Faroe Petroleum slides into the red as revenues halve

The Scottish economy grew by 0.4 per cent in the second quarter of the year.. Picture: Danny Lawson/PA Wire
The Scottish economy grew by 0.4 per cent in the second quarter of the year.. Picture: Danny Lawson/PA Wire
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Oil and gas explorer Faroe Petroleum yesterday lifted its output forecasts for this year despite plunging into the red at halftime after production was hit by problems at fields off Norway.

Although Faroe suffered a sharp drop in revenues, chief executive Graham Stewart said the Aberdeen-based firm was “well placed for growth” following its “transformational” acquisition of a number of fields from Danish grop Dong in July.

Faroe, which focuses its efforts in UK and Norwegian waters, posted a pre-tax loss of £35.9 million for the six months to the end of June, a turnaround from the £365,000 profit for the same period a year earlier.

The loss came after the Aim-quoted company saw its revenues tumble to £23.1m from £51.1m a year ago, reflecting a drop in production linked to the suspension in June of the Njord and Hyme fields, in which it has a 7.5 per cent stake, for “upgrades and strengthening”.

READ MORE: Faroe Petroleum kicks off Norwegian drilling campaign

Average production from Faroe’s existing portfolio came in at 9,030 barrels of oil per day (boepd), lower than the 10,971 barrels achieved in the first half of 2015.

But production guidance for 2016 has been revised upwards to 16,000-18,000 barrels from 15,000-17,000 barrels, which Faroe said reflected better the expected performance from the Trym, Brage and Oselvar fields.

The group said its balance sheet had been strengthened by the recent £66m share placing to fund the acquisition from Dong of four producing fields in Norway.

Stewart said the firm was now “well positioned to progress its exploration-led, production-backed growth strategy”,

He added: “Faroe has had considerable success with the drill bit in recent years, and we are now seeing the real value of that success materialise.”

Analysts at SP Angel said the figures underlined the operational strength in the business, but added: “Cash flow is the only real measure against which a company can be measured, and in this respect the first six months have not been kind.”

However, the broker said it “continues to believe that the company will emerge from these periods of low oil prices stronger than when it entered it”.

Another Scottish firm has fallen victim to the low oil price. Johnston Carmichael has been appointed as administrators to Arbroath-based Axon Well Interventions Products UK.

The company, which manufactured and supplied equipment to oil and gas companies, employed 36 people who are all being made redundant. The business is part of the Axon Energy Products Group but no other parts of the business are affected.

Joint administrator Gordon MacLure said the ongoing challenges in the oil and gas sector had been insurmountable for Axon Well and had led to a sustained downturn in capex by its customers.

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