Shares in Faroe Petroleum (FPM) fell 12 per cent after these half-year results were released. While the first-half financial metrics were all in line, the company was forced to lower full-year oil production guidance for the second time this year due to an extended maintenance shutdown at its Njord field in the Norwegian Sea. Faroe now expects to produce between 5,500 to 6,500 barrels of oil-equivalent per day (boepd), down from the lower end of 7,000 to 9,000 boepd.
Clearly, the downgrade is disappointing. But Faroe is more of an exploration play than a production story - since it essentially puts all of its cash from operations back into exploration each year. On that front, investors will be pleased Faroe reiterated that it expects to drill six wells in Norway in the coming period, targeting reserves in excess of 85m boe unrisked net to the company.
The entire 2013 program is expected to cost Faroe approximately £70m after taking into account generous Norwegian tax rebates of around £60m. Broker Panmure Gordon forecasts adjusted pre-tax profits of £7.5m and EPS of 7.3p in the current year.
FAROE PETROLEUM (FPM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 116p | MARKET VALUE: | £246m | |
| TOUCH: | 115-116p | 12-MONTH HIGH: | 164p | LOW: 105p |
| DIVIDEND YIELD: | nil | PE RATIO: | 74 | |
| NET ASSET VALUE: | 114p* | NET CASH: | £66.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 90.6 | -15.9 | 1.76 | nil |
| 2013 | 89.0 | 17.6 | 5.76 | nil |
| % change | -2 | - | +227 | - |
*Includes intangible assets of £177m, or 83p a share | ||||
