Faroe Petroleum and utility Scottish and Southern Energy (SSE) said yesterday they had agreed to work together to acquire producing oil and gas assets in the North Sea.
At the same time, the Aberdeen-based oil and gas company Faroe said it had raised £60million after expenses in a fully subscribed placing of shares with institutional investors.
Faroe said that £14million would go on appraisal and predevelopment of its Maria and Fogelberg discoveries, £14million on increasing stakes in key exploration wells, £6million on higher exploration well costs following BP’s Macondo incident in the Gulf of Mexico and £26million on acquisitions of appraisal and production assets.
Perth-based SSE subscribed in the placing for 5.1% of Faroe’s enlarged share capital for about £18million.
SSE is working towards final completion of the acquisition of its first North Sea gas production assets, from Hess, later this year. They include stakes in the Everest, Lomond and Neptune fields in the southern North Sea and in the Cats pipeline.
The SSE/Faroe partnership said it was already working on opportunities to acquire upstream production. SSE energy-supply director Alistair Phillips-Davies, said: “Our goal is to build up a presence in the upstream gas sector in a measured way to provide an additional source of primary fuel and a hedge for our gas generation and supply activities.
“This agreement with Faroe Petroleum, which has a strong track record and team, should help us to achieve that over the medium term.”
Faroe chief executive Graham Stewart said: “The agreement with SSE is an important step forward for Faroe, as we pursue our strategy of growing production revenues to support our extensive exploration activities. The partnership’s combined expertise and relationships across the market provide a unique opportunity to acquire high-quality oil and gas production and benefit from our respective strengths.
“We are delighted to have received such strong support for the placing, which will allow us to fund the new opportunities we have generated.”
Faroe placed the shares at 165p each, a discount of 7.7% on Thursday’s close. Yesterday the shares were down 2.8% at 174p.
The issue of new shares will dilute South Korean state oil company KNOC’s stake in Faroe, acquired through buying Dana Petroleum, from a 27.5% interest in the firm to 22.5%.
Mark McCue, a divisional director at investment manager and financial-planning specialist Brewin Dolphin in Aberdeen, said: “From Scottish and Southern’s point of view, the stake and strategic partnership should allow it to grow assets in the North Sea.
“All in all, it looks an excellent move and the successful placing represents a show of confidence in Faroe, especially with SSE coming on board.”