Sector News

Faroe Petroleum poised to snap up North Sea bargain

May 17, 2016

Independent oil explorer Faroe Petroleum expects to buy up discount North Sea assets within months as it prepares to position itself for a market recovery.

The global oil price crash has saddled many of its rivals with debt but Faroe boss Graham Stewart said the oil company will be able to use cash to buy assets it might not otherwise have been able to afford.

“We’ve got about $100m of net cash – which is quite a good position when most companies have net debt. And now is the time to be positioning yourself to make an acquisitions,” he said.

The company said it is mulling low cost assets from a range of sellers which include companies hard-hit by the market downturn, and those hoping to reposition their portfolios.

Werner Ryding, an oil analyst with Peel Hunt, said Shell’s North Sea assets could be a potential target.

“A good portion of Shell’s operated and non-operated portfolio in the UK is in the Central North Sea and so this could present some interesting asset-specific opportunities for the right smaller player,” he said.

Faroe focuses exclusively on North Sea assets in UK and Norwegian waters which have been hard-hit by the oil market downturn due to the basin’s declining reserves and high cost base, but Faroe says there are still areas of the aging North Sea which can produce oil at a cost of below $10 a barrel.

“Although banks have had their hands burned by the downturn they will lend to those they trust, those they have a relationship with and those that already have assets,” he said.

“For sellers the amount of people available to sell to has shrunk – very few are buying or are able to buy. That puts any buyer in an interesting position where you might be able to get something that you wouldn’t normally be able to get in a ‘normal’ world,” he said.

By Jillian Ambrose

Source: The Telegraph

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