Sale of the Breagh Field

abarrelfull wrote on 16 Jun 2014 13:12
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22nd July 2009

Faroe Petroleum plc, the independent oil and gas company focusing principally on exploration, appraisal and undeveloped field opportunities in the Atlantic margin, the North Sea and Norway, is pleased to announce the sale of its entire 10% interest in the Breagh Gas Field in the UK Southern North Sea Gas basin to RWE Dea UK SNS Limited, for approximately $41.6m (approximately £25.3m).

The Company acquired its interest in the Breagh gas field from Sterling Resources Ltd in 2006. The field is situated close to the northern limit of the Southern Gas Basin and is one of the largest discoveries in this area in the last 10 years. During 2008, the partnership successfully drilled and tested two further wells in the same block proving up significant additional reserves and achieving commercial flow rates. These wells proved additional gas resource and communication between east and west flanks of the field.

Whilst it is clear that Breagh is an outstanding discovery, provision of development finance for an asset of this scale would be particularly challenging for junior oil companies, especially in this economic climate. Against this background the six company partnership has taken the pragmatic decision to sell 70% of the discovery to a much larger company which is able to fund the development costs which are expected to be in excess of $1 billion. Faroe is participating in this consortium sale in respect of its entire 10% interest in the discovery (Sterling Resources Ltd, the current operator, is retaining a 30% interest).

The Company’s interest in the Breagh field is being sold for cash for approximately $41.6m, prior to working capital adjustments, such consideration being payable at completion of the sale, which is estimated to occur within the next three months. Completion is subject to the satisfaction of various pre‐conditions including consent from the Secretary of State.

Faroe and its co‐venturers were advised on the transaction by Standard Chartered.

Graham Stewart, Chief Executive of Faroe, commented:

“We are very pleased to be able to announce the sale of our stake in Breagh for a substantial cash sum. The transaction clearly demonstrates the success of our business model to convert exploration and appraisal assets into cash, thereby creating significant value for shareholders. The cash will be reinvested in further value‐creating opportunities, notably in suitable development and production opportunities in the UK, in order to maximise tax efficiencies.

"Faroe’s firm seven well exploration programme to be drilled over the next 24 months is continuing, with the next two exciting wells located in the UK west of Shetlands area ‐ the high risk/high reward Glenlivet and Tornado prospects ‐ both expected to commence in September.”

• Sale of the Breagh Field

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