Faroe’s shares drop 10% after discoveries are abandoned

By PETER RANSCOMBE
Published on 02/11/2012 09:52

Shares in Faroe Petroleum dropped nearly 10 per cent in early trading today after the Aberdeen-based driller abandoned plans to develop its Freya and Fulla discoveries to the west of Shetland.

Faroe, which held a 50 per cent stake in the P1161 licence block alongside Canadian Overseas, said it would not be economically-viable to develop the discoveries due to “confirm relatively poor oil quality, smaller than expected resource size and limited access to infrastructure”.

Chief executive Graham Stewart said: “Faroe Petroleum adheres to a strict policy of protecting shareholder interests such that substantial development investments are only made where there is good potential for an attractive return and unfortunately the P1161 licence does not satisfy our economic criteria.”

Faroe is already developing its Glenlivet and Tornado gas discoveries to the west of Shetland and, in September, bought a stake in the East Foinaven oil field.

The company is also involved in the drilling of the North Uist exploration well to the west of Shetland and the Spaniards East well in the North Sea.

Numis Securities analyst Sanjeev Bahl said: “Fulla was Faroe’s first successful operated exploration well announced in August 2011, so clear this is a disappointing outcome.

“We also believe that the size of the discovery was well below the 25 million-tonne criteria for the recently announced west of Shetlands tax allowance.”