Faroe Petroleum agreed to an asset swap with Equinor in the Norwegian Sea and North Sea region of the Norwegian Continental Shelf (NCS).
Equinor said the asset swaps are calibrated to be balanced in terms of value with no cash consideration. The companies did not give a value for the assets involved.
As a result of the swap agreement, Faroe will get Equinor’s stakes in the Vilje and Ringhorne East fields, while Equinor gets Faroe’s stakes in Njord’s Bauge and Hyme assets. Additionally, Faroe will get part of Equinor’s stakes in the Marulk and Alve fields.
The effective dates of the transactions are 1 January 2019 with closing subject to government approval.
“The net effect of our agreement with Faroe is to upgrade Equinor’s portfolio in line with our updated roadmap for the NCS,” said Siri Espedal Kindem, Equinor’s senior vice president for Operations North. “We are strengthening our operated position in the prolific Njord area, which we believe continues to have considerable upside potential.”
Equinor will remain the operator and majority equity holder in Alve, which is produced via Norne, an important part of the Norwegian Sea for Equinor, while it reduces exposure to non-core and partner-operated assets.
Meanwhile, Faroe said the swap would significantly reduce the need for capital investments as the company’s stake in $1.9 billion Njord re-development project would fall to zero from 7.5 percent, while it would add 7,000-8,000 barrels of oil equivalent per day (boepd) for Faroe in 2019.
“The transaction will accelerate delivery of our fully-funded production target, while strengthening further our financial position in advance of reaching investment decisions on our new Iris/Hades and Agar discoveries,” Graham Stewart, chief executive of Faroe said. “We are now confident in our ability to deliver in excess of 50,000 boepd in the medium term.”
Its overall output is expected to rise to 18,000–22,000 boepd in 2019.
DNO Faroe buyout
DNO, which already owns 28 percent of Faroe made a hostile bid last month to buyout the British energy company. Faroe rejected DNO’s 152 pence per share bid on Nov. 26, saying it significantly undervalued the Aberdeen-based firm.
DNO however raised questions over the deal, arguing Faroe switched future growth potential for short-term cash flow from fields with declining output.
“While Faroe has asserted this is not designed to stop the DNO offer, we need to ask if this is good value for a company seeking growth... That is the test this deal needs to satisfy,” the Oslo-listed firm DNO said in a statement.