Faroe Petroleum has bought majority stakes in two North Sea gas assets from Tullow Oil for £35million.
Tullow – which has suffered a string of disappointing exploration results – will maintain a 40% stake across the two fields, Schooner and Ketch, while Faroe Petroleum will operate them.
The deal is being funded up front in cash from Faroe’s existing reserve-based lending debt facility.
The acquisition is expected to complete before year end and is subject to UK regulatory approval.
Faroe Petroleum chief executive Graham Stewart said: “We are very pleased to announce this acquisition, funded entirely from existing resources and debt facilities, which significantly boosts and diversifies our oil and gas cash flow generation.
“Ketch and Schooner are good-quality producing fields, well known to the company as they are located in one of our core areas and offer significant upside potential in the form of increasing reserves, production and field life.
“The transaction is highly tax efficient for us, providing shelter for both past and future tax losses in the UK and is in line with our strategy to grow our production portfolio to continue the efficient funding of Faroe’s busy and highly successful exploration programme.
“This is our first move into operating producing assets. This transaction gives us the opportunity to add value to these fields over time, and both assets offer numerous possibilities and options to grow.
“Nevertheless, our clear strategic focus on exploration will remain unchanged going forward.
“Elsewhere, drilling activities continue in our exploration and appraisal programme with the drilling of the Pil side-track (Faroe 25%) in the Norwegian Sea, following the significant Pil discovery and associated successful production test.
“Drilling continues at the Butch East exploration well (Faroe 15%), located adjacent to the Butch Main discovery (Faroe 15%) in the Norwegian North Sea, with results expected in the coming weeks.”
The Ketch field was discovered in 1984 and the Schooner field in 1987, with first gas from Schooner in 1996 and Ketch in 1999. Both fields, developed by Shell, are multi-well developments with “normally unmanned” platforms, currently managed by a third-party duty-holder. Gas is exported via the Caister Murdoch facilities to the Conoco-operated Theddlethorpe gas terminal where it is sold into the national grid.