Faroe Petroleum has announced the results of the Agar/Plantain exploration/appraisal well in licence P1763 (Faroe has a 25% interest in Agar/Plantain and 12.5% in the wider licence). The well encountered 20m of gross hydrocarbon-bearing reservoir with high net to gross ratio. Operator Azinor Catalyst estimates gross recoverable resources at 15–50mmboe, a volume expected to be commercial given available infrastructure. Assuming the partial de-risking of Agar/Plantain at mid-case 32.5mmboe (down from our pre-drill estimate of 79mmboe) to a 70% chance of commercial success would leave our RENAV broadly unchanged, but provides validation of our approach of including risked value for Faroe’s exploration programme, which made up 32.6p/share of our 185.2p/share RENAV in our recent initiation.
Written by
Faroe Petroleum |
Agar/Plantain discovery |
Well result |
Oil & gas |
15 November 2018 |
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Business description
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Faroe Petroleum is a research client of Edison Investment Research Limited |
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Faroe Petroleum has announced the results of the Agar/Plantain exploration/appraisal well in licence P1763 (Faroe has a 25% interest in Agar/Plantain and 12.5% in the wider licence). The well encountered 20m of gross hydrocarbon-bearing reservoir with high net to gross ratio. Operator Azinor Catalyst estimates gross recoverable resources at 15–50mmboe, a volume expected to be commercial given available infrastructure. Assuming the partial de-risking of Agar/Plantain at mid-case 32.5mmboe (down from our pre-drill estimate of 79mmboe) to a 70% chance of commercial success would leave our RENAV broadly unchanged, but provides validation of our approach of including risked value for Faroe’s exploration programme, which made up 32.6p/share of our 185.2p/share RENAV in our recent initiation.
Year end |
Revenue (£m) |
PBT* |
Cash from |
Net debt/ |
Capex |
12/16 |
94.8 |
(61.6) |
55.4 |
(60.9) |
(79.4) |
12/17 |
152.9 |
(21.0) |
133.9 |
(43.3) |
(144.2) |
12/18e |
236.3 |
62.3 |
173.6 |
(43.8) |
(225.7) |
12/19e |
225.0 |
37.7 |
173.7 |
44.7 |
(263.8) |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments.
The 09/14a-17B well bore targeted the Plantain prospect encountering a thin oil column in a high-quality sandstone. The partnership then elected to appraise the up-dip Agar oil discovery, encountering the Upper Frigg Formation at 1,763m penetrating a gross reservoir interval of 20m. The reservoir zone had high net to gross and average porosity of c 30%, and no oil water contact was observed. The Agar/Plantain discovery is located close to existing infrastructure around 12km from the Apache-operated Beryl Bravo and 14m from the Alvheim FPSO, making it a commercial discovery and economically attractive after considering the potential to accelerate usage of Faroe’s UK tax losses.
As discussed in our flash note yesterday, removal of the Rungne exploration well from our last published RENAV of 185.2p/share would reduce it by 5.9p/share. Further details of our valuation can be found in our recent initiation report.
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Disclaimer
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Disclaimer
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