AIM listed oil and gas group Faroe Petroleum Plc (LON:FPM) has agreed a deal to acquire an 18% stake in the Blane oil field in the UK North Sea. The move will boost the company’s daily production figures by more than 2,000 barrels of oil equivalent per day, taking it to in excess of 3,000 boepd. Faroe is acquiring the stake for a headline figure of £60m together with the farm out, on promoted terms, of a 20% interest in three Atlantic Margin exploration licences. The deal has been done with ENI UK Ltd and ENI ULX Ltd and is being funded from company cash and bank debt and will benefit from significant tax efficiencies connected to past tax losses and the gains made on the sale of the Breagh gas field in August 2009.

The Blane oil field was discovered in 1989, and is located on the Central Graben of the UK continental shelf, extending into the Norwegian sector. Production kicked off in September 2007 from a Tertiary Palaeocene Forties sands reservoir with a structural closure. The field has been developed as a sub-sea tie-back to the BP (LON:BP.) -operated Ula platform located in the Norwegian continental shelf (34km to the north east) and currently comprises two horizontal production wells with gas lift and one water injection well.

Blane is a low-cost producing field with average gross production rates during September 2010 of 11,964 boepd (net production 2,154 boepd). Remaining 2P reserves, as evaluated by Faroe’s reserves auditors Senergy, as at 30 June 2010 were 3.0 million barrels of oil equivalent net to Faroe, which corresponds to an acquisition cost of $17.5/boe when incorporating tax synergies. Faroe said there was also upside potential in the existing reserves, through a combination of outperformance of the existing development, and the potential for further in-fill drilling. Joint venture partners in the field are Talisman Resources (43.0% and operator), Roc Oil (12.5%), Nippon Oil (14.0%) and Dana Petroleum Plc (LON:DNX) (12.50%).

As part of the transaction Faroe is farming out stakes in the Atlantic Margin Rannva exploration licences (Faroese Licences 012 and 017 and UKCS licence P.1740) which straddle the UK/Faroe border. These prospective licences cover…

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