Faroe Petroleum swaps assets with Norwegian firm Petoro

Faroe's chief executive said the transaction with Petoro was "transformational"

Faroe Petroleum, which specialises in exploration under UK waters, has swapped assets to provide revenue for further drilling.

The Aberdeen-based company has given up fields that were ready for development, in a pure asset swap with Norwegian company Petoro.

The deal involves swapping a 30% share in the Maria discovery with shares in Norwegian fields already in production.

The swap is subject to regulatory approval.

The move steps up Faroe's production by about 7,300 barrels a day of oil and its gas equivalent to a total of 9,200 barrels a day this year.

The Maria discovery, which was announced in July 2010, is due for further development and the estimated cost of that to Faroe would have been £280m.

But to avoid that capital expenditure and to focus on its exploration specialism, Faroe has swapped it for Petoro assets in the Njord, Brage and Ringhorne East fields. It is estimated the fields produced £98m in profits last year.

Faroe's chief executive Graham Stewart said the transaction with Petoro was "transformational".

He added: "It secures, on an exclusive basis, a substantial, high-quality production portfolio, without the requirement on Faroe to either pay a consideration or make the substantial investments needed for Maria's development.

"It also increases considerably the company's cash flows and debt capacity, thereby freeing up funding for other value-creating purposes."