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Faroe Petroleum sells 17.5% stake in Fenja to Suncor for $54.5m
Oil and gas company Faroe Petroleum has agreed the sale of a 17.5% working interest in the Fenja development in the Norwegian Sea to Suncor for a cash consideration of $54.5m.
The deal, which is expected to cut Faroe's future capital expenditure on Fenja to around £70m, will see the group retain a 7.5% stake in the development. It will also allow Faroe to maintains its "strong" balance sheet and fully funded position across its portfolio of Norwegian field developments.
Chief executive officer Graham Stewart said: "I am very pleased to welcome Suncor, a significant global integrated energy company, into the Fenja joint venture. Suncor's acquisition of a 17.5% stake in Fenja from Faroe confirms our belief in the attractiveness of this project. We look forward to working together with Suncor as the Fenja project progresses to first oil.
"This transaction marks a major milestone for Faroe, which has taken Fenja through exploration and appraisal drilling to predevelopment work and validates Faroe's business model of generating tangible shareholder returns from its exploration portfolio. Having held a significant interest in PL586 from its discovery, Faroe has now generated cash returns through a partial-monetisation while still giving shareholders exposure to future cash flows from a continuing interest in this high quality project."
RBC Capital Markets said: "On a risked basis we included just over $30m for the 17.5% stake in our Tangible NAV (inc the Norwegian tax synergies), so this looks accretive.
"The entry of Suncor into the Fenja development gives credibility to the project on a standalone basis and allows Faroe's to be fully aligned with its existing 7.5% interest in the Greater Njord Area. This deal has boosted the balance sheet and relieved any investor concerns about a further debt or fundraising to finance developments. Following the completion of this deal, Faroe is still expected to reach a production rate in excess of 30,000boe/d following the development of the Brasse and Fenja projects."