Pil. Njord is planned to continue producing until 2040. So, Faroe will own a share of new infrastructure which will generate income for about 20 years. Is it sounding any better?

Maybe only a little?

I do agree that the total of Faroe's share is very material to a company of market cap only £330 million, but what choice was there? And they can fund it from their existing and as yet unused debt facility.

As long as Faroe hedge enough of their oil production, they should walk through this development phase and arrive at the 'golden pastures' in 2020 - group production c. 50kboe/d.

(Fwiw, I still think Delek will want the other 87% before 2020.)

[rogerlin] 28/3/2017 19:43

The final well in 2016 was the Njord North Flank (Faroe 7.5%) exploration well in the Norwegian Sea. The initial well encountered oil and gas and a subsequent side-track encountered gas. Preliminary gross estimates indicate a range of 1.9 to 28.3mmboe.

What else can be found in the Njord area and tied in? They continue to mention the NNF find in a positive way, although the results seemed very underwhelming.

[thegreatgeraldo] 28/3/2017 18:08

I'd have thought they could have commissioned a brand new platform for £2 billion!

[wbodger] 28/3/2017 17:45

I don't think Faroe have a choice, they need the production from Njord, Hyme, Bauge etc. My point, perhaps poorly expressed, was that Statoil the operator needed to squeeze the suppliers in this market, because oil looks set to be limited to $60/barrel for the forseeable.

It is worrying that Statoil have announced this even though they only have 20% of Njord etc. Engie have 40% and Fridman 30% - presumably they were involved in the decision.

To me it looks as if frugal Faroe is getting dragged into the extravagance of big spending partners, and I just wonder if this was the best way forward. The timing for this sort of expenditure on a half-depleted field (Njord itself) is poor. But really I just did not expect the Njord platform structural repairs to cost £2 billion. Did anyone else?

[harry rags] 28/3/2017 13:36

Ed123I agree 200p is likely rather than possible IMHO so I am still holding

[ed 123] 28/3/2017 08:42

Yes, it's a big sum but the cashflows will be big too. I make it that at $50 oil it will take Faroe about two and a half years of cashflow from that development to pay back it's capital outlay. After that and after 78% tax I make it that Faroe will earn about 3.6p per share from that production. These fields will go into a natural decline but could last about 20 years.

Faroe have said that they will use their debt facility to fund their share.

About the time that Njord/Hyme/Bauge come online, there will be Brasse and Pil too. Oda should have come before that.

When these fields are all producing, at $50 oil and after 78% tax, I make it that Faroe will earn about 29p per share. Might we see a share price of 200p?

Delek wouldn't have bought 13% of Faroe without expecting a good return. They may double their money in 4 years?

Anyone dis/agree?

(No advice intended.)

[rogerlin] 28/3/2017 08:33

I wonder if VNG would buy FPM out of Njord and Hyme/Bauge, they have 2.5% which is not much for them.

[wbodger] 27/3/2017 23:26

Offshoreonline is carrying the story too:
hxxp://www.offshoreenergytoday.com/norway-statoils-two-new-offshore-developments-to-see-2-4b-investment/

15.7 billion plus 4.1 billion kroner is about 1.85 billion pounds. FPM will be respnsible for 7.5% of that, or £138 million. That is a lot of money at risk for 7.5% of some fields. Really, how hard did Statoil look for savings? Remember, the only way Faroe gets any money out of Norway is after 78% tax.

[scaff55] 27/3/2017 15:55

Statoil has plans to use its new subseakonsept, Cap-X, when the company to associate field Bauge (formerly Slughorn) to the Njord platform.
It writes Upstream.
Cap-X is a combination of existing and new technologies. The Foundation is a SIP-anchor, glass fiber is used as protection and existing subseautstyr, such as Christmas trees, be standardized and adapted to the new structure.
The new subsealøsningen has a size that is a quarter of today's subsea templates. It offers lower production costs, but it is not here the great potential for savings is located.
-This solution will save rig days and marine installation expenses, including faster operations, and the use of simpler vessels. Possibility to drill simple Wells also provides a flexibility when it comes to location on the ocean floor, which in turn provides a more optimal drening of the reservoir, said Cap-X-inventor Kjell Einar Ellingsen to petro.no for a half month ago.

[scaff55] 27/3/2017 15:52

The licensees of the Njord field and the nearby Bauge-found in the Norwegian Sea today delivered two PDO (Plan for development and operation) to the authorities.
This prolongs the lifetime of Njord and opens the way for further developments in the area.
Njord closed production in 2016 and the platform was towed to shipyard Aker Stord-while the storage vessel Njord B were brought to Kristiansund-for remedy and upgrading. Now operator Statoil and its partners in production licences for Njord Unit, 107 and 132, delivered into the PDO for the field changed-as well as own PDO for Bauge that covered by the production licences and 348 348 B.
Expected investment is 15.7 billion for Njord and 4.1 billion for Bauge, the Norwegian Petroleum Directorate writes in a press release.
The investments include reinforcement of the hull to the Njord A platform, upgrading of equipment on the deck, the drilling of new wells as well as the upgrade of the storage vessel Njord B.
Bauge, which is located about 15 kilometres north-east of Njord, developed with a subsea solution, pipeline to the Njord A and the control cable from the underwater field Hymer. It will be drilled two production wells and one injection well.
Gas is piped through the Åsgard transport system to the receiving terminal at Kårstø North of Stavanger.
It is also added to that found "Arrow" in production licence 586, South of Njord, can be linked up to the Njord A.

[rogerlin] 27/3/2017 13:57

Results discussed in weekend Investor's Chronicle, I have only hard copy but "Catalysts in short supply for Faroe" is the title. "... the profit and loss account will have disappointed some investors...compensation in the form of 24.7 new barrels of contingent resources from the Brasse discovery. Even better, proven and probable reserves were up 42 per cent at the end of the year" and their recommendation is still buy.

Also the IC "The Trader" column, Nicole Elliott re Brent. "We feel prices have topped out around the $58 area, taking the best part of four months to do so. Now expect a drift down to $40, again slowly, with a potential brief dip to $34.

That wouldn't do much for any of these oil shares!

[wbodger] 22/3/2017 08:57

Yes. GS reiterates that the FDP on Njord Future Project will be submitted 'this month', which effectively means next week. They are issuing contracts, here's an OffshoreEnergy link from last Friday:

hxxp://www.offshoreenergytoday.com/kvaerner-to-upgrade-njord-a-platform-for-588m/

[rogerlin] 22/3/2017 08:17

The Njord Future project is a life time extension, reinforcement and renovation project. We have been able to recover more of the reserves than originally expected, and following new discoveries and the Snilehorn development, field production will continue beyond 2030. The commercial basis for the Njord A renovation still requires production from Njord and Hyme, where we have identified 177 million barrels of oil equivalent (boe) remaining to be produced. Scheduled for tie-in to Njord, the Snilehorn discovery contains 66 million barrels. These two fields combined will provide more recoverable resources than the Gina Krog field, which is currently under development on the Norwegian continental shelf. In addition to this the partnership of PL586 has decided that subsea tie back to Njord is the preferred development solution for the Pil & Bue discoveries in the Norwegian Sea. Total resource estimate: 90-200 Mboe. To enable Njord A to receive these resources, the hull must first of all be reinforced. Extensive renovation on board the platform will also be made. Production from Njord is scheduled to be resumed in 2020.

Assuming a bit of slippage in all this, resumption of production from Njord is some way off.

[wbodger] 22/3/2017 00:38

Gas hedges are fine (92% hedged this year) but only 32% of oil is. There is a direct comment in the Hedging paragraph: "The Company continues to monitor the commodity market and aims to extend the current hedging programme ..." etc

I also jotted down these:
"Faroe's internal resources [were] further strengthened by the addition last year of a number of experienced key members of the DONG operating team"

and
"exploration costs which were written off during the year related to P218 (Perth), PL611 (Kvalross), PL753 (Zircon), PL660 (Blackmore), 14/1-3 (Celtic Sea Licences), PL794 (Rosapenna) and PL792 (Slynge) along with other exploration costs on a number of licences."
Slynge and Rosapenna are disappointing, both in the Greater Njord - Pil and Bue - Portrush blocks. I suppose Portrush may go too, when Shell get around to it.

Early guidance on 2017 production is encouraging:
"During the first months of 2017 production has performed above expectation at approximately 15,200 boepd (from 1 January to 14 March 2017); average production in March 2017 (from 1 to 14 March) was approximately 16,100 boepd. Trym is producing unconstrained and the risk of being curtailed by the Harald host facilities appears to have been reduced. On this basis, we have narrowed the 2017 production guidance to 13,000-15,000 boepd (previously 12,000-15,000), split approximately 60% liquids and 40% gas. "

[ed 123] 21/3/2017 10:04

I read the results before coming here and the surprise for me too was the farm out to Nexen. I guess we've all become pretty familiar with Faroe over the years.

Just like the good old days - a minnow explorer getting hold of a promising licence and persuading a "big 'un" to cover an optional first exploration well. Frontier drilling at nil cost is ok by me.

They are strongly preparing the market for another asset acquisition, so maybe are putting the final touches to a deal. I think it will be UK sector (to use tax losses), mature production and they will hedge for 2 years, so that the income covers the purchase price. (They did this with Ketch and Schooner.)
Edit I'd guess Southern North Sea gas again. I sense they may be a little wary of Scottish oil.

Pleased that they plan to hedge more of their oil production. Gas hedges for this year are ok. They need to hedge more as they are making development commitments - a level of income needs to be guaranteed.

Overall, does seem to be going places in terms of the planned big step-up in production. A good time for Delek to buy the other 87%? If it is to buy (and there's no certainty), it would be sensible to move before Brasse, Njord and Pil come into production.

[wbodger] 21/3/2017 08:40

#8033 Yes, that is new (to me, anyway), that they have interested Nexen (CNOOC) in farming the Irish Licence. Not many farm-ins being announced since the oil price crash. Very cautious, only keeping 20%.

[rogerlin] 21/3/2017 08:03

In July 2016, Faroe was awarded Licensing Option 16/23 (Faroe 100% and operator), in the Slyne/Erris Basin in Ireland, approximately 15 kilometres east of the producing Corrib gas field (operated by Shell), which came on-stream at the end of 2015. The Company sees considerable exploration potential in this licence option and has recently executed a farm-out agreement with Nexen. Under the terms of the farm-out agreement, upon completion which is also subject to regulatory consent, Nexen will take over operatorship of this licence and an 80% working interest (Faroe 20%) and in return will meet the full costs of the associated work programme including any acquisition of seismic data and the drilling of an exploration well.

This is new isn't it?

[wbodger] 21/3/2017 08:01

Results are out but I can't open the RNS on investegate. This link on FPM website seems to work:
hxxp://www.fp.fo/news/final-results-for-the-year-ended-31-december-2016/

[rogerlin] 15/3/2017 10:44

Yes quite a few disappointments for long term holders! Also some successes of course but lately the appraisals on those (Butch and Pil) have not met best hopes. Perhaps Brasse will be the one!