UK: Faroe Petroleum to Boost its Business Using Cash Raised Through Share Placing

Faroe Petroleum, the independent oil and gas company focusing principally on exploration and production opportunities in the Atlantic Margin, the North Sea and Norway,announces that it has conditionally raised £62.2 million (approximately USD $100 million)  through a Placing of 37,718,024 new Ordinary Shares at a Placing Price of 165 pence per Ordinary Share, with both new and existing investors.

The Placing is conditional upon Admission, which is expected to take place on 24 November 2010. Panmure Gordon and Oriel Securities acted as joint bookrunners to the Placing.

Highlights

* Placing to existing and new institutional and other investors to raise £62.2 million

* Proceeds of the Placing to fund the recent successes and significant opportunities generated by the Company including:

o appraisal and pre-development of recent discoveries

o increased exposure to exploration upside, by taking larger equity stakes and committing to new wells

o acquisition of appraisal and production assets

* New strategic partnership with Scottish & Southern Energy PLC (“SSE”) to develop wider co-operation

o subscribing in Placing for 5.1 per cent. of enlarged share capital

o scope to develop wider co-operation, including joint acquisition targets, leveraging mutual strengths

* Placing Price of 165 pence is at a discount of 7.7 per cent. to the middle market closing price of 178.75 pence per Ordinary Share on 18 November 2010, the last business day prior to this Announcement

* The Executive Directors have also subscribed for Placing Shares at the Placing Price

Graham Stewart, Chief Executive of Faroe Petroleum said:

“We are delighted to have received such strong support from our existing and new shareholders for this placing, which will allow us to fund the new opportunities that we have generated, encompassing appraisal and pre-development work, expansion of our exploration programme, and further acquisition opportunities.

“Alongside today’s placing we have entered into a significant strategic agreement with SSE through which we will leverage our respective resources to mutual benefit in growing our respective upstream portfolios. This relationship has been cemented by SSE’s investment in Faroe through the placing, endorsing our significant potential as a rapidly growing independent exploration and production company.”

Background to and Reasons for the Placing

Since completing the Rights Issue in April this year, the Company has continued to deliver success and has generated a number of new opportunities. In addition to the successful Glenlivet, Tornado and Fogelberg discoveries, Faroe has announced a high quality oil discovery in its Maria licence in Norway and completed drilling on the Anne-Marie prospect in the Faroes, where technical assessment is underway and Faroe is investigating the potential for a follow-up well.

Faroe has also increased its stake in the Clapton prospect in Norway, from 20 per cent. to 40 per cent.. Faroe is the operator of the licence, on which a well is expected to be drilled in 2012, targeting the Upper Cretaceous Hod, Tor and Ekofisk formation.

In the Atlantic Margin, Faroe also has a number of new exploration targets in the Grouse, Balblair, Ardbeg and Aileen prospects, consisting of 23 blocks and part-blocks, with equity stakes of between 37.5 per cent. and 50 per cent., awarded in the UK 26th licensing round. On the Rannva prospect, into which ENI has recently farmed in, the Company is also undertaking further technical work ahead of a drill or drop decision in December 2011.

In Norway, the Company’s Fogelberg and Maria discoveries have unlocked significant further potential in the area. Faroe has a number of key targets on the Halten Terrace and is preparing an exploration programme for a new play, which has been revealed by the application of leading edge seismic technology.

In October 2010, Faroe announced that it has agreed, subject to certain conditions, to acquire an 18.0 per cent. interest in the Blane oil field from ENI UK Limited and ENI ULX Limited. This acquisition will increase the Company’s production to approximately 3,000 boepd. Faroe’s growing production profile is designed to allow the Company to leverage its debt facilities and increase its tax-efficiency in order to generate cash to part-fund its exploration activities. This acquisition is a significant step towards meeting the Company’s production goal of 6,000 boepd, which is the approximate amount required to fund the Company’s future exploration and appraisal programme.

These developments in the Group’s business have led the Directors to seek further funding through the Placing.

[mappress]

Source: Faroe Petroleum, November 19, 2010;