FPM to spend £90m in 2017 on major work programmes across asset base.
Companies: Faroe Petroleum
Faroe has provided an operational update this morning that highlights the progress made in what was a transformational year for the Group. 2017 looks to be a year of development as some Faroe's assets come offline for planned development. As a result, the production guidance is understandably lower at 12-15kboed, down from the "economic" production in 2016 of 17.4kboed.
Just to clarify the "economic" part of that figure allows for the fact that Faroe was receiving the economics from the acquired field for the full year despite only completing the deal in December. Actual production was around 8kboed, but that would be a misleading comparison.
Reserve additions
The DONG acquisition plus some minor upward revisions in Faroe's other assets increased 2P reserves for the group by 42% over the year to 81 million boe, as well as rebasing production at more than double previous levels.
Capex programmes and lower production in 2017
2017 looks to be a year of required maintenance and development spend with Njord, Hyme and the acquired DONG fields undergoing work programmes. Total budgeted capex spend on production and development is £90m. Unsurprisingly, the increased number of work programmes means more downtime on producing fields and Management are therefore expecting a lower production guidance of 12-15kboed in 2017.
Operating costs up
Looking at opex per barrel, Faroe expects this to rise from $24 in 2016 to $25-29 in 2017. Again this is to be expected as lower production raises unit costs, although the range does seem a little wide.
Exploration spend remains at about £10m once you factor in the Norwegian tax rebate, or £45m in gross terms.
Overall the company is in good shape and remains one of the higher quality operators in the sector. It is sitting on a net cash position of c.£100m with an unused $250m lending facility.
CEO Graham Stewart commented:
"We are now poised for a major growth phase as we invest across our core hub assets in 2017 and beyond, and believe that we have the asset base to reach our stated goal of 40-50,000 boepd over the next five years."
Shares are flat today as the solid update raised little in the way of surprises, and are up 100% over the last year, following the rebound in the sector.
