News

February 09, 2009

Faroe Petroleum Exploits Favourable Tax Regime To Get Busy In Norway Waters

Faroe Petroleum has long seen the advantages of working in Norway. Norway’s 15-year time lag behind the UK sector means there are plenty of under-explored plays and previously sub-economic or over-looked opportunities available for appraisal and development, making it an attractive playground for ambitious start-ups looking to grow through the drillbit. And Faroe Petroleum can afford to drill up its licences in Norwegian waters because it is in the relatively rare position of being able to raise debt to fund exploration. This is because the Norwegian fiscal regime returns 78 pence for every pound invested in exploration, against which the company has a NKr500 million credit facility with Barclays and Bank of Scotland. Importantly, this facility was doubled late last year in challenging market conditions, marking a vote of confidence in the AIM-quoted E&P.

Under the terms of the revolving credit facility, 75 per cent of Faroe's exploration and appraisal expenditure in Norway will be supported  by the  bank  facility,  thereby effectively quadrupling  the capital available for investment in the Scandinavian country. This explains why the company is keeping busy in Norway. Last week it spudded the Grosso exploration well in PL376 (Faroe  10 per cent), which lies on the northeast flank of the...