Drilling for oil is literally a hit and miss affair. While North Sea focused explorer Faroe Petroleum (FPM) found nothing at Butch East and South West drills, it came up trumps at the Pil exploration well. This is significantly larger than pre-drill estimates suggested. Together with a successful side-track well, it should bring Faroe’s share to between 20m and 50m barrels of oil equivalent (boe).
The two other notable achievements in the first half were a successful share placing, which raised £65m, and the acquisition of 53 per cent and 60 per cent stakes respectively in the Schooner and Ketch gas and condensate assets in the UK part of the North Sea, which cost £35m.
Average accounting production (which excludes Schooner & Ketch) fell 48 per cent to 3,901 boe per day (boepd) as a result of structural reinforcement work that stopped production at the Njord and Hyme fields. However, both these fields came back on stream in July. Together with contributions from Schooner and Ketch, full-year production is likely to be significantly higher and within the stated full-year guidance of 7,000 to 10,000 boepd.
The group's cash pile is expected to cover the exploration and appraisal programme for next year and 2016. This includes five exploration wells scheduled in Norway, including two follow-up wells on the Pil discovery.
Analysts at RBC Capital Markets are forecasting full-year net income of £67m and EPS of 27p (from 6p in 2013).
| FAROE PETROLEUM (FPM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 109p | MARKET VALUE: | £291m | |
| TOUCH: | 108-109p | 12-MONTH HIGH: | 155p | LOW: 103p |
| DIVIDEND YIELD: | nil | PE RATIO: | NA | |
| NET ASSET VALUE: | 110p* | NET CASH: | £96.7m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 89.0 | 17.6 | 5.8 | nil |
| 2014 | 53.5 | -20.1 | -1.9 | nil |
| % change | -40 | - | - | - |
*Includes intangible assets of £230m or 86p a share | ||||
