B r i g h t h o r i z o n s 1 Slide 1 June 2018

Transcription

1 B r i g h t h o r i z o n s Slide 1 June

2 Disclaimer These materials do not constitute or form any part of any offer or invitation to sell or issue or purchase or subscribe for any shares in Faroe Petroleum plc (the Company ) nor shall they or any part of them, or the fact of their distribution, form the basis of, or be relied on in connection with, any contract with the Company relating to any securities. Any decision regarding any proposed acquisition of shares in the Company must be made solely on the basis of public information on the Company. These materials are not intended to be distributed or passed on, directly or indirectly, to any other persons. They are available to you solely for your information and may not be reproduced, forwarded to any other person or published, in whole or in part, for any other purpose. No reliance may be placed for any purpose whatsoever on the information contained in these materials or on their completeness. Any reliance thereon could potentially expose you to a significant risk of losing all of the property invested by you or the incurring by you of additional liability. No representation or warranty, express or implied, is given by the Company, its directors or employees, or their professional advisers as to the accuracy, fairness, sufficiency or completeness of the information, opinions or beliefs contained in these materials. Save in the case of fraud, no liability is accepted for any loss, cost or damage suffered or incurred as a result of the reliance on such information, opinions or beliefs. Certain statements and graphs throughout these materials are forward-looking statements and represent the Company s expectations or beliefs concerning, among other things, future operating results and various components thereof, including financial condition, results of operations, plans, objectives and estimates (including resource estimates), the Company s anticipated future cash-flow and expenditure and the Company s future economic performance. These statements, which may contain the words anticipate, believe, intend, estimate, expect and words of similar meaning, reflect the directors beliefs and expectations and involve a number of risks and uncertainties as they relate to events and depend on circumstances that will occur in the future. Forward-looking statements speak only as at the date of these materials and no representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. The Company expressly disclaims any obligation to update or revise any forward-looking statements in these materials, whether as a result of new information or future events. If you are considering buying shares in the Company, you should consult a person authorised by the Financial Conduct Authority who specialises in advising on securities of companies such as Faroe Petroleum plc. Slide 2

3 Introduction to Faroe Petroleum Building a leading pan-north Sea independent E&P company 1 Adjusted Established North Sea full-cycle E&P independent 40 oil & gas assets across Norway, UK, Ireland HQ in Aberdeen, offices Stavanger & London Blue chip institutional shareholders High quality, diversified pan-north Sea asset base 12 principal fields across four hubs/areas 2P reserves: 98 mmboe, 79% oil (YE17) 1 Production: 2018 guidance 12-15,000 boepd Material investment in organic production growth Funded growth plan to >35,000 boepd Organic potential to increase to >50,000 boepd Low unit opex in mid-$20s, set to fall further Active portfolio management and M&A focus for high returns DONG assets acquired at bottom of cycle Fenja partial monetisation achieved UK and Norway acquisition focus Exploration track record as core value creator Vast majority of 2P reserves from exploration Five high quality E&A wells in H2 18 and H1 19 Significant Iris/Hades discovery April 2018 Strong balance sheet provides flexibility ~ $500m liquidity YE17 net cash 75m; EBITDAX 82m Successful $100 million bond (Nov-17) $250 million RBL remains undrawn for the disposal of a 17.5% participating interest in Fenja which remains subject to regulatory approvals Slide 3

4 Strong delivery of hard value through the drill bit Reserves evolution 2P Reserve Growth (mmboe) 98 58% Discoveries (Transfer from 2C) % Discoveries (Maria swap) 25% Existing portfolio & acquisitions (net of production) Reserves Evolution Slide 4

5 High value organic production growth Fully funded for all committed projects, additional infill upside, plus Brasse Further potential pending from Fogelberg, Iris &Hades discoveries 50,000 Production Contingent Resources incl. infills (boepd) Gross Margin $/boe Producing fields + Oda + Njord Future + Bauge + Fenja + Brasse 2018 Fully funded production growth plus identified upside in existing portfolio Unit Opex 2022 Strong growth trajectory from subsea tie back developments Note: this chart relates to existing, defined projects; it is illustrative and not forward guidance Slide 5

6 Material production & reserves from diversified portfolio ULA hub area Growth area for Faroe given Oda development, Tambar gas lift and further investment opportunities Operators (Ula/Tambar) Increased production from Tambar infill wells (Oselvar) Pursuing cost reductions and incremental barrels (Oda) Net 2P mmboe, Jan 2018 Net prod. boepd, ,440 Net 2P Net prod. Greater NJORD hub area Njord Future project to exploit >340mmboe of gross reserves Njord A platform on track for restart in 2020 Operators mmboe, Jan 2018 (Njord Area) Fenja PDO approved April 2018 boepd, restart Net 2P Net prod. (Fenja) TRYM Faroe-operated subsea tieback with low unit Opex Operator Materially de-risked following Tyra redevelopment plan Contributing material production until suspension in mid-2019 with planned restart in 2022 mmboe, Jan 2018 boepd, ,540 Net 2P Net prod. BRAGE BRASSE hub area Current production from Brage with initial STOOIP of ~1,000 mmboe Operators mmboe, Jan 2018 Faroe-operated Brasse discovery nearby with Concept Selection planned for 2018; targeting first oil 2021 (Brage) Brage decommissioning liabilities retained in part by Petoro (Brasse) boepd, ,830 Net 2P Net prod. UKCS Tax efficient production from portfolio of mature assets Tax loss position enables value-accretive M&A Blane field (UKCS) included in Ula hub Operators (Schooner & Ketch) (East Foinaven) mmboe, Jan boepd ,490 Slide 6

7 Asset summary

8 BRASSE - flagship operated development project - 50% Robust, simple subsea development project with excellent address Brasse: (Faroe 50% and operator) PL740 Brasse oil and gas discovery July 2016 Successful 2017 appraisal campaign: proved commerciality of field Matured to 2P reserves within 18 months from discovery 2P reserves of 30.7 mmboe net (oil: 25mmbbl; gas: 34 bcf) Very good reservoir properties DST flowed at a maximum stable rate of 6,187 bopd Concept Selection planned for 2018; targeting first oil 2021 Preliminary plan assumes a subsea tie back development Two potential hosts - 13 km to Brage & Oseberg Central platforms Preliminary net capex estimated at 240m for a five well development scenario1 Key exploration wells underway to add further resources Operated wells Brasse East and Rungne to be drilled back-to-back in H The actual capex levels will depend on development concept and commercial terms for tie-in Slide 8

9 Ula hub area Significant upside from further infill drilling and WAG scheme Ula, Tambar, Oda and Blane Ula (20%) Renewed exploitation drive underway led by AkerBP New 4D seismic, infill targets maturing Tambar (45%) Two new infill wells successfully drilled April 2018 Initial production exceeded pre-drill expectations Retrofit gas lift system in existing wells completing Q3 Oda (15%) Subsea tie-back to Ula First oil expected in 2019 Upside potential Oselvar (Faroe 55% operator) redevelopment target Blane (Faroe 45%) - infill well candidate Exploration Cassidy well in H2 18 Ula platforms Significant reduction in unit opex targeted Slide 9

10 Njord hub area: NJORD + HYME + BAUGE + FENJA Attractive projects with excellent upside Njord: (Faroe 7.5%) + Fenja (Faroe 7.5%*) Njord A facility at the Aker Stord yard Significant resource base Gross reserves on Faroe licences estimated to be more than 340 mmboe (gross) via Njord hub Njord (Faroe 7.5%) Fenja (Faroe 7.5%)* Njord Future Project Njord A dry dock phase completed Bauge to be developed as a subsea tie-back to Njord Planned to come back on stream in 2020 Fenja subsea tie back development to Njord Three horizontal producers supported by water and gas injectors FDP approved April 2018 Partial cash sale (17.5%) to Suncor ($54.5m) * as adjusted for the sale of 17.5% of Fenja Slide 10

11 Exploration key to Faroe s value creation Tax-efficient, low cost exploration offers material value uplift Focused and balanced exploration strategy Strict internal criteria for drilling and exploration Benefiting from lower exploration costs Exploration spend eligible for 78% tax rebate from Norwegian State Highly successful exploration track record has delivered Multiple developments, e.g Maria, Fogelberg, Oda, Fenja, and Brasse Latest discovery April 2018 Iris/Hades Fogelberg - appraisal well currently drilling, preparing for potential DST Sustainable programme going forward to deliver value Five high-quality E&A wells committed so far for H and H Brasse East (Faroe 50% and operator, 12.5mmboe gross*) Rungne (Faroe 40% and operator, 70 mmboe gross*) Pabow (Faroe 20%, 70 mmboe gross*) Cassidy (Faroe 15%, 50 mmboe gross*) Yoshi (Faroe 30%, 30 mmboe gross*) Many further targets being matured for adding to drilling programme *Gross unrisked resource potential Slide 11

12 Key catalysts 2018 Value-driving events over next ~12 months 2018 Q1 Q Q3 Q4 H1 Production & Development Tambar infills Brage infills Brasse DG2 and PDO Fenja PDO approval Oda first oil Exploration & Appraisal Iris/Hades1 1 Discovery Fogelberg Rungne Cassidy Pabow Brasse East Yoshi April 2018 Slide 12

13 Finances

14 2017 final results & 2018 outlook Financial highlights and outlook 2017 Results Revenue 152.9m (2016: 94.8m), EBITDAX 82.2m (2016: 25.8m) Production 2017 economic production¹ 14,349 boepd, forecast 2018 production 12-15,000 boepd Liquidity Net cash (31 Dec-17) 75.0m (31 Dec-16: 96.8m) $100m NOK Bond + $250m RBL facility + $100m accordion + NOK 1.0bn EFF = significant liquidity Capex 2017 E&A spend 47.7m ( 11.5m post-tax), D&P spend 96.0m 2018 E&A forecast 80m ( 20m post-tax), D&P forecast 175m Hedging 85% of post-tax gas production averaging 42p/therm, 60% oil production hedged averaging $57/bbl (post-tax) hedged to end of 2018 and 37% of post-tax oil production hedged averaging $62/bbl to 30 June 2019 ¹ Economic production in 2016 includes production from the recent acquisitions from the effective date. Accounting production excludes production between the effective date and date of completion. Accounting production in 2017 was 8,026 boepd (2014: 10,252 boepd) Slide 14

15 Strong financial foundation to unlock value Diversified capital structure and financial flexibility Exploration success driving development capex Seek to manage exposure to individual projects Healthy cash balance Tax efficient Operatorship important factor Strong balance sheet crucial Prudently increase leverage through development phase Hedging Financial flexibility & discipline Significant debt headroom Target financial ratios below mandated levels Reduce uncertainty where possible Active hedging programme Strong cash flow Fully funded programme Maintain cash buffer Financial flexibility Diversified funding sources Ability to move quickly and access opportunities Slide 15

16 Capital structure and liquidity - approx. $500m Maximising debt availability Reserves based lending facility $250 million facility Total Liquidity1 Maturity July 2023, amortisation starts 2020 ( million) Currently undrawn with availability of $235 million $100 million accordion available2 Fenja to be added to borrowing base on a 1P basis upon PDO approval Undrawn RBL As production grows, so does debt capacity Exploration financing facility million 149 Cash (YE17) NOK 1 billion available until 31 Dec 2019 Efficient funding for upcoming active drilling programme Bond loan Fixed 8% coupon, maturity April 2023 Unsecured and covenant light Portfolio management to ensure balance 39 Fenja farmdown proceeds Fenja farm down (announced Feb. 2018) from 25% to 7.5% realises $54.5m cash and reduces net share of capex by approx. $220m 1At $/ FX rate of 1.40 and excluding the EFF and RBL accordion to credit approval 2Subject Slide 16

17 Summary Diversified portfolio, high upside, funded programme - material value growth Solid and proven pan-north Sea model with world class team delivering sustainable value growth Greatest exposure to Norway of all LSE quoted E&Ps Strong exploration programme continues and is sustainable - underpinned by production and Norwegian tax rebate Material Brasse discovery on track for near-term development Faroe is operator with 50% Asset base delivering solid value 2P reserves of 97.7mmboe plus 2C resources of 78.6mmboe, one of largest on AIM Portfolio has funded growth potential to deliver over 35,000 boepd Further upside to increase delivery to >50,000 boepd from existing portfolio Robust balance sheet (with no drawn RBL debt) and operationally strong at low commodity prices Robust balance sheet, undrawn RBL debt facility, new $100m senior unsecured bond, prudent financial management Tax efficient cash flow from production Profitable at low commodity prices - low unit opex (mid-20s $/boe), set to fall further as new wells & fields brought on stream Material forward programme locks in significantly lower costs and Norwegian State tax incentives Active programme ahead with significant investment focused on adding and growing reserves, production and cash flow 78% of E&A costs in Norway recovered from State; tax credits shield 90% of Norwegian investments Investing at bottom of cycle significant organic and M&A investment driving growth Strong balance sheet ensures all committed programme investments are fully funded - capturing low costs Actively pursuing near term growth in value and scale organically and through deals - acquisitions, swaps and divestments Slide 17

18 Appendices

19 Iris & Hades Discoveries and Fogelberg Appraisal Successful start of 2018 exploration programme Iris & Hades: (Faroe 20%, Operator OMV) Prospects identified by Faroe: Original award in APA 2009 Reapplied as an extension to Aerosmith in APA 2015 PL644 Faroe 20%, OMV operator 30%, Statoil 40% 1 and Spirit 10%1 Two Significant Discoveries in one well Lange sandstones of moderate to good quality Thick (218m) Garn moderate to excellent reservoir Recoverable estimates : mmboe (Iris & Hades combined) Fogelberg: (Faroe 15%, Operator Spirit Energy) PL433 Centrica (51.7% operated), Faroe (15%), PGNiG (20%) Dyas (13.3)1, Host Discovery well 6506/9-2 drilled in 2010 Encountered gas condensate in the Garn and Ile Formations Currently drilling side-track in appraisal well. DST decision imminent Target PDO submission in H Subsea development via existing nearby infrastructure (Åsgard B) 1 subject to MPE approval Slide 19

20 Strong support from institutional shareholders Share price performance and shareholder overview Major shareholder split * 12 Month share price performance DNO: 28.7% Other institutional 35.9% Invesco: 4.1% JP Morgan: 5.2% Aviva: 6.6% Retail: 11.6% Blackrock: 9.0% Shareholder geographic split * Rest of the World: 2.4% United Kingdom 58.2% North America: 3.7% Nordic / Europe: 35.7% * Source: RD:IR as at 31 March 2018 Slide 20

21 Faroe s executive team Graham Stewart Chief Executive Officer Helge Hammer Chief Operating Officer Instrumental in founding Faroe Petroleum in 1998 Over 30 years experience in oil and gas technical and commercial affairs Previously finance director and commercial director at Dana Petroleum 1997 to 2002 Experience with Schlumberger, DNV Technica, Petroleum Science & Technology Institute Offshore Engineering degree (HeriotWatt University) and MBA (University of Edinburgh ) Jonathan Cooper Chief Financial Officer Joined Faroe Petroleum in 2006 Over 30 years technical & business experience, incl. Shell (Norway, Oman, Australia and Holland) Joined Faroe Petroleum as Chief Financial Officer in 2013 Managing Director of wholly owned Norwegian subsidiary, Faroe Petroleum Norge AS Former Finance Director of Gulf Keystone Petroleum and Sterling Energy and CFO of Lamprell plc Previously Asset Manager and Deputy Managing Director at Paladin Resources Former Director of the Oil and Gas Corporate Finance Team of Dresdner Kleinwort Wasserstein Economics degree (Institut Français du Pétrole, Paris) Broad range of experience from mergers and acquisitions, public offerings and financing Petroleum Engineering degree (NTH University of Trondheim) Chartered accountant by training having qualified with KPMG PhD Mechanical Engineering (University of Leeds) Slide 21