Faroe Petroleum is raising £69.8m through a rights issue to accelerate its exploration programme in the UK and Norway and expand operations into Greenland. The company announced the fund raising alongside results for 2009, a year in which it achieved considerable operational success. Last week's Fogelberg exploration discovery was the third successive drilling strike since last autumn and the first in the promising Norwegian sector. Most significantly, it launches Faroe into a busy few months that will see it drill several of the highest potential prospects in its portfolio.
First up will be the Maria prospect, which is expected to start drilling imminently. Like Fogelberg, Maria is located in Norway, where Faroe benefits from a 78 per cent exploration tax rebate that lets it take larger stakes than it would otherwise choose to finance. Faroe will then drill Anne Marie in the Faroe Islands and Cardhu and Lagavulin in the West of Shetland, any of which could prove transformational. Chief executive Graham Stewart is excited not only by the size of these prospects but because nearby discoveries have significantly improved the exploration odds.
Faroe is raising funds via a rights issue - a rare event for Aim. The underwritten issue will be on the basis of 0.6666 for 1 and is priced at 100p, a discount of 20.9 per cent to the previous theoretical ex-rights closing price. The funds will finance up to eight additional wells over the next two years on top of the current eight-well plan, and may let Faroe take larger stakes and accelerate the most attractive prospects.
The rights issue is perfectly timed as Faroe is applying for new licences in the UK, Norway and a new geographic area, Greenland. Having qualified as an operator in Norway and Greenland should enhance the prospects of securing attractive new exploration acreage. Mr Stewart is also keen to grow production, and hopes to double current output of 1,800 barrels of oil equivalent per day by the end of the year.
