Faroe Petroleum (LON:FPM) has reported a new gas condensate discovery in the North Uist exploration well, but it says that more analysis is needed to assess its commercial potential.

The deep water well, located in the challenging West of Shetland area, was drilled to a depth of 4,700 metres and it successfully encountered hydrocarbons.

An extensive data set has been gathered, and this data set is now being evaluated. Though, Faroe says that results so far indicate varying reservoir quality.

"After a long period of drilling activity on this wild-cat exploration well, we are pleased to have made a discovery in the North Uist exploration well, although we had, however, hoped for better quality reservoir,” said chief executive Graham Stewart.

“The result proves another working hydrocarbon system in the frontier west of Shetlands which is good news for further prospectivity in these UK waters.

“The partnership will now undertake extensive analysis of the considerable volumes of data and samples collected from the well operations before deciding on the next steps."

Faroe Petroleum (LON:FPM) has told investors that its latest production asset, the Hyme oil field, is now coming on stream.

It owns a 7.5% stake in the Statoil operated field, in the Norwegian Sea, which has now started to produce oil.

Statoil believes the field contains around 30mln barrels of oil equivalent, which equates to 2.25mln barrels net to Faroe.

The first oil from Hyme comes just over two years since the development decision was made, Faroe says, and the programme came in on budget.

Faroe’s share of the costs totalled £37.5mln and this was covered by cash flows from its other producing assets. The AIM quoted firm expects Hyme will yield between 10% and 15% of the group’s daily production in 2013.

"We are delighted to see the Hyme oil field come on stream on schedule and on budget,” said chief executive Graham Stewart.

“This important, high quality field, will provide a significant boost to our production income and funding for the forward programme, while also extending the field life of Njord."

Faroe also highlighted that the Darwin wildcat exploration well, in the Norwegian Barents Sea, is expected to spud shortly. It has a 12.5% stake in this prospect which is location to the south west of significant recent discoveries that were made by Statoil.

"The Darwin well is the next frontier well in our drilling programme, and our first in Norwegian waters of the Barents Sea,” Stewart added.

“Darwin is a very exciting prospect, and follows only a few months after Statoil's nearby successes with the giant Skrugard and Havis oil discoveries.

“In the meantime, we await the near term results of another frontier well, North Uist, located west of Shetland, which has suffered lengthy delays due to technical drilling difficulties."

Faroe Petroleum (LON:FPM) this morning confirmed that the Rodriguez exploration well has made a significant gas condensate discovery.

The discovery, in the well’s Lower Cretaceous interval, is estimated in the order of 19 to 126mln barrels of recoverable oil equivalent, which would equate to 6 to 126mln barrels net to Faroe.

However, Faroe said that further appraisal work will be required to establish the size and extent of the discovery as this is the first well on the prospect.

"We are very pleased to announce this gas condensate discovery on the secondary target of this Norwegian Sea exploration well,” said chief executive Graham Stewart.

“This significant discovery gives the partnership a good indication of further upside potential on the rest of the licence block with at least two further matured and partially de-risked prospects and we look forward to its further appraisal.

"We have an active 2013 exploration drilling programme which includes several high impact exploration wells including Darwin (Barents Sea), Novus (Norwegian Sea) and two Butch wells (Norwegian North Sea)."

Faroe also highlighted proposed changes in Norway, which would see reductions to gas transportation tariffs, and it says they would improve the project economics of the Rodriguez discovery, as well as the company’s Fogelberg gas discovery.

The proposal is currently in the Norwegian authorities’ consultation process which is due to be completed in March.

Faroe owns a 30% stake in the Rodriguez well.

Drilling has now begun on Faroe Petroleum’s (LON:FPM) latest exploration, the Rodriguez prospect on the Halten Terrace in the Norwegian Sea.

The Rodriguez well is targeting oil in Jurassic sandstones in three formations and it will be drilled to a depth of 4,040 metres. The drilling operations are expected to last for 75 days.

"We are very pleased to announce the spudding of this exploration well on the Norwegian Sea Halten Terrace, near our 2010 Maria oil discovery," said chief executive Graham Stewart.

"This will be the last well to spud in our 2012 programme and we now look forward to an exciting 2013 programme with four important exploration wells scheduled to be drilled in Norwegian waters.

“In the meantime, we await the results from the BP operated North Uist well, west of Shetland."

Faroe has a 30% stake in the well which is operated by Wintershall, and the other 20% is owned by Centrica (LON:CNA).

Faroe Petroleum (LON:FPM) said this morning it is acquiring a 10 per cent interest in East Foinaven Field off the Shetland Islands for a headline US$32 million.

As part of the deal struck with Marubeni Oil & Gas, it is also buying a 0.5 per cent interest in the West of Shetland Pipeline System.

Chief executive Graham Stewart said: "We are very pleased to further broaden our production portfolio through the acquisition of the East Foinaven interest, which boosts and continues to diversify our oil and gas revenue.

"East Foinaven is a good quality producing field which provides significant upside potential from one of our core areas. 

“The transaction is very tax efficient for Faroe Petroleum, 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 funding of our exploration programme."

The shares fell 1.5 per cent to 150.75 pence following the news.

However the reaction of City analysts this morning was positive.

Both Oriel Securities and Panmure Gordon repeated their ‘buy’ advice. 

Oriel said set a risk adjusted net asset value for Faroe of 214 pence a share, while Panmure’s price target is 218 pence.

“We see this transaction accretive,” said Panmure’s Leila Reddy.

As part of the deal struck with Marubeni Oil & Gas, it is also buying a 0.5 per cent interest in the West of Shetland Pipeline System.

Chief executive Graham Stewart said: "We are very pleased to further broaden our production portfolio through the acquisition of the East Foinaven interest, which boosts and continues to diversify our oil and gas revenue.

"East Foinaven is a good quality producing field which provides significant upside potential from one of our core areas. 

“The transaction is very tax efficient for Faroe Petroleum, 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 funding of our exploration programme."

Faroe Petroleum (LON:FPM) shares dropped almost 9 per cent today as it revealed the disappointing news that a test on the Cooper well in the Norwegian Sea failed to flow hydrocarbons to surface. 

The Cooper well’s primary goal was to prove up hydrocarbons in four targeted formations – the Middle Jurassic Garn, Ile, Tofte and Tilje. It had two secondary targets also, in the Cretaceous Lysing and Lange formations.

Oil was encountered in a 59 metre gross section in the Garn formation, and in a 10 metre section within the Ile Formation. Also oil was encountered in thin sand stringers within the Cretaceous Lysing and Lange formations.

A drill stem test was conducted in the Garn formation but no hydrocarbons flowed to surface and a subsequently pressure test confirmed there was restricted flow within the reservoir.

"Although the DST results on the Garn formation were disappointing we take encouragement from the discoveries made at multiple horizons and that the poor flow characteristics of the Jurassic reservoir observed in this well are not seen in the other nearby producing fields,” said chief executive Graham Stewart.

"We will continue to evaluate the large amount of data that has been collected in the Cooper well to try to resolve why the Garn formation is tight and whether this is likely to be a local or a field wide reservoir phenomenon.”

Faroe Petroleum (LON:FPM) has acquired a 12.5 percent interest in the Darwin prospect in the Norwegian Barents Sea, securing a stake in an “attractive, high impact, wildcat” exploration well.

The prospect lies within the PL531 licence around 60 to 80 kilometres to the south west of the recent Statoil Skrugard and Havis oil discoveries.

Multiple targets have been identified on 3D seismic.

The first exploration well, expected to spud earliest end December 2012, will test the main Darwin prospect and will help de-risk the potential of the remaining licence area.

“With drilling operations due to begin around the end of the year, this adds a further exciting well to our already substantial drilling programme and gives us access to our first exploration well in the highly prospective Barents Sea,” said chief executive of Faroe Graham Stewart.

“Licence PL531 is an important new position in the promising western part of the Barents Sea - an area where a major breakthrough was achieved last year with the giant Skrugard oil discovery.”

The company added that the section of the sea is expected to be highly competed for in the upcoming licensing round.

Faroe Petroleum (LON:FPM) this morning revealed disappointing results from the Clapton exploration well in the Norwegian North Sea.

The company said the reservoirs in the well’s primary target were ‘thinner and poorer quality’ than expected. 

And the well’s other targets, the Shetland Group chalk reservoirs, contained no hydrocarbons in producible quantities, it added. Though oil shows were present in another part of the well.

The well will be plugged and abandoned.

"Whilst the results for the Clapton well are disappointing, the data obtained does provide important new information which will allow further evaluation; particularly in the upper sections of the well where hydrocarbons were encountered,” said chief executive Graham Stewart.

Clapton was Faroe’s first operated well in Norway and it owned a 40 per cent stake in the venture.  

The other partners included KNOC-owned Dana Petroleum (20 pct), Lundin (18 pct), Norwegian Energy (12 pct) and Det Norske Oljeselskap (10 pct).

Faroe still has ongoing operations on two other high impact wells and Stewart says it is an exciting period for the company.

The company’s ongoing wells are Cooper (30 per cent owned) in the Norwegian Sea and the North Uist (6.3 per cent owned) in the west of Shetland region of the UK North Sea.

Results from the Cooper well are expected in the next two weeks, Faroe said. 

Faroe Petroleum (LON:FPM) today announced the spudding of the Cooper exploration well in the Norwegian North Sea.

The well is located on the Halten Terrace between the Smørbukk and Morvin oil fields. And Faroe says it is targeting the prolific Middle Jurassic Garn and Ile formations, which are the main producing reservoirs in these neighbouring fields.

"We are pleased to announce the spudding of this Halten Terrace exploration well which is in one of our core areas,” said chief executive Graham Stewart.

“The Cooper prospect offers significant resource potential and is in close proximity to a number of important discoveries made by the company including Fogelberg and Maria."

"We also look forward to the commencement of the Faroe-operated Clapton exploration well in the Norwegian North Sea, whilst drilling operations continue on the West of Shetland North Uist exploration well."

Faroe has a 30 per cent stake in the Centrica operated Cooper project. Meanwhile it operates the 40 per cent owned Clapton project and it has a 6.3 per cent stake in North Uist.

AIM-quoted Faroe Petroleum (LON:FPM) today reported that the North Uist deep-water exploration well, in the North Sea, West of Shetland, has been spudded by a BP-led venture.

Faroe has a 6.25 per cent stake in the project and it has a financial carry of a portion of the well costs.

The exploration well is positioned near Chevron’s Rosebank discovery. It will target several reservoir objectives the most significant is said to be the North Uist target in the upper Jurassic.

"We are very pleased to announce the spudding of this frontier exploration well in one of our core areas. 

“The North Uist prospect offers significant resource potential and is in close proximity to a number of important discoveries on the Atlantic Margin Corona Ridge, including Rosebank and Cambo."

BP is the operator of the North Uist venture and it is the largest stakeholder with a 47.5 per cent interest. Nexen Petroleum owns a 35 per cent stake, while the other partners CIECO and Idemitsu Petroleum own 6.25 and 5 per cent respectively.

The spudding of the North Uist exploration well comes just days after chancellor of the exchequer George Osbourne revealed a plan to create a new tax relief for the development of oilfields in the challenging West of Shetland region of the North Sea.

Stewart, meanwhile, says that Faroe is looking forward to the start of drilling some of its other prospects in Norway during the months ahead.

It is operator and it owns a 40 per cent stake in the planned Clapton exploration well in the Norwegian North Sea and it has a 30 per cent stake in the Centrica operated Cooper well in the Norwegian Sea. 

Faroe Petroleum (LON:FPM) reported that its exploration well failed to discover commercial oil in the T-Rex and Bolan exploration prospects on license PL431 in the Norwegian Sea.

The 6406/3-9 well, which will now be plugged and abandoned, was the first well to be drilled on the licence by operator Maersk Oil.

The report disappointed investors, pushing shares in Faroe down 3.5 percent to 164.75 pence in early trade, valuing the company at £349.9 million.

On a positive note, the well confirmed the presence of oil and provided new data for further evaluation and de-risking of the exploration area, in which Faroe holds a number of licences.

“In addition to our evaluation of the remaining potential on Licence PL431, we will apply these new data directly to calibrate and identify the follow-up potential of several Cretaceous potential prospects we have in this area,” said chief executive of Faroe Petroleum Graham Stewart.

Faroe will now move on with its 2012 exploration campaign. In the second quarter, Faroe and its partners will drill an exploration well on North Uist prospect, west of the Shetlands, while two other wells will target the Clapton and Cooper prospects in Norway.