Faroe Petroleum beat £65m fundraising target

Aberdeen oil firm Faroe raised �65. Picture: Alamy
Aberdeen oil firm Faroe raised �65. Picture: Alamy
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OIL driller Faroe Petroleum has beaten its fundraising target following a “very strong response” to its cash call from institutional shareholders.

The Aberdeen-based firm had been seeking to raise about £45 million through a share placing to boost its exploration activity, but said yesterday that it had netted £65m from investors.

Chief executive Graham Stewart said the oversubscribed placing had been priced at 120p a share by joint bookrunners Oriel, Panmure Gordon, Pareto and RBC.

He added: “This will strengthen [our] financial position, whilst safeguarding our core value, and will allow us to accelerate our exploration, appraisal and development activities.

“The increased fundraise will also allow us the flexibility and financial strength to target further production acquisition opportunities.”

The proceeds will be used to fund the drilling of four extra wells in 2015-16 and to protect its 25 per cent interest in the Pil discovery in the Norwegian Sea. Faroe last month said that a second side-track well was planned to test the separate Bue prospect after an appraisal well at Pil struck more oil.

Faroe said: “Owing to a very strong response by institutional investors, the size of the placing has been increased from the base size of approximately £45m to £65m.”

The Aim-quoted driller has interests in four main producing oil and gas fields in the UK and Norway – the Blane oil field in the UK, and the Njord, Brage and Ringhorne east fields in Norway – which collectively produced 6,059 barrels of oil equivalent per day in 2013. By the end of 2017, the company is aiming to have proven and probable reserves of 100 million barrels of oil equivalent and average daily production of 20,000 barrels.

Faroe this month began drilling the Centrica-operated Butch South West exploration well in the Norwegian North Sea, which it said has the potential to add “substantially” to the volumes and value of the Butch field, in which it has a 15 per cent stake.

Analysts at BMO Capital markets recently started covering the firm with an “outperform” rating and a 199p target price. The broker said: “Faroe ranks as one of the most attractive stocks in our coverage.

“The company trades at a substantial discount to both our core net asset value and our risked sum-of-parts, which we believe is unwarranted and has been partly due to a general sector de-rating. We expect the shares to re-rate as the market starts to appreciate the real value already in the portfolio, and the accretive nature of much of the forward exploration programme.”