London — North Sea explorer Faroe Petroleum is to offload stakes in a cluster of Norwegian projects and acquire stakes in four producing fields in a swap with state-controlled Equinor, the companies said Wednesday.
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In a statement, Faroe said the cashless deal would accelerate its production growth, bringing it an additional 7,800 b/d of oil equivalent next year, an estimated 83% rise on this year's expected 12,000 boe/d. The deal was immediately questioned by Oslo-listed DNO, which owns 28.22% of Faroe and mounted a hostile takeover bid for the company last month, and suggested it would be better off retaining its 7.5% stakes in the Njord area, currently shut for refurbishment.
London-listed Faroe emerged from the price downturn with relatively little debt, having concentrated on exploration, which is heavily subsidized by the Norwegian state, and avoided expensive development projects, although it now aims to raise its production to 50,000 boe/d in the medium term.
Under Wednesday's deal it takes a slight hit to its reserves, of less than 1 million boe, handing over 7.5% stakes in fields in the Njord area of the Norwegian Sea, where Equinor (previously Statoil) is undertaking major redevelopment work. Njord was shut in 2016, along with the Hyme satellite field, due to structural issues with the Njord A platform. Faroe is also handing over a stake in a third nearby field, Bauge, which is due to start producing for the first time at the end of 2020, once Njord is back on stream.
In exchange, Faroe gets sizable stakes in four mostly mature fields with modest production, including in the Alvheim and Norne areas, in the North Sea and Norwegian Sea respectively.
The deal does not include a stake in Alvheim, but a stake in the Vilje field, tied to Alvheim, and so could be useful in developing Faroe's Agar oil find, made earlier this year in nearby UK waters and estimated at 15 million-50 million boe, it said.
Faroe also gets stakes in the Alve and Marulk fields in the Norne area, and in Ringhorne East. Norne is being redeveloped by Equinor partly to handle production from this year's Cape Vulture oil discovery, estimated at 50 million-70 million boe.
Wednesday's deal "provides better portfolio balance between production and development with no material impact on reserves," Faroe said.
Faroe CEO Graham Stewart added that the deal "immediately rebalances our asset mix towards production after a series of exploration successes and resultant development projects."
"The transaction will accelerate delivery of our fully funded production target, while strengthening further our financial position."
However, DNO said: "We need to ask if this is good value for a company seeking growth: to swap out of its high quality, large scale, core growth hub, Njord, operated by the national oil company of Norway, Equinor, and to take on instead mature and declining production assets
Equinor said Njord, with estimated reserves of 175 million boe, including from Hyme, "continues to have considerable upside potential" and Wednesday's deal reduced the company's "exposure to non-core and partner-operated assets." -- Nick Coleman, firstname.lastname@example.org
-- Edited by Maurice Geller, email@example.com