Annual Report & Accounts 2010
Faroe Petroleum Annual Report & Accounts 2010
Communiqué Associates Limited, Edinburgh www.communique-associates.co.uk
Faroe Petroleum 
24 Carden Place
Aberdeen
AB10 1UQ
www.faroe-petroleum.com Cover design
Faroe Petroleum ran a competition 
challenging 3rd year graphic design  
students at Gray’s School of Art, part of 
Aberdeen’s Robert Gordon University,*  
to come up with a design theme for our  
2010 Annual Report. 
The honours were shared between Iain 
Currie and Asa Rodger whose richly coloured 
dynamic designs reflect our theme of 
‘continuing success’ , and the momentum  
of a growing business operating in an  
exciting environment.
*  Sunday Times Scottish University of the Year 2011  
Best modern university in the UK (The Times Good 
University Guide 2011)
Officers and professional advisers 
Directors
Mr J W S Bentley
Mr G D Stewart
Mr I M Lanaghan
Mr H A Hammer
Mr R C Witts
Mr T P Read
Ms H Harlem
Group head office
24 Carden Place 
Aberdeen  
AB10 1UQ
Secretary and registered office
Mr J G M Riddick 
51 Eastcheap 
London  
EC3M 1JP
Principal bankers
Bank of Scotland 
39 Albyn Place 
Aberdeen  
AB10 1YN
Auditors
Ernst & Young LLP
Blenheim House
Fountainhall Road
Aberdeen
AB15 4DT
Solicitors
Hunton & Williams LLP 
30 St Mary Axe 
London 
EC3A 8EP
McGrigors LLP
Johnstone House
52-54 Rose Street
Aberdeen
AB10 1UD
Joint stockbroker and Nomad
Panmure Gordon (Broking) Limited  
Moorgate Hall 
155 Moorgate 
London   
EC2M 6XB
joint stockbroker    
Oriel Securities Limited 
125 Wood Street 
London 
EC2V 7AN
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA Faroe Petroleum plc Annual Report 2010  ::  1
Gaining 
momentum
2010 was an outstanding year for Faroe Petroleum. 
We built on the drilling success of 2009 with two 
further significant discoveries in Norway on Maria 
and Fogelberg. We will increase substantially our 
production following completion of the acquisition of 
18% of the Blane oil field, and our finances are strong 
on the back of successful equity fund raisings.
We look to the future with confidence as we execute 
our very active drilling programme with seven wells 
scheduled for 2011 and 17 wells planned between 
now and the end of 2013.
Graham Stewart 
Chief Executive
Highlights ....................................................... 2
Chairman’s letter ......................................... 4
Chief executive’s review ........................... 6
Review of activities ...................................10
Finance review ...........................................26
Board of directors ......................................30
Report & accounts .....................................32
Officers & professional advisers ...........93 2010
another 
record
year
•	 C on tinuing	e xplor a tion	
suc c ess	with	t w o	
sig nifican t	near-field	
disc o v eries	-	M aria	and	
F ogelber g	-	in	Halt en	
Terrace, Norway
•	 F arm- out	of	50%	of	
F ulla	w ell ,	 W est	of	
Shetlands	–	oper a t ed	
b y	F ar oe ,	drilling	
scheduled	f or	Q2	2011
•	 I ncr eased	equit y	in	
Clapt on	w ell ,	Nor w a y	
–	oper a t ed	b y	F ar oe ,	
drilling	scheduled	f or	
Q1	2012
•	 A w ar d	of	7	new	
lic enc es:	4	oper a t ed	
UK ,	 W est	of	Shetlands;	
3	non- oper a t ed	in	 
mid-Nor w a y
•	 A c quisition	of	18%	of	
Blane	oil	field	in	UK	
with	eff ec tiv e	da t e	of	 
1	July	2010	–
tr ansac tion	scheduled	
f or	c ompletion	
in	Q2	2011
•	 2010	a v er age	oil	
and	gas	pr oduc tion	
appr o xima t ely	1,200	
boepd	(2009:	1,015	
boepd)	-	Dec ember	
2010	pr oduc tion,	
including	Blane ,	
appr o xima t ely	 
2,800	boepd
•	 A c quisition	of	28%	
in t er est	 in	 undev eloped	
UK	Nor th	S ea	P er th	oil	
field	post	y ear	end
•	 H igh	impac t	A tlan tic	
mar g in	w ells:
	 –	 A nne	M arie ,	F ar oe	
f ound	a	sig nifican t	
h y dr ocarbon	c olumn	
but	did	not	enc oun t er	
pr oducible	r eser v oir
	 –	 Laga vulin,	UK	w ell	
still	drilling ,	with	
r esults	e xpec t ed	in	
c oming	w eeks
2  ::  Faroe Petroleum plc Annual Report 2010
Activity Faroe Petroleum plc Annual Report 2010  ::  3
•	 R igh ts	Issue	and	
Placing	 with	 c ombined	
net	pr oc eeds	of	
£125.1m	–	t o	fund	
f or w ar d	pr og r amme
•	 C ash	of	£132.2m	
(31	Dec ember	2009	
adjust ed:	£33.1m)
	 	 T urno v er	of	£15.1m	
(31	Dec ember	2009:	
£7.0m)
•	 L oss	af t er	tax	of	
£20.4m	(31	Dec ember	
2009	adjust ed*:	
£20.0m)
* Adjusted loss after tax in 2009 
excludes the post-tax gain on 
the disposal of Breagh of £13.1m
•	 A ppr o xima t ely	£75m	
of	cr edit	facilities	as	
a t	31	Dec ember	2010,	
c omprising	£20m	
borr o wing	base	and	
NOK	500m	Nor w eg ian	
e xplor a tion	facilities	
–	look ing	t o	incr ease	
facilit y	siz es
•	 Nor w a y	tax	r ec eiv able	
of	£28.1m	(31	
Dec ember	2009:	
£12.6m),	due	in	
Dec ember	2011
•	 C arried	f or w ar d	UK	tax	
losses	£67.7m	(2009:	
£56.3m)	–	no	near-
t erm	Supplemen tar y	
C orpor a tion	 T ax	r a t e	
impac t
•	 S ev en	w ell	e xplor a tion	
&	appr aisal	drilling	
pr og r amme	scheduled	
f or	2011
•	 F ully	funded	17	w ell	
drilling	pr og r amme	
in	plac e	tar geting	
appr o xima t ely	5	w ells	
per year
•	 Oper a t or	of	F ulla	
and	Clapt on	w ells ,	
scheduled	f or	drilling	
in	2011	and	2012	
r espec tiv ely
•	 S tr ong	balanc e	sheet	
pr o vides	a	solid	base	
f or	driving	f or w ar d	
g r o wth	pr og r amme
•	 P r og r essing	the	
c ommer cialisa tion	of	
f our	disc o v eries
•	 F ur ther	e xpansion	
of	pr oduc tion	
por tf olio	t o	incr ease	
tax	efficien t	cash	
gener a tion
strong 
growth
exciting
future
Financial Outlook Chairman ’ s	letter
4  ::  Faroe Petroleum plc Annual Report 2010
2010 was a year of exceptional progress 
for Faroe Petroleum on a number of 
fronts, including two major discoveries 
in Norway. As we continue to grow 
and mature our frontier and near-field 
exploration portfolio, the Company has 
again been very successful in Norwegian 
and UK licensing rounds, demonstrating 
the high quality of technical competence 
within the team. 
Our production will more than double 
following completion of the acquisition  
of a material stake in the Blane oil field.
Chairman’s letter
John Bentley  
Chairman Faroe Petroleum plc Annual Report 2010 ::  5
Chairman ’ s	letter
Dear	Shar eholders
Successes 
2010 was a year of exceptional progress for Faroe 
Petroleum on a number of fronts, including two major 
discoveries in Norway. As we continue to grow and 
mature our frontier and near-field exploration portfolio, 
the Company has again been very successful in 
Norwegian and UK licensing rounds, demonstrating the 
high quality of technical competence within the team. 
Our production will more than double following 
completion of the acquisition of a material stake in the 
Blane oil field.  We also successfully raised substantial 
new equity funds in the year thereby ensuring that we 
have a strong balance sheet to underpin our active 
growth plans.  On the shareholder front, I am pleased 
that our new alliance with Scottish and Southern 
Energy (“SSE”), designed to develop wider co-operation 
between our companies, has been cemented in the form 
of a 5% shareholding in Faroe.  Faroe now has two strong 
industrial shareholders with both SSE and Korea National 
Oil Corporation, the new owners of Dana Petroleum. 
These successes underline the quality of our portfolio, 
the robustness of our business model, and the ingenuity 
and skill of our team.
Strategy 
Faroe has, through careful portfolio and financial 
management, ensured that at all times it has the 
necessary funding in place to advance its strategy, in 
particular in order to participate with material stakes 
in its multiple-well drilling campaign.  A number of 
world-class high-impact prospects are being targeted 
in the programme, several of which will be tested in the 
coming period, with the potential to transform the value 
of the Company. 
We have stated our intent to increase production further, 
through a combination of transactions and, where 
appropriate, organic development, with the objective 
of progressively self-funding our continuing exploration 
programme.  Any new production additions will be 
designed to optimise our tax position and leverage debt 
where appropriate.  
Board Appointment 
In our continuous programme of ensuring good 
corporate governance, we have further strengthened the 
Board with the appointment of Norwegian national and 
a former Minister of Justice, Ms Hanne Harlem as a Non-
Executive Director.
Outlook 
Faroe’s team has built a reputation of pursuing and 
delivering high quality exploration and appraisal 
opportunities as well as partnering with some of the 
best and most successful oil and gas companies in the 
world.  The Company has, over many years, created 
an extremely exciting growth platform and a unique 
opportunity to achieve great things as an independent 
oil company.  Underpinned by a strong funding base 
we have built real momentum in our drilling campaign 
and look forward with confidence and enthusiasm to 
delivering continued business growth.
Faroe Petroleum is fortunate to have a strong and 
supportive shareholder base, which includes a 
substantial number of large institutional investors, and I 
would like to acknowledge their continuing support as 
we progress into a very exciting period of activity ahead.
John Bentley 
Chairman 
Chairman’s letter 6  ::  Faroe Petroleum plc Annual Report 2010
Chief Executive’s review
win licences
• leverage our world class technical expertise 
• replenish exploration prospects 
• secure material equity stakes 
drill & discover
• drill five material wells per year 
• spread risk and cost optimally 
• partner with strong companies 
monetise assets
• exploit drilling success 
• trade assets across value cycle 
• maximise trade value 
generate revenue &
create value for shareholders
• increasingly fund wells from cash flow 
• build balanced production portfolio 
• achieve tax efficiency  Faroe Petroleum plc Annual Report 2010  ::  7
We continue to grow and mature 
our frontier and near-field 
exploration portfolio, ensuring 
that at all times Faroe has the 
necessary funding in place to 
participate with material stakes 
in its multiple-well drilling 
campaign.
The Company aims to drill five 
material exploration and appraisal 
wells each year, in order to test  
the value potential of our 
prospect inventory on an almost 
continuous basis. 
Faroe also continues to prioritise 
the monetisation of discoveries 
in a timely manner and increase 
production further, with the 
objective of progressively 
self-funding our continuing 
exploration programme. 
Graham Stewart 
Chief Executive Chief	Ex ecutiv e ’ s	review
8  ::  Faroe Petroleum plc Annual Report 2010
I am pleased to announce the audited 
results for the year ended 31 December 
2010, our most successful year to date.  
The team delivered two significant 
exploration discoveries with the Maria 
and Fogelberg wells in Norway,  
building on our two 2009 discoveries 
west of Shetlands.  Maria, in which  
Faroe Petroleum holds the largest 
stake at 30%, is reported to be one of 
the larger oil fields to be discovered in 
recent times in Norway.  
In April we raised £69.8 million by way of a rights issue 
of 69,823,124 shares at a price of 100 pence per share, 
which was exceptionally well received, with 93.1% of 
new shares being taken up.  In November we raised 
a further £62.2 million through a share placing of 
37,718,024 shares at 165 pence per share.  This has 
put Faroe Petroleum in a strong position to commit 
to new wells in our rolling drilling programme and 
invest in growing production through a combination 
of commercialisation of existing discoveries and 
acquisitions. 
Over a period spanning 11 years we have carefully built 
a focused, well balanced portfolio of over 40 licences 
spanning the Atlantic margin (Faroe Islands and UK West 
of Shetlands), Norwegian Sea, Barents Sea (Norway) 
and the North Sea (UK and Norway).  The Company’s 
exploration portfolio is focused on the core exploration 
areas of the Atlantic margin and Norway.  These areas 
are particularly important for several reasons: they have 
substantial potential to generate hydrocarbons; they are 
under-explored; they are receiving significant attention 
and investment from the major oil companies; special 
tax incentives are in place; they have low “country risk”; 
and Faroe has developed considerable expertise and 
knowledge in these areas.  
In line with our strategy of replenishing our exploration 
prospect pool, we were pleased to be awarded seven 
new licences in 2010 rounds.  Of these, four were in the 
UK 26th Round in partnership with E.on and Idemitsu 
in the West of Shetlands, all of which are operated by 
Faroe, and three were in the Norwegian 2010 APA Round 
in partnerships including Wintershall and Centrica.  All 
the exploration licence applications were identified and 
prepared substantially by Faroe’s technical team.  Faroe’s 
equity in the new licences is considerable, ranging from 
30% to 50%.  Our continuing success in winning prized 
licences in partnership with many of the world’s most 
successful oil and gas explorers demonstrates clearly the 
sustainability of our approach to exploration.    
The Company aims to drill five material exploration 
and appraisal wells each year, in order to test the value 
potential of our prospect inventory on an almost 
continuous basis.  The current drilling campaign includes 
eight firm wells and nine expected wells to be drilled 
over the coming two to three year period, funded from 
a combination of cash reserves, production revenues, 
and Norwegian tax rebates.  As licences in the portfolio 
mature, a continuous flow of new prospects will feed 
into the firm drilling programme.  
The high-impact West of Shetland Lagavulin exploration 
well is due to reach target depth in the coming weeks.  
We are preparing to drill the Fulla well  in shallow water, 
west of Shetlands, which will be Faroe’s first well as 
operator, and for which a rig contract has recently been 
entered into for a well slot in Q2 of this year.  In line 
with our cost management guidelines, in early 2011 we 
farmed out a 50% equity stake in the Fulla/Freya licences 
to Canadian Overseas Petroleum Limited which will pay 
a 60% share of the drilling costs.  The Company has also 
committed to operate the shallow water Clapton well 
in the Norwegian North Sea, and has entered into a rig 
contract for a well in early 2012.  
In addition to pursuing a dynamic exploration strategy, 
the Company is focused on building a cash-generative, 
non-operated production portfolio.  At 31 December 
2010 the portfolio comprised five producing oil and 
gas fields in the UK and Norway.  We announced the 
Chief Executive’s review Faroe Petroleum plc Annual Report 2010  ::  9
Chief	Ex ecutiv e ’ s	review
acquisition from Eni of 18% of the Talisman-operated 
Blane oil field in October 2010 and expect to complete 
the transaction soon.  Blane is an important addition, 
generating high quality, predictable cash flows, and 
making a significant contribution towards efficiently 
utilising our UK tax losses of some £67.7 million and 
thereby producing strong post-tax cash flows.  Including 
this new acquisition our production was around 2,800 
boepd in December 2010, efficiently contributing 
towards funding the continuing exploration programme.   
Blane is an excellent asset, well known to a number of 
our team who were responsible for its development 
during their time with Paladin Resources, the former 
operator of the field.
Another recent transaction is our acquisition of a 
28% interest in the undeveloped Perth oil field in the 
UK North Sea.  In this opportunity, which includes 
a number of additional exploration prospects, we 
see significant value creation potential in a licence 
well known by members of our team, with scope for 
near term monetisation.  Faroe Petroleum is looking 
forward to working closely with the operator, Deo 
Petroleum, to address the technical challenges relating 
to development of the Perth field, and to investigate 
further exploration and appraisal opportunities on 
the licence block, in advance of progressing to a field 
development decision.  
The Company operates a highly disciplined and prudent 
approach to financial management to underpin 
the exploration and appraisal programme.  Clear 
guidelines are set for project investment thresholds, 
and considerable effort is put into ensuring that all 
exploration and appraisal costs are well understood 
and allocated within a tightly controlled budget.  Cost 
exposure and financial risks are controlled through 
a combination of farm-outs to other oil companies, 
utilisation and financing of available tax rebates for 
Norway exploration, and a rolling hedging programme 
for commodity and currency risk.  We have managed 
our finances in order to sustain what is one of the most 
active and attractive drilling programmes of any small 
cap independent oil company, and we are confident in 
our potential to deliver significant value.
Faroe Petroleum has a highly experienced and skilled 
team of professionals with an excellent track record.  
Our cross-disciplinary team members have worked 
for a range of very successful oil companies, including 
Shell, Statoil, Enterprise Oil, Dana Petroleum and 
Paladin Resources.  In preparation for our upcoming 
operated wells we have recently added to our internal 
technical and HSE operations team.   For a company of 
its size, Faroe Petroleum is unusual in this respect and 
the benefits of investing in this team are now paying 
substantial dividends.
Outlook 
We will continue to manage our portfolio to optimise 
capital efficiencies by balancing licence equity and 
cost exposure with risked upside potential.  In addition, 
we aim to make further advances in building our 
production portfolio through a variety of means in order 
to progressively and efficiently self-fund our future 
exploration programme. 
Following the great successes of 2010, Faroe Petroleum 
continues to drive forward its dynamic drilling 
programme with seven expected and committed 2011 
wells each carefully selected for their potential to add 
significant near term value.  From our strong financial 
position, we plan to mature many new prospects 
for future drilling, and to win attractive new licences 
through which we will generate future prospects.  
Graham Stewart 
Chief Executive Review of activities Review	of activities
Faroe’s team has built a reputation of pursuing and 
delivering high quality exploration and appraisal 
opportunities as well as partnering with some of 
the best and most successful oil and gas companies 
in the world. Our cross-disciplinary team members 
have worked for a range of very successful oil 
companies, including Shell, Statoil, Enterprise Oil, 
Dana Petroleum and Paladin Resources, and the 
benefits of investing in this team are now paying 
substantial dividends. 
A strong team
10  ::  Faroe Petroleum plc Annual Report 2010 Faroe Petroleum plc Annual Report 2010  ::  11
Review of activities Review	of activities Review	of activities
12  ::  Faroe Petroleum plc Annual Report 2010
Review of activities
We are proud to be the partner of 
choice for many major international 
companies and will continue to invest  
in these valued relationships.
We have built a focused, well balanced portfolio of over 
40 licences spanning the Atlantic margin, Norwegian 
Sea, Barents Sea and the North Sea. In 2010 we made 
two new significant discoveries in Norway and our 
drilling programme includes 17 wells, to be drilled over 
the coming two to three year period. 
Our continuing success in winning prized licences in 
partnership with many of the world’s most successful oil 
and gas explorers demonstrates the sustainability of our 
approach to exploration. 
Including the new Blane acquisition our production was 
around 2,800 boepd in December 2010 and Faroe is 
involved in six potential field developments, all currently 
in the pre-sanction phase.   
Helge Hammer 
Chief Operating Officer
Helge Hammer 
Chief Operating Officer Faroe Petroleum plc Annual Report 2010  ::  13
Review	of activities
•	 	 fully -funded	17	w ell	dr illing	
programme to end 2013 
•	 	 w ells	ma tur ing	f or	ongoing	
programme after 2013 
•	 	 oper a t or	of	F ulla	(UK )	and	Clapt on	
(Norway) wells in 2011 and 2012 
© Copyright University of Hamburg, KlimaCampus
Focused on highly  
prospective regions
Nor w a y	Nor th	S ea/ 
Nor w eg ian	S ea
S outhern 
Nor th	S ea
W est	of	Shetland F ar oe	Islands
 19
 4
 17
wells
 8
 12
The Company’s exploration portfolio is 
focused on the core exploration areas of 
the Atlantic margin and Norway. These 
are under-explored areas with substantial 
hydrocarbon potential, which are receiving 
significant investment from the major oil 
companies and are areas in which Faroe has 
considerable expertise and knowledge. 
Norway
UK
A dynamic drilling  
programme ahead Review of activities
14  ::  Faroe Petroleum plc Annual Report 2010
In good company  
in the Atlantic margin
The Group currently has 16 exploration 
licences in the Atlantic margin area; four in the 
Faroe Islands and 12 in the UK, and is the third 
largest Atlantic margin position holder after 
Statoil and DONG, by gross licence area. 
BP
FAROE
+29 OTHER ACREAGE HOLDERS
STATOIL DONG Faroe Petroleum plc Annual Report 2010  ::  15
The Atlantic margin area between 
Shetland and the Faroe Islands is a  
core area for Faroe Petroleum, with 
proven resources and considerable 
upside potential.  
The Group currently has 16 exploration licences in this 
area, four in the Faroe Islands and 12 in the UK, making 
the Group the third largest Atlantic margin position holder 
after Statoil and DONG, by gross licence area.  Faroe has 
successfully embarked upon a very active exploration 
programme in this area which involves the drilling of key 
wells and the acquisition of critical new exploration data 
for de-risking future wells. 
Following on from the success of the Glenlivet and Tornado 
wells in 2009 the active programme is continuing with 
Faroe Petroleum’s participation in a number of significant 
wells in the west of Shetland area in the period ahead.  
The Faroese Anne Marie exploration well (Faroe 12.5%) 
on licence 005 was drilled by operator ENI with the 
West Phoenix deep water drilling rig.  The well found 
a significant hydrocarbon column in thin sandy layers 
dispersed in a thick volcano‐clastic sequence of Paleocene 
age, indicating robust evidence of the presence of an 
active petroleum system, but did not encounter producible 
reservoir.  Further analyses are in progress to evaluate the 
size and the characteristics of the discovery.
The Lagavulin exploration well (Faroe 10%) on UK licence 
P1196 is a significant sub-basalt opportunity situated 
in the deeper waters of the Corona Ridge, with very 
substantial resource potential.  The well is currently being 
drilled by operator Chevron using the Stena Carron drill 
ship.  The well was spudded in October 2010.  Drilling has 
progressed more slowly than expected and a technical 
sidetrack had to be executed as a consequence of 
difficult drilling conditions.  As a result, notwithstanding 
a partial carry, the well is currently expected to cost Faroe 
approximately £6 million more than was budgeted.  We 
expect this high impact well to reach target depth in the 
coming weeks.
The North Uist/Cardhu licence P1192, operated by BP , 
has an exciting high-impact prospect, which contains 
multiple reservoir objectives and is located near Chevron’s 
Rosebank discovery, also located on the Corona Ridge.  The 
commitment well is likely to be drilled in the fourth quarter 
of 2011 or early in 2012. 
Faroe Petroleum will reach a significant milestone during 
2011 when it operates its first exploration well.  The Fulla 
prospect is scheduled to be drilled during the summer of 
2011.  This well targets a similar play to the Clair field and 
the Freya discovery which lies in the same P1161 licence.  
Faroe’s partner in the well is Canadian Overseas Petroleum 
Ltd with 50% interest earned by paying a 60% share of the 
costs of the well.
The high-grading of exploration licences, following 
considerable technical assessment, has resulted in the 
relinquishment of some licences which did not meet 
certain levels of prospectivity.  This permits resources to 
be focused on the more attractive opportunities and into 
developing new prospects in unlicensed areas which can 
be obtained through licensing rounds.
Exploration – Atlantic margin 
Review of activities Review of activities
16  ::  Faroe Petroleum plc Annual Report 2010
Since entering Norway in 2006, Faroe  
has built a significant portfolio of  
some 19 licence interests. All licence 
applications were prepared substantially 
by Faroe’s technical team. 
A key aspect in building the portfolio is risk-diversification.  
Faroe holds a variety of assets in Norway ranging from 
high impact exploration prospects, lower risk exploration 
prospects, follow-up exploration opportunities around the 
recent discoveries and appraisal assets.  Another key aspect 
of the portfolio is the focus on a few highly prospective 
areas where Faroe has been able to gain excellent positions, 
notably on the Halten Terrace in the Norwegian Sea and in 
the southern Norwegian North Sea.  Despite being non-
operator in the majority of our Norway licences, most of the 
prospects on these licences were originated and mapped by 
Faroe’s own exploration team, which continues to play a key 
role in the ongoing technical work programmes and value 
creation on the licences.     
The Fogelberg and Maria discoveries in Norway are both 
located close to several potential oil and gas processing hosts 
and to the gas transportation infrastructure on the Halten 
Terrace in Mid Norway. 
The Fogelberg discovery in production licence PL433 (Faroe 
15%), announced in April 2010, is a gas condensate discovery 
in sandstones of Jurassic age. Fogelberg was identified by 
Faroe and successfully applied for in the APA2006 round.  
The gas has a medium condensate yield and compositional 
analysis shows that gas condensate blocking is not expected 
to occur in the reservoir during production. The operator, 
Centrica, is currently performing concept screening studies 
for a sub-sea development to various hosts in the area. The 
need for and timing of an appraisal well is under evaluation in 
parallel with the concept screening studies. Such an appraisal 
well is likely to target a potentially deeper hydrocarbon-
water contact and thereby could significantly add to the 
currently proven reserves estimate.  The Fogelberg gas field 
has a CO2 content of 4% which is fully compatible with the 
infrastructure in the area.  However, due to current export 
capacity constraints in the mid-Norway area, Fogelberg gas 
production is not likely to commence before 2018. 
The Maria discovery in production licence PL475BS (Faroe 
30%) was announced in July 2010 and is a significant oil 
discovery in sandstones of Jurassic age.  The Maria well was 
drilled up-dip of well 6406/3-5 which was drilled in 1988 
and which had shows in the Upper Garn formation.  The 
Maria well was drilled in the southern part of the Maria 
structure and proved oil in both Upper and Lower Garn in 
good quality reservoir.  The oil API is around 40 degrees.  
The operator, Wintershall, is currently carrying out concept 
screening studies and is working towards Field Development 
Plan (FDP) submission in 2012.  The current best estimate of 
recoverable volumes is around 105 mmboe (source: Senergy 
Competent Person’s Report March 2011) and is considered 
large enough for a commercial project.  However, an appraisal 
well in the northern part of Maria is planned in late 2011 
or early 2012 to better define the size of the development 
project.  Discussions with several potential processing hosts 
have been initiated.  Sub-sea development solutions are 
being evaluated in parallel with alternative stand-alone 
development solutions. 
During 2010, the Group has continued to progress the 
Norwegian exploration work programme and has matured 
several new prospects to the drilling decision stage.  This has 
resulted in Faroe now having committed to seven firm wells 
in Norway, scheduled for drilling in 2011 and 2012: PL431 
T-Rex (Faroe 30%), PL414 Kalveklumpen (Faroe 20%), PL405 
Butch (Faroe 15%), PL477 Cooper (Faroe 30%), PL475 BS Maria 
Appraisal North (Faroe 30%), PL475 Mirage (Faroe 30%) and 
PL440S Clapton (Faroe 40% and operator). 
Exploration – Norway  of Faroe’s 2010 spend funded by Norwegian tax refunds
Faroe Petroleum plc Annual Report 2010  ::  17
Review of activities
High equity stakes  
in Norway
Since entering Norway in 2006, Faroe has built a 
significant portfolio of some 20 licence interests. All 
licence applications were prepared substantially by 
Faroe’s technical team. Very favourable Norwegian 
tax rebates for oil and gas exploration, enable 
Faroe to hold large licence equity stakes in Norway, 
ranging from 30% to 50%. The Company was 
pre-qualified as an Operator in January 2010, and 
committed to its first operated well on the Clapton 
prospect in the southern Norwegian North Sea. Review of activities
18  ::  Faroe Petroleum plc Annual Report 2010 Review of activities
Faroe Petroleum plc Annual Report 2010 ::  19
Faroe Petroleum was pre-qualified as an 
Operator in Norway in January 2010, which 
was an important step to give the Company 
increased flexibility to pursue exploration 
opportunities on an independent basis and 
with larger licence equity stakes.  
Following the great successes of 2010, Faroe Petroleum 
continues to drive forward its dynamic drilling programme 
with a total of seven wells scheduled for drilling in 2011, and 
a further 10 wells planned in 2012 and 2013, each carefully 
selected for its potential to add significant near term value. 
These include the Company’s first operated exploration well, 
on the Fulla prospect, scheduled to be drilled during the 
summer of 2011. 
WilPhoenix rig contracted to drill  
Fulla prospect
Dynamic drilling programme Review of activities
In order to provide a continuing flow of 
high impact, high quality drilling targets, 
the Faroe team has continued its efforts 
to identify new, promising oil and gas 
exploration opportunities and apply for and 
win these in consecutive licensing rounds.  
In February 2010, the Company was awarded a licence in 
the APA 2009 Licensing Round, which was an extension to 
the existing PL477 Cooper licence, containing the Zappa 
prospect and is located immediately to the south of the 
PL433 Fogelberg discovery.   The work obligations are 
covered by the existing work programme within PL477, 
which is already well advanced. 
Furthermore, the Company applied for new licences 
in the Norway 2010 APA Licensing Round and in the 
Norway 21st Licensing Round.  In the Norway 2010 APA 
round, Faroe was awarded three additional blocks within 
the Halten Terrace, building on the position around the 
Maria and Fogelberg discoveries and also securing new 
exciting opportunities in the Cretaceous play in the area: 
the Milagro and Greyling prospects.  The Norway 21st 
Licensing Round awards are expected to be announced in 
the spring of 2011.
Faroe Petroleum was also very successful in the UK 26th 
Licensing Round.  With E.on Ruhrgas as partner, the 
Company was awarded 3 licences in which it operates with 
a 50% interest.  Two of these licences are focused on sub-
basalt prospectivity in the North Corona area and include 
the Ardbeg and Balblair prospects. The third licence with 
E.on Ruhrgas as partner is in the Foula sub basin to the 
south west of the giant Clair oil field and contains the 
Aileen prospect in an Upper Cretaceous play, which was 
recently successfully explored by Total with the Edradour 
discovery.  In addition, Faroe Petroleum was awarded a 
licence, again as operator, and with E.on Ruhrgas (37.5%) 
and Idemitsu (25%) as partners in the area directly south 
of the currently drilling Lagavulin well.  This large licence 
contains the Grouse prospect and presents a number 
of potentially attractive plays ranging from sub-basalt 
Mesozoic sandstones to Oligocene fans associated with 
the uplift of the Lagavulin structure.
20  ::  Faroe Petroleum plc Annual Report 2010
Exploration - licensing rounds  Review of activities
Faroe Petroleum plc Annual Report 2010  ::  21 Review of activities
22  ::  Faroe Petroleum plc Annual Report 2010
Faroe has strengthened its portfolio of 
appraisal and development projects over 
the last year through further exploration 
success and an asset acquisition. 
The first half of the year saw successful 
exploration drilling with two new 
significant discoveries, Fogelberg and 
Maria in Norway, whilst in early 2011 
Faroe announced the acquisition of a 
significant stake in the Perth discovery 
in the UKCS.  This activity, along with the 
maturing of the Glenlivet, Tornado and 
Orca gas fields means Faroe is involved 
in six potential field developments, all 
currently in the pre-sanction phase.  
The west of Shetland Glenlivet gas discovery (Faroe 10%) 
on UK licence P1195 was made in the second half of 2009.  
Data from the discovery and two appraisal well bores 
drilled on this gas accumulation have been evaluated and 
results indicate a material volume of gas in an excellent 
quality multi-Darcy reservoir.  Work is progressing and is 
focused on finding a good and cost efficient solution for 
bringing the gas to market and on conceptual planning of 
the development project. The forward work programme 
will be aimed at finding the optimum development 
solution for this resource.
The Company’s second UK Atlantic margin exploration 
success in 2009 was Tornado (Faroe 7.5%) on licence 
P1190.  Tornado is a sizeable gas discovery in an 
excellent reservoir which will require access to existing 
infrastructure to transport it to market.  Due to its location 
further offshore and in deeper water, current work 
suggests that Tornado may be best developed in parallel 
with a new infrastructure project in the area, possibly 
together with one of the nearby fields or discoveries.  
Work is continuing with third parties to identify potential 
joint development solutions.
In January 2011 Faroe announced the acquisition of a 
28% non-operated interest in the Perth oil discovery from 
Nexen.  The Perth field is located 185 kilometres north 
east of Aberdeen in UK block 15/21c, which together with 
15/21b forms licence P588.  Water depth at this location is 
approximately 130 metres.  Three appraisal wells and one 
side-track have been completed on the field, which has 
remained undeveloped since the last well was drilled by 
Hess in 1997.  The crude tested from the field’s Claymore 
sands has ranged in gravity from 29° to 32°API and has 
flowed at rates between 1,000 and 6,000 barrels of oil per 
day with associated sour gas.  Faroe Petroleum is working 
closely with the operator, Deo Petroleum, to address 
technical challenges relating to development of the Perth 
field, and will investigate further exploration and appraisal 
opportunities on the licence block, in parallel with 
progressing the field towards possible FDP submission.  
The necessary waivers and consents have been obtained 
and the transaction will now progress to completion.
Discoveries  
& appraisal projects Faroe Petroleum plc Annual Report 2010  ::  23
Review of activities
Significant  
exploration 
success
Prospect
Equity  
share Location Q1 Q2 Q3 Q4
Lagavulin 10% West of Shetlands
T-Rex 30% Halten Terrace, Norway
Fulla 50% West of Shetland
Kalvklumpen 20% Norwegian North Sea
Butch 15% Norwegian North Sea
North Uist 6.25% UK West of Shetland
Maria 30% Halten Terrace, Norway
4 discoveries in 2009 and 2010
Tornado
Glenlivet
Fogelberg
Maria
8 exploration wells drilled 2009-10
7 well exploration & appraisal drilling programme expected during 2011
Appraisal
Exploration Review of activities
24  ::  Faroe Petroleum plc Annual Report 2010
2008
boepd
2009 2010
1,000
0
Dec 2010
2,000
3,000
including
1600boepd
added with
Blane acquisition
145 boepd
1,015 boepd
1,200 boepd
2,800 boepd
Growing production levels 
in Norway and UK  Faroe Petroleum plc Annual Report 2010  ::  25
Review of activities
Producing assets
Group average production for the period 
was 1,200 boepd (2009; 1,015boepd).  
In October 2010 Faroe announced its 
acquisition from Eni of an 18% interest in  
the producing Blane oil field.  The 
transaction has an effective date of 1 July 
2010, and is expected to complete soon, 
at which point Faroe will have interests in 
six producing fields, two in the Norwegian 
sector and four in the UK sector.  
Blane is a low‐cost producing field with average gross 
production rates during September 2010 of 11,964 barrels 
of oil equivalent per day (boepd) (net production 2,154 
boepd), taking group production to over 3,000 boepd at end 
2010.  Remaining 2P reserves in Blane, as evaluated by Faroe 
Petroleum’s reserves auditors Senergy (GB) Limited, as at 30 
June 2010 were 3.0 million barrels of oil equivalent net to Faroe 
Petroleum.  The Company recognises upside potential in the 
existing reserves, through a combination of outperformance  
of the existing development, and the potential for further  
in‐fill drilling. 
The Enoch oil field (Faroe 1.86%, located in the Norway sector) 
is operated by Talisman and straddles the UK/Norway median 
line in the Central North Sea.   It has been developed with a 
single subsea well tied back to the Marathon-operated Brae A 
platform. 
The Schooner gas field (Faroe, as of January 2011, 6.96%), 
operated by Tullow Oil, is located approximately 34  kilometres 
south east of the Murdoch Field, and has been on production 
since 1996.  A total of 10 wells have been drilled from the 
un-manned Schooner platform with production in the 
mature decline phase.   In January 2011 Faroe completed the 
acquisition, through the exercise of pre-emptive rights of a 
further 2.07% interest taking its interest in the asset to 6.96%. 
The RWE-operated Topaz gas field (Faroe 7.5%) is located 14 
kilometres south east of the Tullow operated Schooner field 
in the UK Southern North Sea.  It has been developed with a 
single subsea production well tied back to the Schooner field.
The Wissey gas field (Faroe 18.75%) is located in the UK 
Southern North Sea, 10 kilometres east of the Horne & Wren 
field facility and 25 kilometres south east of the Thames 
platform.  The field is operated by Tullow Oil and consists of  
a single sub-sea well tied back to the Horne & Wren platform. 
The Glitne oil field (Faroe 9.3%) is operated by Statoil and is 
serviced by the Petrojarl-1 floating production and storage 
vessel (FPSO).  Glitne is located in the Norwegian sector of the 
North Sea, 30 kilometres north of the Sleipner gas complex.  
The field is in the mature phase, with production expected to 
decline slowly during 2011, and a decision is expected in the 
first half of 2011 on which rig to use for an in-fill well targeting 
volumes identified using 4D seismic technology.  Any further 
development activity will have the dual benefit of increasing 
reserves and prolonging the economic life of the field. The 
operator’s abandonment estimate was increased during the 
year leading to a pre-tax impairment charge of £3.9 million 
being recognised by the Group in 2010. 26  ::  Faroe Petroleum plc Annual Report 2010
Income statement 
Revenue was £15.1 million (2009: £7.0 million).  This 
represents a significant increase on last year, reflecting 
increased oil revenue including a full year of revenue 
from the Enoch and Glitne fields in Norway, higher 
production volumes from UK gas fields, and higher oil 
and gas prices.  In line with Group policy approximately 
40% of UK gas sales were hedged, with hedging losses  
of £0.3 million (2009: £1.4 million hedging gains).  
Cost of sales for the year was £14.1 million (2009: 
£9.3 million). In addition, the Group recognised 
an impairment charge of £5.9 million. This was 
predominantly due to an impairment of £3.9 million 
(pre-tax) on the producing Glitne field, where the 
operator’s estimate of future abandonment costs 
were increased significantly during the year.  Glitne 
abandonment costs are however fully deductible at 
the tax rate of 78%.  At this time Faroe does not have 
sufficient revenues in Norway to allow this potential  
tax deduction to be recognised in the 2010 results.   
The gross loss for the year was therefore £4.9 million 
(2009: £5.9 million).  
Finance review
2010 was a period of considerable 
activity for the Group, with an extensive 
and successful exploration programme, 
the winning of new licences, the 
acquisition of Blane (to be completed  
in 2011) and two equity raises. The 
Group ended the year in a strong cash 
position with £132.2 million of cash  
(31 December 2009 adjusted: £33.1 
million) following the £125.1 million 
(net) from fund raises during the year.
Iain Lanaghan 
Group Finance Director Faroe Petroleum plc Annual Report 2010  ::  27
Exploration expenditure for the year was £13.7 million 
(2009: £18.3 million).  This expenditure includes pre-
award exploration expenditure (£5.1 million) and 
write-offs of licence-specific exploration and evaluation 
expenditure on previously capitalised licences where 
active exploration has now ceased (£8.6 million).  The 
pre-award exploration expenditure included costs 
incurred in licence rounds.  A number of licences were 
relinquished and written off during the year including 
Licence 002 in the Faroes, representing £8.1 million, with 
other smaller write-offs over several exploration assets. 
During the year the Group had no exceptional gains  
on the sale of assets, compared to last year where there  
was a £17.6 million pre-tax gain on the disposal of the 
Breagh field.
The Group’s loss before tax was £26.0 million (2009:  
£11.8 million).  Post-tax losses were £20.4 million  
(2009 adjusted: £20.0 million).  Adjusted loss after tax 
in 2009 excludes the post-tax gain on the disposal of 
Faroe’s interest in the undeveloped Breagh gas field  
of £13.1 million.
Taxation 
The Group had a tax receivable at 31 December 2010 of 
£28.1 million (31 December 2009: £12.6 million), being 
78% of exploration expenditure, net of production 
profits, in Norway during the year.  This will be repaid 
to Faroe in December 2011.  Of the tax rebate for 2010 
expenditure, a credit of £5.7 million (31 December 
2009: £9.4 million) has been recognised in the income 
statement, the balance being credited to deferred tax 
liabilities.  
The sale of Faroe’s interest in the undeveloped Breagh 
gas field in 2009 for a substantial gain triggered a 
potential capital gains tax liability of £4.5 million which 
was recognised in 2009.  The capital gain may, under 
tax legislation relating to re-investment relief, be 
exempted to the extent that the proceeds are reinvested 
in qualifying assets.  The Blane acquisition, which was 
announced in October 2010 and which is expected  
to complete in Q2 2011, will qualify for reinvestment 
relief, at which point the £4.5 million tax provision will  
be reversed.
At December 2010 the Group had unrelieved tax 
losses in the UK of £67.7 million (2009: £56.3 million).  
The unrelieved tax losses are available indefinitely for 
offset against future taxable profits, with the potential 
to materially enhance the Group’s net results going 
forward.  On 23 March 2011 the UK Government 
announced that the rate of supplementary corporation 
tax (SCT) would increase from 20% to 32%, resulting 
in a combined rate for UK upstream activities of 62%.  
With the Group’s carried forward UK losses and the 
ongoing capital expenditure we do not forecast that the 
Company will pay tax on production from its current UK 
portfolio, which includes Blane, and the increase in SCT 
is therefore unlikely to have any near-term impact. 
Balance sheet 
Exploration and evaluation investments of £46.2 
million were made in the year.  These mainly related 
to drilling the Fogelberg and Maria wells in Norway 
(reflecting costs before 78% Norwegian tax rebates), 
both of which were discoveries, and the Anne Marie and 
Lagavulin exploration wells in the Atlantic margin.  After 
exploration write-offs in the year of £8.6 million (2009: 
£14.4 million), the intangible exploration and evaluation 
assets increased by £37.7 million to £102.7 million (31 
December 2009: £65.0 million).  
Net assets increased during the period to £181.1 million 
(31 December 2009: £74.2 million).  
Cashflow 
Closing cash was £132.2 million (2009 adjusted: £33.1 
million).  This reflects the two fund raises during 2010 
with the effect that the Company is well funded for the 
planned exploration programme. 
Faroe Petroleum plc Annual Report 2010  ::  27 28  ::  Faroe Petroleum plc Annual Report 2010
Finance review continued
The major cash inflows during the year were proceeds 
from the rights issue in May 2010 and the placing in 
November 2010, totalling £125.2 million. Major cash 
outflows related to the drilling costs on Fogelberg, Maria, 
Anne Marie and Lagavulin. 
The Norwegian fiscal regime is designed to encourage oil 
and gas exploration, and it repays 78% of eligible costs 
in the year following the expenditure.  Faroe Petroleum 
benefits significantly from a revolving credit facility 
of NOK 500 million (approximately £52.6 million) with 
Lloyds Banking Group for provision of 75% of its eligible 
net exploration costs on a cash flow basis, such that 25% 
of eligible exploration expenditure in Norway is funded 
from equity sources going forward.  This arrangement 
makes it possible to make greater investments in Norway 
exploration than would be possible elsewhere.  
At 31 December 2010 £17.6 million (2009: £22.7 million) 
was outstanding on this facility, which is drawn against 
the Norwegian tax rebate receivable in December 2010 
of £28.1 million.  In December 2010 a tax rebate of £12.4 
million (December 2009: £30.2 million) was received 
in Norway.  The Group also has a secured, undrawn 
£20.0 million reserve based debt facility with Société 
Générale.  The Group’s facilities expire in 2012 and 2014 
respectively.  It is planned to increase and extend both 
facilities in the near future, to reflect the Company’s 
active exploration programme in Norway and planned 
increase in production.
Share issues  
In April 2010 the Company raised by way of a Rights 
Issue £69.8million (£65.2 million net of expenses) by 
the issue of 69,823,124 new ordinary shares at a price of 
100 pence per each. The Rights Issue was to allow the 
Company to target and commit to approximately five 
exploration and appraisal wells per annum, with the 
result that the current exploration programme to end 
2013 is fully funded. 
In November 2010 the Company announced a Placing 
which raised £62.2 million (net £60.0 million). The Placing 
was to allow the Group to build on its success from 
recent discoveries, two of which were in Norway and 
two west of Shetland, by taking them to pre-FDP stage, 
committing to further exploration wells, increasing 
stakes in existing firm wells where appropriate, plus 
investing in attractive appraisal and production 
opportunities. The Placing led to the issue of 37,718,024 
new shares and the shares in issue are now 212.4 million.
Iain Lanaghan 
Group Finance Director Faroe Petroleum plc Annual Report 2010  ::  29
Maersk Guardian rig contracted  
to drill the Clapton prospect 30  ::  Faroe Petroleum plc Annual Report 2010
Board of Directors
John	B en tley ,	Non-Ex ecutiv e	Chairman
John is British and has 40 years experience in the natural resources sector.  He was 
Managing Director of Glencore’s Brazilian mining company, Sao Bento Mineracao, 
from 1988 to 1993 when he became Chief Executive of Engen’s E&P division. In 
1996 he was instrumental in floating Energy Africa Ltd on the Johannesburg stock 
exchange and became Chief Executive for five years.  John was Executive Chairman 
of FirstAfrica Oil plc from 2006 until its acquisition by BowLeven plc in 2007.  He 
is non-executive Chairman of Artumas Group Inc, CDS Oil & Gas Group plc and 
Scotgold Resources Ltd, and Non-Executive Director of Resaca Exploitation Inc and 
Kea Petroleum plc. John, who holds a degree in Metallurgy from Brunel University, 
was appointed to the Board in September 2007.
Helge	Hammer ,	Chief	Oper a ting	O ffic er
Helge is Norwegian and holds a degree in Petroleum Engineering from NTH 
University of Trondheim and in Economics from Institut Français du Petrol in Paris. 
He joined Faroe Petroleum in 2006 from Paladin Resources, where he was Asset 
Manager and deputy Managing Director.  Previously he worked for Shell for 13 
years as a Reservoir Engineer, Team Leader and Business Manager in Norway, Oman, 
Australia and Holland. He is Chief Operating Officer and the Managing Director of 
Faroe Petroleum’s Norway subsidiary, Faroe Petroleum Norge.
Gr aham	S t ew ar t ,	Chief	Ex ecutiv e
Graham is British and was instrumental in founding Faroe Petroleum in 1998.  He 
was non-executive Chairman until his appointment as Chief Executive in December 
2002. He holds an honours degree in Offshore Engineering from Heriot-Watt 
University and an MBA from Edinburgh University and has over 20 years’ experience 
in oil and gas technical and commercial affairs. He previously held positions of 
Finance Director and Commercial Director with Dana Petroleum from 1997 to 2002. 
Before that he held positions with Schlumberger, DNV Technica and the Petroleum 
Science and Technology Institute.
Iain	Lanaghan,	Gr oup	F inanc e	Dir ec t or	
Iain is British and joined the Board as full-time Group Finance Director in May 2009. 
He has a broad range of experience gained in the energy, transport and service 
sectors. His positions have included Group Finance Director of FirstGroup plc, 
Finance Director of Powergen International and Group Finance Director of the oil 
and gas services business Atlantic Power Limited. More recently he has concentrated 
on the private equity sector, including founding a German transport group, Abellio. 
In addition to a traditional financial background he has extensive experience of 
financings, M&A and disposals. He is a Chartered Accountant, having qualified with 
KPMG in London and Frankfurt. Faroe Petroleum plc Annual Report 2010  ::  31
T im	Read ,	S enior	I ndependen t	Non-Ex ecutiv e	Dir ec t or
Tim was appointed to the Board as non-executive director in March 2009. He has 
over 40 years experience in the natural resource sector. He has extensive experience 
of all aspects of corporate finance, particularly M&A and equity markets. Between 
1999 and 2006 he was the Chief Executive of Adastra Minerals Inc, and since 
then has acted as non-executive director for several natural resource companies, 
including: Cumerio SA (acquired in 2008) and Nevoro Inc (acquired in 2009). Tim, 
who is currently a director of Starfield Resources Inc, has a BA (Economics) from the 
University of Strathclyde in Glasgow and is a Fellow of the Chartered Institute for 
Securities and Investment. 
Roger	 W itts ,	Non-Ex ecutiv e	Dir ec t or
Roger is British and is a qualified accountant with over 30 years experience in the 
oil and gas industry. He has broad senior management experience with specific 
expertise in financial and tax planning, economic appraisal, debt finance and risk 
management. Roger was Finance Director of Thomson North Sea from 1984 to 1989 
and of Seafield Resources from 1990 to 1997 when they were acquired by Dana 
Petroleum.  Roger was appointed to the Board in May 2007 as part-time Finance 
Director and became a non-executive director in May 2009. Roger is a Chartered 
Accountant having qualified with Coopers & Lybrand in London.
Hanne	Harlem,	Non-Ex ecutiv e	Dir ec t or
Hanne Harlem was appointed to the Board as an Independent Non Executive 
Director in July 2010. She is a Norwegian citizen and is a qualified lawyer with 
over twenty-five years of experience in the business, financial and political arenas 
in Norway. Hanne has held senior posts at the Financial Supervisory Authority of 
Norway as Head Lawyer, was Deputy Chief Executive, Head of Power Trading  and 
Power Markets at Norsk Hydro and has held the position of non executive director 
at Gaz De France Norge AS. In addition she has acted as Minister of Justice for the 
Norwegian Government and Managing Director of the University of Oslo. 32  ::  Faroe Petroleum plc Annual Report 2010 Directors’	report............34
Report	on	Directors’	remuneration...........44
Independent	auditors’	report............50
Group	income	statement............52
Group	statement	of  
other	comprehensive	income............53
Company	statement	of  
other	comprehensive	income............53
Group	balance	sheet...........54
Company	balance	sheet...........55
Group	cash	flow	statement............56
Company	cash	flow	statement............57
Group	statement	of	changes	in	equity............58
Company	statement	of	changes	in	equity............59
Notes	to	the	accounts............60
Officers	and	professional	advisers............93
Report & Accounts
Faroe Petroleum plc Annual Report 2010  ::  33 34  ::  Faroe Petroleum plc Annual Report 2010
Directors’ report
The directors present their annual report and the audited financial statements for the year ended 31 December 2010.
Principal activities
The principal activities of the Group are the exploration, appraisal, development and production of oil and gas  
reserves.  The principal geographic areas of activity during 2010 were the North Atlantic margin, the North Sea and  
the Norwegian Sea.
Business review and future developments
A review of the Group’s operations during the year and likely developments are set out in the Chief Executive’s Review 
and Review of Activities. The purpose of the following section is to demonstrate how the Company assesses and 
manages risk and uncertainty and adopts appropriate policies and targets.
Principal risks and uncertainties
The Group operates in a harsh environment that may result in increased risk, cost pressures and schedule delays. The 
risks that face the Group are common to all of the Group’s offshore oil and gas activities, but are more severe in the 
Atlantic margin.
The following are some of the key risks the Group faces:
Exploration, development & production risk
There is no assurance that the Group’s exploration activities will be successful and statistically a relatively small number 
of properties that are explored are ultimately developed into producing hydrocarbon fields. Accordingly, the Group is 
seeking to i) balance this risk by building a portfolio of prospects that carry a range of differing technical and commercial 
risks, and ii) limit the amount invested in any one project.  
The Group’s activities may also be curtailed, delayed or cancelled not only as a result of weather conditions but also as a 
result of shortage or delays in the delivery of drilling rigs and other equipment which, at times, are in short supply. For 
its non operated assets, the Group has adopted a policy of entering into joint ventures with major companies where 
possible, which have access to rigs and equipment. For its operated assets, the Group aims to make its prospects drill 
ready in order to benefit from rigs of convenience (i.e. rigs that become available between contracts).  
The Group manages its non-operated production through joint ventures with appropriate planning, budgetary and 
asset management monitoring.
Competition
There is strong competition within the petroleum industry for the identification and acquisition of properties considered 
to have hydrocarbon potential.  The Group competes with other exploration and production companies, some of which 
have greater financial resources than the Group, for the acquisition of properties, leases and other interests as well as 
for the recruitment and retention of skilled personnel. The challenge to management is to secure transactions without 
having to over-pay. 
Commodity prices and fiscal regimes
The market price of hydrocarbon products is volatile and is outwith the control of the Group.  When the price of 
hydrocarbon products drops significantly, or the fiscal regime changes for the worse, the economic prospects of the 
projects in which the Group has an interest can be significantly reduced or rendered uneconomic.  Where and when 
appropriate the Group will continue to put in place suitable hedging arrangements, in accordance with its hedging 
policy, to mitigate the risk of a fall in commodity prices. Faroe Petroleum plc Annual Report 2010  ::  35
Financing
The development of the Group’s properties will depend upon the Group’s ability to obtain financing through the joint 
venture of projects, public financing, debt financing, tax rebates (in Norway), farm downs or other means.  There is no 
assurance that the Group will be successful in obtaining the required financing or attracting farminees in the medium term.  
If the Group is unable to obtain additional financing as needed through the attraction of suitable farm-in partners, some 
interests may be relinquished and/or the scope of the operations reduced. 
Currency
The Group reports its financial results in pounds sterling which is the currency in which expenditure and gas revenue is 
denoted. However, the market for oil is principally denominated in United States Dollars, as are a significant proportion 
of capital and operating contracts. The Company also incurs a significant proportion of its expenditure in Norwegian 
Kroner. The Group will only engage in active hedging to minimise exchange rate risk when it has a material contracted 
liability. 
Environmental and other regulatory requirements 
Existing and future environmental legislation, regulations and actions could cause additional expense, restrictions 
and delays in the activities of the Group, the extent of which cannot be predicted.  The full consequences on the 
regulatory regime of last April’s Macondo Gulf of Mexico blow out, are still uncertain but it is highly likely that there will 
be greater requirements for participants to demonstrate their financial capability to deal with any catastrophic event. 
Faroe has already increased insurance limits and may have to further increase limits in the future. Further, drilling costs 
may increase due to additional regulatory requirements. The costs of meeting such enhanced requirements may limit 
or curtail the Group’s exploration operations. In addition, before development or production can commence on any 
properties the Group must obtain regulatory approval and there is no assurance that such approvals will be obtained. 
Development and performance of the business
The information of the development and performance of the business can be found in the Chairman’s Letter, the Chief 
Executive’s Review, the Review of Activities and the Finance Report.
Key Performance Indicators
The Board has laid down the following Key Performance Indicators (KPIs) for the Group which are focused principally on 
managing the activities inherent in exploration and appraisal operations:
Area KPI Comments
Health, Safety and 
Environment
Lost Time Injury Frequeny Rate (LTI) No time was lost on operations during the period.
Serious Incident Rate (SI) Operated: nil; non-operated: one.
Operational The number of exploration licences
Enough licences to generate 3-5 wells per annum.  
43 actual.
The number of wells drilled Target 3-5 per annum.  4 actual for 2010.
Exploration success rate
To be better than the industry average. 2 out of 3 
completed  wells were discoveries in 2010.
Reserves – resources added by drilling
Net reserves increased through Maria and 
Fogelberg discoveries.
Production Increase level of production.
Finance and Market Share price performance
Relative share price performance is disclosed on 
page 25.
Net cash position
Adequate cash at all times.  Year end balance of 
£132.2m.
Exploration funding All firm wells fully funded.
Human Resources Senior employee retention rate No senior employee left the company during 2010. 36  ::  Faroe Petroleum plc Annual Report 2010
Directors’ report continued
Results and dividends
The Group financial statements are set out on pages 50 to 56 and are presented in pounds sterling.  The Group’s net loss 
for the year was £20,350,000 (2009: £6,912,000).  The directors do not recommend the payment of a dividend for the year.
Events since the balance sheet date
Details of significant post balance sheet events are set out in note 29 in the Group financial statements.
Share capital and share options
Details of the share capital of the Company and options over shares of the Company are set out in note 20 to the Group 
financial statements.  Over the period the Company had two share incentive schemes by which directors and employees 
may (i) be granted options, at prevailing market prices, to subscribe for shares in the Company; and (ii) be issued shares 
under a co-investment plan.  The maximum aggregate number of shares which may be issued in respect of these 
schemes is currently limited to 10% of the issued share capital.
Directors and Secretary
The directors of the Company during the period were as follows:
John W S Bentley    Graham D Stewart
Helge A Hammer    Iain M Lanaghan
Nils S Sørensen (resigned 26 April 2010) Roger C Witts
Hanne Harlem (appointed 12 July 2010) Timothy P Read
The names of the directors and secretary of the Company during and after the financial year are set down on page 93 
and included in the Directors’ biographies. 
Corporate governance and the Revised Combined Code
The directors support high standards of corporate governance and comply, in so far as is practical given the 
Company’s size, with the Combined Code 2008 (the “Code”).  The Board considers that the Company has been in 
compliance with the Code throughout the period except for the following Code provisions:
 
P r o vision	of	the	C ombined	C ode C ompan y	position	
A.4.2 Led by the senior independent director, the non-
executive directors should meet without the Chairman 
present at least annually to appraise the Chairman's 
performance and on such other occasions as are deemed 
appropriate.
The performance of the Chairman was not assessed in a 
separate formal meeting but was assessed by the non-
executive directors as part of the annual performance 
evaluation.  
B.1.2 A smaller company should have at least two 
independent non-executive directors.
In July, a second independent non executive director was 
appointed to the board.
B.2.1 There should be a nomination committee which 
should lead the process for Board appointments and make 
recommendations to the Board. A majority of members 
of the nomination committee should be non-executive 
directors.
In July a third independent non executive director was 
appointed to the Committee making a majority noting that 
the Board as a whole has led the process of selecting and 
appointing Board members over the period.
B.4.2 The Chairman should regularly review and agree with 
each director their training and development needs
There is no formal process for reviewing and agreeing director 
training and development. Faroe Petroleum plc Annual Report 2010  ::  37
Notwithstanding the above disclosure, it is worth noting that as an AIM quoted company, the Company is not required 
to comply with the Code.
Internal controls
The Board is responsible for establishing and maintaining the system of internal controls. The system of internal controls 
is vital in managing the risks that face the Group and safeguarding shareholders’ interests. The Group’s internal controls 
are in accordance with the guidance of the Turnbull Committee and the system is designed to manage rather than to 
eliminate risk as an element of risk is central to the activities of an oil and gas exploration company.  It is the Board’s 
objective to be aware of the risks, to mitigate them where possible, to insure against them where appropriate and to 
manage the residual risk in accordance with the stated objectives of the Group.
The Board confirms that the system of internal controls has been in place throughout 2010.
The following describes the principal elements of the Group’s internal control system and processes employed to review 
the effectiveness of such system:
S tr a t eg ic	plan: the Board sets the strategic direction for the Group which is then implemented by the executive directors 
and senior management which make up the executive committee. Goals are set at the commencement of each year by 
the executive committee and monitored thereafter by the Board.
M anagemen t	struc tur e: a formal schedule of matters is reserved for consideration and approval by the Board including 
all major decisions of financial, technical or organisational importance.  The Group’s internal control procedures require 
Board approval for all new projects and all major expenditure requires the approval of the Chief Executive.  The executive 
committee meets regularly to discuss day-to-day operational matters.
R isk	managemen t: the Board is responsible for identifying the major business risks that face the Group and for 
determining appropriate risk mitigation in accordance with the Group’s risk management policy which covers 
environmental, operational, financial and legal risks.   
Budgetar y	risk: each year the Board approves the Group’s business plan and budget and variance analysis is undertaken 
regularly throughout the year and reported to the Board which approves any material variation to the budget. The 
Group has also introduced a five year plan which is also approved by the Board.
A nnual	r eview: the effectiveness of the Group’s system of internal control is reviewed on an annual basis.  The Audit 
Committee undertook a review in December 2010 which addressed internal control issues and, more specifically, 
financial, operational and compliance controls and risk management.  The process involved the review of written 
procedures and amendment thereto as necessary and discussion with key personnel as to the implementation of such 
control procedures. The Audit Committee reported to the Board that following such review, it considered the internal 
controls in respect of key risks to be appropriate.
P r o vision	of	the	C ombined	C ode C ompan y	position	
B.7.2 The Board should set out to shareholders in the papers 
accompanying a resolution to the report to elect a non-
executive director why they believe an individual should be 
elected.
Whilst no formal explanation was provided with the 
accompanying resolutions in 2010, it is planned to do so at the 
2011 annual general meeting.
D.2.1 The Board should establish a remuneration committee 
of at least three, or in the case of smaller companies two, 
independent non-executive directors.
In July, a second independent non executive director was 
appointed to the remuneration committee.
C.3.1 The Board should establish an audit committee of 
at least three, or in the case of smaller companies two, 
independent non-executive directors.
In July, a second independent non executive director was 
appointed to the remuneration committee. 38  ::  Faroe Petroleum plc Annual Report 2010
Directors’ report continued
As part of that annual review the Board concluded that no internal audit function was required given the scale of the 
Group’s operations.
The workings of the Board and its commitees
The Board
At 31 December 2010 the Board comprised four non-executive directors, one of whom is the Chairman, and three 
executive directors.  The Board is responsible to the shareholders for the proper management of the Group.  It meets 
regularly, as set down in the table on page 17, to review trading performance, set and monitor strategy, examine 
acquisition and divestment possibilities, approve major capital expenditure projects, corporate overhead costs, 
significant financing matters and report to shareholders (the table of Board meetings excludes those held during the 
year to approve specific projects). The Board delegates authority for the management of the day-to-day business under 
a set of delegated authorities which cover: routine operational matters, purchasing procedures, financial authority limits, 
contract approval procedures and the hiring of full time and temporary staff and consultants.   Matters reserved for the 
Board are communicated in advance of formal meetings. All of the directors are subject to election by shareholders at 
the first AGM after their appointment to the Board and to re-election by shareholders at least once every three years. 
In addition, any non-executive director who has served on the Board for more than nine years will be subject to annual 
re-election.
At the year end the Board comprised three independent non-executive directors being Tim Read (senior independent 
director), Hanne Harlem (appointed July 2010) and Roger Witts, who was deemed independent in December 2010. 
Although the UK Corporate Governance Code 2010 would not deem Roger Witts independent due to his former 
executive employment which ended in May 2009 the Board has evaluated Mr Witts’ judgement, character and 
performance since that date, and has satisfied itself that he acts as an independent director and in the best interests of 
the Company and its shareholders and so deem him to be independent.
The Chairman John Bentley is a non-executive of a number of other companies as disclosed in the directors’ biographies 
and during the year ceased to be a director of CDS Oil & Gas Group plc.  The associated commitment of the continuing 
directorships has no measurable impact on the Chairman’s ability to discharge his responsibilities effectively.
All directors have access to the advice and services of the Company secretary who is responsible to the Board for 
ensuring that Board procedures are followed and that applicable rules and regulations are complied with.  In addition, 
the Company secretary will ensure that the directors receive appropriate training as necessary.  The appointment and 
removal of the Company secretary is a matter for the Board as a whole.   
Board performance
In accordance with Code provision C.2.1 the Company has a formal process of annual performance evaluation for the 
Board, its committees and individual directors. The performance evaluation of the Board and the Board committees 
was primarily based upon answers to a detailed questionnaire. The areas covered in the questionnaire included the 
effectiveness of the Board and its committees, performance against objectives, preparation for and performance at 
meetings and corporate governance matters.
Once a questionnaire had been completed by each member of the Board, the Chairman then reported the results of the 
process to the Board. The Board and its committees are satisfied that they are operating effectively. 
A performance evaluation of the Board, the Board committees and individual directors will continue to be conducted 
annually and the method for such review will continue to be reviewed by the Board in order to optimise the process.
The executive directors have their performance individually reviewed by the remuneration committee against objectives 
which are set annually. The bonuses payable to the executive directors are linked directly to the results of these reviews.
The Company has directors’ and officers’ liability insurance in place. Faroe Petroleum plc Annual Report 2010  ::  39
The following is a table of Board meetings during the year (excluding those called to authorise specific transactions):
B oar d A udit	C ommitt ee Remuner a tion	C ommitt ee
Meetings held during 2010 4 3 4
Number	of	meetings	
a tt ended
Number	of	meetings	
a tt ended
Number	of	meetings	
a tt ended
Ex ecutiv e	Dir ec t ors
Graham Stewart 4 Not applicable Not applicable
Iain M Lanaghan 4 Not applicable Not applicable
Helge Hammer 4 Not applicable Not applicable
Non- e x ecutiv e	Dir ec t ors
John Bentley 4 3 4
Tim Read 4 3 4
Roger Witts
1
4 Not applicable 1
Nils Sørensen
2
1 Not applicable Not applicable
Hanne Harlem
3
1 1 0
1
   Roger Witts was deemed to be independent in December 2010. The number of committee meetings attended is stated 
with effect from that date.
2
 Nils Sørensen resigned as a director in April 2010. 
3
  Hanne Harlem was appointed as a director in July 2010. The number of meetings attended is stated with effect from 
that date.
During 2010, certain directors who were not committee members attended meetings of the audit committee, 
remuneration committee and nomination committee by invitation. These details have not been included in the table.  
Where a director was unable to attend meetings of the Board or of Board committees, he reviewed the relevant papers 
for the meetings and provided his comments to the Board or the Board committees in advance of such meetings.
The following committees deal with specified aspects of the Group’s affairs.
Audit committee
The Audit Committee comprises Tim Read (committee chairman), Hanne Harlem and John Bentley. The Audit Committee, 
which has Terms of Reference agreed by the Board, meets as a minimum at least twice a year and meetings are attended 
by the Chief Executive.  At least once a year the Committee meets in private session with the external auditors. A record of 
directors’ attendance at meetings of the Audit Committee held during 2010 is given in the table above.
The role of the committee includes:
•	 consideration of the appointment of the external auditor and the audit fee; 
•	 reviewing the nature and scope of the Company’s annual audit;
•	 reviewing the cost effectiveness of the audit and the independence and objectivity of the external auditor;
•	 reviewing the half-year and annual financial statements, and any audited accounts, before submission to the Board; 
•	 discussing with the Group’s auditors problems and reservations arising from the interim and final audits; 
•	 reviewing the external auditor’s management letter and management’s response; 
•	 reviewing, on behalf of the Board, the Group’s system of internal control and making recommendations to the Board;  40  ::  Faroe Petroleum plc Annual Report 2010
Directors’ report continued
•	 reviewing the requirement for an internal audit; and
•	 reviewing the Group’s whistle blowing procedures.
The Audit Committee has established a policy for the supply of non-audit services by the auditor to ensure that such 
services do not impair the auditor’s independence or objectivity by identifying services that the auditor may provide, 
identifying services that are excluded in normal circumstances, setting limits to expenditure for non-audit services and 
implementing a reporting and review process by the Audit Committee.
As far as categories of services which it is acceptable for an auditor to provide, the governing principles are: the auditor 
cannot audit its own work, the auditor cannot perform management functions and the auditor cannot act as an 
advocate for the Group. Based upon these principles, specific categories of services have been identified that the auditor 
can provide.
Remuneration committee
The make-up and workings of the Remuneration Committee together with details of the directors’ remuneration, 
interest in options together with information on service contracts, is set out in the Report on Directors’ Remuneration.
Nominations committee
The Nominations Committee comprises John Bentley (committee chairman), Tim Read, Hanne Harlem, Roger Witts and 
Graham Stewart.  The Nominations Committee, which has Terms of Reference agreed by the Board, will meet as and 
when required to:
•	 consider, at the request of the Board, the making of any appointment or reappointment, to the Board; and
•	 provide advice and recommendations to the Board on any such appointment or re-appointment.
The Nominations Committee does use the services of independent consultants from time to time to assist in the 
identification of candidates for non-executive directors and/or to benchmark candidates already identified by the 
committee against possible candidates identified by consultants. Independent consultants were used to identify Hanne 
Harlem.
The changes made to the Board composition during 2010 were considered by the Board as a whole and no separate 
meetings of the committee were held.
Relations with shareholders
Communication with shareholders is given high priority by the Board and is undertaken through press releases,  
general presentations at the time of the release of the annual and interim results and face-to-face meetings.  The  
Group issues its results promptly to individual shareholders and also publishes the same on the Company’s website 
(www.faroe-petroleum.com).  Regular updates to record news in relation to the Company and also the status of 
exploration programmes are also included on the website. 
In order to ensure that the members of the Board develop an understanding of the views and concerns of major 
shareholders there is regular dialogue with institutional shareholders including meetings after the announcement of 
the Company’s annual and interim results. In addition, the Chairman and the senior independent non-executive director 
have held face-to-face meetings or spoken on the telephone with a number of the Company’s major shareholders 
on a range of matters including strategy and corporate governance issues. The senior independent non-executive 
director is available to attend meetings with major shareholders without the executive directors present, if requested by 
shareholders. The Board uses the Annual General Meeting to communicate with private and institutional investors and 
welcomes their participation. Faroe Petroleum plc Annual Report 2010  ::  41
Composition of group
Details concerning the principal subsidiary undertakings are given in note 14 to the Group financial statements.
Substantial shareholdings
The Share register records that the following shareholders held 3% or more in the issued share capital of the Company at 
21 March 2011:
Directors’ interests in share capital
The directors’ interests in the share capital of the Company at 1 March 2011 was as follows:
 
Policy and practice on payment of creditors
It is Group policy to settle all debts owing on a timely basis, taking account of the credit period given by each supplier.  
Trade creditors of the Company at 31 December 2010 were equivalent to 30 (2009: 30) days’ purchases based on the 
average daily amount invoiced by suppliers during the year.
Health, safety, the enviroment and the community
The Group has a formal Health, Safety and Environmental Policy which requires all operations within the Group to 
pursue economic development whilst protecting the environment.  The directors aim not to damage the environment 
of the areas in which the Group operates, to meet all relevant regulatory and legislative requirements and to apply 
responsible standards of its own where relevant laws and regulations do not exist.
It is the policy of the Group to consider the health and welfare of employees by maintaining a safe place and system of 
work as required by legislation in each of the countries where the Group operates.
Shar eholder 	Or dinar y	Shar es %
Dana Petroleum* 48,055,825 22.63
Blue Gold Capital Management 14,263,261 6.72
Lansdowne Partners 13,349,173 6.29
Artemis Investment Management 11,163,129 5.26
Scottish & Southern Energy PLC 10,909,091 5.14
Henderson Global Investors Limited 7,396,912 3.48
* Wholly owned subsidiary of KNOC
	Or dinar y	Shar es
Options	and	
M a t ching	
Shar es
G D Stewart* 225,417 4,984,978 
J Bentley 61,675                      –   
H Hammer 137,270 2,283,693 
R Witts 58,331 147,982 
T P Read 49,998       –   
I M Lanaghan 75,578  1,608,082 
H Harlem – –
* Does not include LTIP 42  ::  Faroe Petroleum plc Annual Report 2010
Directors’ report continued
Auditors and their independence
A resolution to appoint auditors for the year to 31 December 2011 will be proposed at the Annual General Meeting. The 
Company has a policy for approval of non-audit services by the auditor, to preserve independence.
Disclosure of information to auditors
The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, 
there is no relevant audit information of which the Company’s auditors are unaware; and each director has taken all the 
steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish 
that the Company’s auditors are aware of that information.
Going concern
The Group’s business activities, together with the factors likely to affect the future development, performance and 
position are set out in the Review of Activities.  The financial position of the Group, its cash flows and liquidity position 
and borrowing facilities are described in the Finance Review and note 18. Further information on the Group’s exposure 
to financial risks and the management thereof is provided in note 21.  
Taking into consideration the Group’s current cash position of £132.2m, future revenue from existing oil and gas fields, 
and the Group’s undrawn borrowing facilities, the Group has adequate financial resources and the directors believe 
that the Group is well placed to meet the costs of the Group’s commitments and manage its business risks successfully 
despite the current uncertain economic outlook.
The Board’s review of the accounts, budgets and forward plan lead the directors to believe that the Group has sufficient 
resources to continue in operation for the foreseeable future.  The financial statements are therefore prepared on a going 
concern basis.
Treasury policy
The objective of the Group’s treasury policy is to manage the Group’s financial risk and to minimise the adverse effects of 
fluctuations in the financial markets on the value of the Group’s financial assets and liabilities, on reported profitability 
and on the cash flows of the Group.  Note 21 sets out the particular risks to which the Group is exposed and how these 
are managed.
Directors’ liabilities
The Company has granted an indemnity to one or more of its directors against liability in respect of proceedings 
brought by third parties, subject to the conditions set out in the Companies Act 2006.  Such qualifying third party 
indemnity provision remains in force as at the date of approving the directors’ report.
Interests in contracts
There have been no contracts or arrangements during the financial year in which a director of the Company was 
materially interested and which were significant in relation to the Group’s business.
Political and charitable contributions
During the year the Group made no charitable donations (2009: nil).  No political contributions were made during the 
year (2009: £nil). Faroe Petroleum plc Annual Report 2010  ::  43
Statement of Directors’ responsibilities in respect of the financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable 
United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.  
Under Company Law the directors must not approve the Group and Company financial statements unless they are 
satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company 
for that period.  In preparing those Group and Company financial statements the directors are required to:
•	 select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates 
and Errors and then apply them consistently; 
•	 present information, including accounting policies, in a manner that provides relevant, reliable, comparable and 
understandable information; 
•	 provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users 
to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s 
financial position and financial performance; 
•	 state that the Group and Company have complied with IFRSs, subject to any material departures disclosed and 
explained in the financial statements; and
•	 Make judgements and estimates that are reasonable and prudent.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s 
and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 
Company and enable them to ensure that the financial statements comply with the Companies Act 2006.  They are 
also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.  
Signed on behalf of the Board by:
Gr aham	S t ew ar t 
Chief Executive 
28 March 2011 44  ::  Faroe Petroleum plc Annual Report 2010
Report on directors’ remuneration 
Remuneration Committee and advisers
The Remuneration Committee comprises Tim Read (committee chairman), John Bentley, Hanne Harlem and Roger 
Witts.  The Committee is responsible for making recommendations to the Board on the Company’s overall framework of 
remuneration and its cost.  The Committee works within terms of reference which were updated and approved by the 
Board during the year.
The role of the committee includes;
•	 determining and agreeing with the Board the remuneration policy for all the executive directors;
•	 ensuring that remuneration packages are competitive and determining individual remuneration packages for each 
director;
•	 determining whether the directors should be eligible for annual bonuses and  benefits under long-term incentive 
schemes;
•	 considering any new long-term incentive schemes and associated performance criteria;
•	 determining payouts or grants under all incentive schemes;
•	 considering the pension contributions to the directors and associated costs to the Company of basic salary increases 
and other changes in remuneration, especially for directors close to retirement;
•	 determining compensation commitments under the directors’ service contracts; and
•	 determining notice or contract periods under the directors’ service contracts. 
No director is involved in deciding his own remuneration.
The Remuneration Committee appointed and sought advice from PricewaterhouseCoopers, as independent 
external advisers who have no other connection with the Company, to analyse and make recommendations on the 
remuneration of the directors.  PricewaterhouseCoopers has reviewed the remuneration of the directors and assessed 
the comparability to the market place.  In the light of the recommendations made by PricewaterhouseCoopers, the 
Committee made adjustments to the remuneration of the directors for the year commencing 1 January 2010.
Remuneration policy
The policy on directors’ remuneration is that the overall remuneration package should be sufficiently competitive to 
attract and retain individuals of a quality capable of achieving the Group’s objectives.  Remuneration policy is designed 
such that individuals are remunerated on a basis that is appropriate to their position, experience and value to the 
Company.  The Remuneration Committee determines the contract terms, basic salary, and other remuneration for each 
of the executive directors, including performance related share options, bonuses, pension rights and compensation 
payments.
Ex ecutiv e	r emuner a tion	pack age: A key element of the executive remuneration package is awards made under the 
Faroe Petroleum 2003 Unapproved Share Option Scheme (“Option Scheme”) and the Faroe Petroleum plc Co-Investment 
plan (“CIP”) the performance criteria for which are directly linked to improvements in the Company’s share price over the 
three year vesting period, thereby ensuring alignment with shareholders’ objectives. 
The details of individual components of the remuneration package and service and employment contracts are discussed 
below.
Basic	salar y	and	benefits: The policy is to review salary and benefits annually against competitive market data and 
analysis, provided by independent consultants, and adjust accordingly.  Faroe Petroleum plc Annual Report 2010  ::  45
B onus	scheme: The incentive bonus scheme for the executive directors in 2010 was based on a combination of (i) 
personal performance measured against personal goals, and (ii) the performance of the Company over the period 
measured against a range of targets, notably improvement in the share price.  The amount of any bonus payments 
under the scheme will not exceed 100% of annual salary. The bonus payment of 100% of base salary made in 2010 was 
conditional upon 60% of such bonus being re-invested in the Company’s shares, with the balance paid in cash. There is 
no contractual obligation to pay bonuses. 
Shar e	options: The Company’s policy on the granting of share options under the Option Scheme is to make such awards 
as are necessary to recruit and retain executives.  Details of option awards made under the Option Scheme and the 
previous option arrangements are detailed in note 23.
CIP: under this plan key employees can invest up to 100% of base salary in any financial year to purchase Company 
shares (“Investment Shares”).  Investment Shares will be matched by new shares to be issued by the Company 
dependent upon the Company’s performance over a three year period. The maximum match will be 3:1 (i.e. three new 
shares for every Investment Share) but will require the Company to satisfy stretching share price growth targets and be 
subject to a comparative total shareholder return underpin.
P ensions: The Company did not operate a pension scheme for the UK based executive directors for the period to 31 
December 2010 but did, at the directors’ option, contribute to the personal pension plans of each executive director, 
or pays cash in lieu of such contributions up to a specified maximum of 20% of salary.  The Company does operate 
a defined benefits scheme in Norway for all staff including the Norwegian based executive director Helge Hammer, 
who also receives part of his pension provision by way of defined contributions. No pension contributions are made in 
respect of non-executive directors.
Fees: The fees for the non-executive directors are determined by the Board having taken independent expert advice on 
appropriate levels and are reviewed on an annual basis.
S er vic e	c on tr ac ts: The service and employment contracts of the executive directors are not of a fixed duration and 
therefore have no unexpired terms, but continuation in office as a director, is subject to re-election by shareholders as 
required under the Company’s Articles of Association and in accordance with the provisions of the Combined Code.  The 
Company’s policy is for executive directors to have service and employment contracts with provision for termination of 
no longer than 12 months’ notice. 
The non-executive directors do not have service contracts.  Letters of Appointment provide for termination of the 
appointment with three months’ notice by either party.
Service contracts
Details of the current directors’ contracts or appointment dates are as follows:
Ex ecutiv e	Dir ec t or Emplo y er
Da t e	of	ser vic e	ag r eemen t	or	
emplo ymen t	c on tr ac t
G D Stewart Faroe Petroleum plc 15 July 2008
H A Hammer Faroe Petroleum Norge AS 15 July 2008
I M Lanaghan Faroe Petroleum plc 20 April 2009
Non-Ex ecutiv e	Dir ec t or Emplo y er Da t e	of	last	r enew al	of	appoin tmen t
J W S Bentley Faroe Petroleum plc 1 September 2010
T P Read Faroe Petroleum plc 1 March 2009
R C Witts Faroe Petroleum plc 4 May 2009
H Harlem Faroe Petroleum plc 12 July 2010
The contracts for the non-executive directors are for a fixed term of three years which are capable of being renewed for 
further three year terms. 46  ::  Faroe Petroleum plc Annual Report 2010
Report on directors’ remuneration continued
Directors’ remuneration
The remuneration of the directors is as follows:
F ees/basic
salary
£’000
A nnual
bonus	
£’000
B enefits
in	k ind
1
£’000
2010
Total
£’000
2009
Total
£’000
2010
P ension
£’000
2009
P ension
£’000
Ex ecutiv e
G D Stewart 278 278 15 571 446 58 50
H A Hammer
2
218 218 12 448 353 56 45
I M Lanaghan
3
212 212 2 426 216 32 17
R C Witts
4
– – – – 72 – –
N S Sørensen
5
– – – – 137 – 15
Non- e x ecutiv e
J W S Bentley 66 – – 66 63 – –
H Harlem
6
26 – – 26 – – –
N S Sørensen
5
80 21 – 101 – – –
M Jacobsen
7
– – – – 14 – –
T P Read
8
62 – – 62 33 – –
R C Witts
4
53 – – 53 24 – –
                                                 
Aggregate remuneration
995 729 29 1,753 1,358 146 127
1
  Benefits typically comprise cash allowances in lieu of company car, in addition to life assurance cover, private health 
care arrangements and permanent health insurance.  
2
 The pension contributions to Mr Hammer are paid into a defined benefits scheme.
3
  Mr Lanaghan joined the Company on 4 May 2009.  He is also a non-executive director of Transport Investment Limited 
(and since the year end has become director and non-executive chairman of Marwyn European Transport plc) whilst he 
is entitled to associated fees, none were paid during the period.
4
  Mr Witts worked as an executive director on a part-time basis up to 4 May 2009 when he became a non-executive 
director. 
5
  On 18 June 2009, Nils Sørensen ceased to be an executive director of Faroe Petroleum plc.  He also ceased to be a non-
executive director in 2010, although he continues as an employee.
6
 Hanne Harlem was appointed as a non-executive director on 12 July 2010.  
7
 Mr Jacobsen resigned as a director on 18 June 2009.
8
 Mr Read was appointed as a non-executive director on 1 March 2009. Faroe Petroleum plc Annual Report 2010  ::  47
Performance graph
The graph below shows the equivalent performance of the Company’s Total Shareholder Return (TSR) against the 
corresponding performance of the FTSE All Share Oil & Gas Producers Index and the FTSE AIM All Share Index from 
January 2006 to December 2010.
0 
20
40
60
80
100
120
140
160
180
30/12/2005 30/12/2006 30/12/2007 30/12/2008 30/12/2009 30/12/2010 
Faroe Petroleum FTSE AIM All-share – Price Index
FTSE AIM SS Oil & Gas £ – Price Index FTSE All Share Oil & Gas £ – Price Index  
The Company’s share price was 180 pence on 31 December 2010. The highest share price during 2010 was 208p and the 
lowest share price was 101p.
Directors’ share option awards 
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares 
in the Company granted to or held by the directors.  Details of directors’ interests in shares held under the Option 
Scheme together with those held under the historic Faroe Petroleum Unapproved Share Option Plan
1
 and those issued 
by Føroya Kolvetni P/F (“FK”)
2
 are shown below. 48  ::  Faroe Petroleum plc Annual Report 2010
Report on directors’ remuneration continued
Options	
held		a t	
01.01.10
I mpac t	of
	righ ts	issue
on	number	
of	Options
4
Options
g r an t ed	
in	the	y ear
Options	held
	a t	31.12.10
Ex er cise	
pric e	(p )*
Ex er cisable
	fr om
Expir y	
date
G D Stewart 288,141 40,109 – 328,250 15.36 23.06.04 17.06.13
432,212 60,164 – 492,376 90.85 23.06.04 24.04.12
500,000 69,600 – 569,600 52.67 07.05.07 06.05.14
550,400 76,616 – 627,016 124.0 29.03.08 28.03.15
373,300 51,963 – 425,263 98.75 14.03.10 13.03.17
470,900 65,549 – 536,449 139.79 23.04.11 22.04.18
570,600 79,428 – 650,028 60.57 23.07.12 22.07.19
– – 718,900 718,900 116.00 06.05.13 05.05.20
H A Hammer 92,200 12,834 – 105,034 97.88 20.10.09 19.10.16
158,500 22,063 – 180,563 98.75 14.03.10 13.03.17
343,000 47,746 – 390,746 139.79 23.04.11 22.04.18
400,500 55,750 – 456,250 60.57 23.07.12 22.07.19
– – 577,300 577,300 116.00 06.05.13 05.05.20
I M Lanaghan 535,100 74,486 – 609,586 65.62 18.05.12 17.05.19
– – 548,200 548,200 116.00 06.05.13 05.05.20
N S Sørensen 480,000 66,800 – 546,800 28.97 25.04.00 24.04.12
150,000 20,880 – 170,880 52.67 07.05.07 06.05.14
202,400 28,174 – 230,574 108.85 29.03.08 28.03.15
109,500 15,242 – 124,742 98.75 14.03.10 13.03.17
164,200 22,857 – 187,057 139.79 23.04.11 22.04.18
– – 103,400 103,400 116.00 06.05.13 05.05.20
R C Witts
3
129,900 18,082 – 147,982 139.79 23.04.11 22.04.18
J W S Bentley – – – – – – –
T P Read – – – – – – –
H Harlem – – – – – – –
                                                                        
Aggregate
5,950,853 828,343 1,947,800 8,726,996
                                                                        
* The exercise price above includes the impact of the rights issue.
1   these options were awarded under the Rules of the earlier Faroe Petroleum Unapproved Share Option Plan dated 18 June 2003;
2   these options (adjusted total 13,670) were awarded by FK in 25 April 2000 at an adjusted price of DKK123 each and upon exercise will be exchanged 
immediately for shares in the Company at the  ratio of 40:1, being the terms of the 19 December 2002 Acquisition Offer made by the Company for 
FK.  This equates to an adjusted exercise price of 28.97p each using the year end exchange rate of £1:8.37DKK. 
3  these options were awarded to Mr Witts when he was an executive director
4  On 15 May 2010 a rights issue completed.  The rights issue comprised the issue of 69,823,124 new shares at 100 pence per share.  The diluting effect 
of the rights issue has resulted in the number of shares under option prior to the completion of the rights issue increasing, and the corresponding 
exercise price decreasing by a factor of 1.1392.  This impact has been reflected in the table above.  Faroe Petroleum plc Annual Report 2010  ::  49
The Option Scheme’s performance criteria are set out on a sliding scale dependent upon the increase in the Company’s 
share price, over and above the Retail Price Index (“RPI”), over a minimum three year period after the date of grant.  40% 
will be exercisable if the rate exceeds RPI plus 4% per annum and 100% will be exercisable if the rate exceeds RPI plus 
10% per annum, with a pro-rata award between these levels.  In any financial year a participant may not be awarded 
options over ordinary shares with an aggregate value of more than three times annual remuneration calculated by 
reference to the market value of the ordinary shares at the time of the grant.  On 6 May 2010 in accordance with the 
Option Scheme 548,200 options were granted to Iain Lanaghan, 718,900 were granted to Graham Stewart and 577,300 
options were granted to Helge Hammer exercisable at 116.0p each.
Directors’ LTIP awards
On 4 October 2005 Graham Stewart received an LTIP award as an option to acquire 247,386 shares in the Company, from 
which a total of 74,216 shares in the Company vested (adjusted to an option over 84,547 shares following the Rights Issue 
of April 2010). The total exercise cost for this LTIP option is £8,455 (10p per share) exercisable before 3 October 2015.
Directors’ CIP awards
Two new awards were made under the CIP to directors during 2010. The first on 13 May 2010 at £1.220 per matching 
share, the second on 19 November 2010 at £1.805 per matching share. The opening balance of matching shares relates 
to matching shares issued to the Directors during 2007 under the CIP at £1.135 per matching share:
M a t ching	
shar es	held
a t	31.12.09
Lapsed	
in	the	
year
M a t ching
shar es	g r an t ed	
during	the	y ear
M a t ching	
shar es	held	
a t	31.12.10
G D Stewart 66,441 66,441 636,300 636,300
I M Lanaghan – – 449,500 449,500
H A Hammer 61,248 61,248 573,800 573,800
N S Sørensen 42,606 42,606 – –
                                                           
Aggregate
170,295 170,295 1,659,600 1,659,600
                                                           
Under the CIP , matching shares are awarded on a multiple of 3:1 to the investment shares in the Company acquired by 
the participant, the issue of which are dependent upon the following performance criteria: (i) continued employment 
and retention by the participant of the investment shares for three years from the date of grant; (ii) the satisfaction 
of a Total Shareholder Return (“TSR”) underpin whereby no matching share awards will be released unless the TSR 
performance of the Company exceeds the return of the FTSE AIM Index over the three year performance period; and (iii) 
the satisfaction of share price growth targets over a three year performance period from the date of grant whereby one 
matching share will be released for share price growth of 50% over the performance period and three matching shares 
will be released for share price growth of 100% over the performance period.
Signed of behalf of the Board by:
John	B en tley 
Non-executive Chairman 
28 March 2011 50  ::  Faroe Petroleum plc Annual Report 2010
Independent auditors’ report to the members of Faroe Petroleum plc 
We have audited the financial statements of Faroe Petroleum plc for the year ended 31 December 2010 which comprise 
Group Income Statement, the Group Statement of Other Comprehensive Income, the Group and Company Balance 
Sheets, the Group and Company Cash Flow Statements, the Group and Company Statement of Changes in Equity and 
the related notes 1 to 30. The financial reporting framework that has been applied in their preparation is applicable law 
and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent 
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006.  Our audit work has been undertaken so that we might state to the company’s members those 
matters we are required to state to them in an auditors’ report and for no other purpose.  To the fullest extent permitted 
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a 
body, for our audit work, for this report, or for the opinions we have formed.  
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 41, the directors are responsible for 
the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility 
is to audit and express an opinion on the financial statements in accordance with applicable law and International 
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical 
Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or 
error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent 
company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of 
significant accounting estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion:
•	 the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 
31 December 2010 and of the Group’s loss for the year then ended;
•	 the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European 
Union; 
•	 the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the 
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
•	 the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Faroe Petroleum plc Annual Report 2010  ::  51
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are 
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to 
you if, in our opinion:
•	 adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not 
been received from branches not visited by us; or
•	 the parent company financial statements are not in agreement with the accounting records and returns; or
•	 certain disclosures of directors’ remuneration specified by law are not made; or
•	 we have not received all the information and explanations we require for our audit.
K evin	 W est on	(S enior	S ta tut or y	A udit or) 
For and on behalf of Ernst & Young LLP , Statutory Auditor 
Aberdeen 
28 March 2011
Notes:
1.   The maintenance and integrity of the Faroe Petroleum plc web site is the responsibility of the directors; the work 
carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no 
responsibility for any changes that may have occurred to the financial statements since they were initially presented 
on the web site.
2.   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ 
from legislation in other jurisdictions. 52  ::  Faroe Petroleum plc Annual Report 2010
Notes 2010
£000
2009
£000
Rev enue 3 15,087 7,005
Cost of sales (14,103) (9,279)
Asset impairment 4 (5,896) (3,647)
                            
Gross loss (4,912) (5,921)
                            
Net gain on disposal of property, plant and equipment – 17,696
Exploration and evaluation expenses (13,702) (18,282)
Administrative expenses (6,571) (4,405)
                            
Oper a ting	loss (25,185) (10,912)
Finance revenue 8 1,524 1,135
Finance costs 8 (2,379) (2,020)
                            
L oss	on	or dinar y	ac tivities	bef or e	tax (26,040) (11,797)
Tax credit 10 5,690 4,885
                            
L oss	f or	the	y ear	a ttributable	t o	equit y	holders	of	the	par en t 11 (20,350) (6,912)
                            
Loss per share – basic and diluted (pence) 11 (13.3) (6.6)
Group income statement
for the year ended 31 December 2010 Faroe Petroleum plc Annual Report 2010  ::  53
Group statement of other comprehensive income
for the year ended 31 December 2010
Company statement of other comprehensive income
for the year ended 31 December 2010
2010
£000
2009
£000
Loss for the year (20,350) (6,912)
Cash flow hedges:
  – Loss on cash flow hedges taken to equity net of tax (37) (292)
                            
Net movement on cash flow hedges (37) (292)
Exchange differences on retranslation on foreign operations 545 915
                            
Total comprehensive loss for the year (19,842) (6,289)
                            
2010
£000
2009
£000
Loss for the year (1,971) (2,456)
Exchange differences on retranslation on foreign operations 258 60
                            
Total comprehensive loss for the year (1,713) (2,396)
                             54  ::  Faroe Petroleum plc Annual Report 2010
These financial statements were approved by the Board of directors on 28 March 2011 and were signed on its behalf by:
Iain	M	Lanaghan 
Director 
Group balance sheet
at 31 December 2010
Note 2010
£000
2009
£000
Non- curr en t	assets
Intangible assets 12 102,688 65,036
Property, plant and equipment: development & production 12 9,492 13,498
Property, plant and equipment: other 12 312 208
Financial assets 13 13 14
112,505 78,756
C urr en t	assets
Inventories 15 645 497
Trade and other receivables 16 7,514 5,983
Current tax receivable 16 28,070 12,621
Financial assets 13 – 37
Cash and cash equivalents 17 132,150 43,583
168,379 62,721
Total assets 280,884 141,477
C urr en t	liabilities
Trade and other payables 18 (20,941) (12,454)
Financial liabilities 18 (17,575) (22,699)
(38,516) (35,153)
Non- curr en t	liabilities
Deferred tax liabilities 10 (52,514) (30,035)
Provisions 19 (8,334) (1,820)
Defined benefit pension plan deficit 22 (383) (275)
(61,231) (32,130)
Total liabilities (99,747) (67,283)
Net assets 181,137 74,194
E quit y	a ttributable	t o	equit y	holders
Equity share capital 20 21,235 10,475
Share premium account 20 205,935 91,573
Cash flow hedge – 37
Cumulative translation reserve 6,273 5,728
Retained earnings (52,306) (33,619)
T otal	equit y 181,137 74,194 Faroe Petroleum plc Annual Report 2010  ::  55
Company balance sheet
at 31 December 2010
Note 2010
£000
2009
£000
Non– curr en t	assets
Property, plant and equipment 12 71 65
Financial assets 13 85,338 95,391
Investments in subsidiary undertakings 14 25,750 2,924
111,159 98,380
                            
C urr en t	assets
Trade and other receivables 16 329 131
Cash and cash equivalents 17 124,524 11,435
124,853 11,566
Total assets 236,012 109,946
                            
C urr en t	liabilities
Trade and other payables 18 (1,667) (673)
T otal	liabilities (1,667) (673)
Net assets 234,345 109,273
E quit y	a ttributable	t o	equit y	holders
Equity share capital 20 21,235 10,475
Share premium account 20 205,935 91,573
Retained earnings 7,175 7,225
T otal	equit y 234,345 109,273
                            
These financial statements were approved by the Board of directors on 28 March 2011 and were signed on its behalf by:
Iain	M	Lanaghan 
Director  56  ::  Faroe Petroleum plc Annual Report 2010
Group cash flow statement
for the year ended 31 December 2010                     
Note 2010
£000
2009
£000
Oper a ting	ac tivities
Cash flow from operations 24 4,007 (23,747)
Tax rebate 12,440 30,199
Net	cash	flo w	fr om	oper a ting	ac tivities 16,447 6,452
                            
I n v esting	ac tivities
Expenditure on intangible assets and plant, property and equipment (46,566) (4,683)
Prepayment of expenditure on intangible assets (644) –
Proceeds from sale of intangible assets – 37,551
Interest received 685 1,135
Net	cash	flo w	fr om	in v esting	ac tivities (46,525) 34,003
F inancing	ac tivities
Short term borrowings (5,538) (10,105)
Issue of ordinary share capital 132,008 –
Issue costs (6,885) –
Interest paid (2,046) (1,991)
Net	cash	flo w	fr om	financing	ac tivities 117,539 (12,096)
Net increase in cash and cash equivalents 87,461 28,359
Cash and cash equivalents at the beginning of the year 43,583 16,706
Exchange differences 1,106 (1,482)
C ash	and	cash	equiv alen t	a t	the	end	of	the	y ear 132,150 43,583
                             Faroe Petroleum plc Annual Report 2010  ::  57
Company cash flow statement
for the year ended 31 December 2010                     
Note 2010
£000
2009
£000
Oper a ting	ac tivities
Cashflow from operations 24 (343) (1,264)
Net cashflow from operating activities (343) (1,264)
I n v esting	ac tivities
Expenditure on property, plant and equipment (19) (55)
Loans to subsidiary undertakings (12,773) 5,234
Interest received 408 56
Net	cashflo w	fr om	in v esting	ac tivities (12,384) 5,235
F inancing	ac tivities
Issue of ordinary share capital 132,008 –
Issue costs (6,886) –
Net	cashflo w	fr om	financing	ac tivities 125,122 –
Net increase in cash and cash equivalents 112,395 3,971
Cash and cash equivalents at the beginning of the year 11,435 7,006
Exchange differences 694 458
C ash	and	cash	equiv alen t	a t	the	end	of	the	y ear 124,524 11,435
                             58  ::  Faroe Petroleum plc Annual Report 2010
Group statement of changes in equity
for the year ended 31 December 2010
Share
capital
£000
Share
premium
account
£000
Cash 
flow 
hedge
£000
Cumulative
translation
reserve
£000
Retained
earnings
£000
Total
£000
A s	a t	1	Januar y	2009 10,475 91,573 329 4,813 (27,820) 79,370
Loss for the period – – – – (6,912) (6,912)
Other comprehensive income – – (292) 915 – 623
Total comprehensive income – – (292) 915 (6,912) (6,289)
Share based payments – – – – 1,113 1,113
A s	a t	31	Dec ember	2009 10,475 91,573 37 5,728 (33,619) 74,194
Loss for the period – – – – (20,350) (20,350)
Other comprehensive income – – (37) 545 – 508
Total comprehensive income – – (37) 545 (20,350) (19,842)
New share issue 10,760 121,248 – – – 132,008
Issue costs – (6,886) – – – (6,886)
Share based payments – – – – 1,663 1,663
A s	a t	31	Dec ember	2010 21,235 205,935 – 6,273 (52,306) 181,137
                                                                                         
Share capital
The balance classified in share capital is the nominal value on issue of the Group’s equity share capital, comprising 10p 
ordinary shares.
Share premium
The balance classified as share premium is the premium on issue of the Group’s equity share capital, comprising 10p 
ordinary shares less any costs of issuing the shares.  
Cash flow hedges
There are no longer any cash flow hedges utilised by the Group.  Historically the cash flow reserve recorded the portion 
of the gain or loss on a hedging instrument in a cash flow hedge that was determined to be an effective hedge. When 
the hedged transaction occurred, the gain or loss on the hedging instrument was transferred out of equity to either 
profit or loss or the carrying value of assets, as appropriate. If the forecast transaction was no longer expected to occur 
the gain or loss recognised in equity was transferred to the income statement within the cost of sales. 
Cumulative translation reserve
The cumulative translation reserve is used to record exchange differences arising from the translation of the financial 
statements of foreign subsidiaries.  Faroe Petroleum plc Annual Report 2010  ::  59
Company statement of changes in equity
for the year ended 31 December 2010
Share
capital
£000
Share
premium
account
£000
Retained
earnings
£000
Total
£000
A s	a t	1	Januar y	2009
10,475 91,573 8,508 110,556
Loss for the period
– – (2,456) (2,456)
Other comprehensive income
– – 60 60
Total comprehensive income
10,475 91,573 6,112 108,160
Issue costs
– – – –
Share based payments
– – 1,113 1,113
A s	a t	31	Dec ember	2009
10,475 91,573 7,225 109,273
Loss for the period
– – (1,971) (1,971)
Other comprehensive income
– – 258 258
Total comprehensive income
10,475 91,573 5,512 107,560
Share issue
10,760 121,248 – 132,008
Issue costs
– (6,886) – (6,886)
Share based payments
– – 1,663 1,663
A s	a t	31	Dec ember	2010
21,235 205,935 7,175 234,345
                                                           
Share capital
The balance classified in share capital is the nominal value on issue of the Company’s equity share capital, comprising 
10p ordinary shares.
Share premium
The balance classified as share premium is the premium on issue of the Company’s equity share capital, comprising 10p 
ordinary shares less any costs of issuing the shares.  60  ::  Faroe Petroleum plc Annual Report 2010
Notes to the accounts
1. Authorisation of financial statements and statement of compliance with IFRS
The financial statements of Faroe Petroleum plc and its subsidiaries (the “Group”) for the year ended 31 December 2010 
were authorised for issue by the Board of directors on 28 March 2011 and the balance sheet was signed on the Board’s 
behalf by Iain Lanaghan.  Faroe Petroleum plc is a public limited company incorporated in England and domiciled in 
Scotland.  
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards 
(IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 
December 2010.  Faroe Petroleum plc is listed on the Alternative Investment Market (AIM). 
2. Accounting policies
Basis	of	pr epar a tion
The Group’s financial statements, for the year ended 31 December 2010, have been prepared in accordance with 
International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).  The Company’s financial 
statements have been prepared in accordance with IFRSs as adopted by the European Union and as applied in 
accordance with the Companies Act 2006.  The Company has taken advantage of the exemption provided under section 
408 of the Companies Act 2006 not to publish its individual Income Statement and related notes. 
The accounting policies which follow set out those policies which apply in preparing the financial statements for the 
year ended 31 December 2010.  
The Group and Company financial statements have been prepared under the historical cost convention, except for 
certain fair value adjustments required by those accounting policies.  The financial statements are presented in Sterling 
and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated. 
The directors believe that the Company has adequate resources to continue its operations for the foreseeable future. 
The basis for the directors’ considerations are disclosed in the directors’ report. Thus the directors continue to adopt the 
going concern basis of accounting in preparing the financial statements.
A c c oun ting	estima t es
The Group’s accounting policies make use of estimates and judgements in the following areas: Impairment, 
Depreciation, Decommissioning, Reserves and Share based payments.  These are described in more detail in the relevant 
accounting policies.
Basis	of	c onsolida tion
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings.  
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and 
continue to be consolidated until the date that such control cease.  Control comprises the power to govern the financial 
and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or 
indirect ownership of voting rights; currently exercisable of convertible potential voting rights, or by way of contractual 
agreement.  The financial statements of subsidiaries used in the preparation of the consolidated financial statements 
are prepared for the same reporting year as the parent company and are based on consistent accounting policies.  All 
intragroup balances and transactions, including unrealised profits arising from them, are eliminated in full.
F or eig n	curr encies
The functional currency for the UK entities is pounds sterling and the functional currencies for Faroe Petroleum Norge AS 
and Føroya Kolvetni P/F are Norwegian Kroner and Danish Kroner respectively.
Transactions in foreign currencies during the year are recorded in the functional currency at the rate of exchange ruling 
at the date of the transaction.  Monetary assets and liabilities are translated at the rate ruling on the balance sheet date 
and any gains and losses on translation are reflected in the Income Statement. Faroe Petroleum plc Annual Report 2010  ::  61
2. Accounting policies (continued)
The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the balance 
sheet date.  Income and expenses are translated at weighted average exchange rates for the year.  The resulting 
exchange differences are taken directly to a separate component of equity.  On disposal of a foreign entity, the deferred 
cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Income 
Statement.
Join t	v en tur es
The Group is engaged in oil and gas exploration, development and production through unincorporated joint ventures 
and production sharing contracts (“Joint Ventures”).  The Group accounts for its share of the results and net assets of 
these Joint Ventures as jointly controlled assets based on its percentage ownership of these Joint Ventures.  In addition, 
where Faroe Petroleum acts as operator to the Joint Venture, the gross liabilities and receivables (including amounts due 
to and from non-operating partners) of the Joint Venture are included in the Group Balance Sheet.  A complete list of the 
Group’s Joint Ventures accounted for as jointly controlled assets is provided in note 30. 
Rev enue
Revenue arising from the sale of goods is recognised when the significant risks and rewards of ownership have passed 
to the buyer and it can be reliably measured.  Revenue is measured at the fair value of the consideration received or 
receivable and represents amounts receivable for goods provided in the normal course of business, net of discounts, 
customs duties and sales taxes.  Revenues associated with the sale of oil, natural gas, natural gas liquids, liquefied natural 
gas, petroleum and chemicals products and all other items are recognised when the title passes to the customer.
 Generally, revenues from the production of oil and natural gas properties in which the Group has an interest with 
joint venture partners are recognised on the basis of the Group’s working interest in those properties (the entitlement 
method). Differences between the production sold and the Group’s share of production are recognised within cost of 
sales at market value.
Interest income is recognised on an accruals basis using the effective interest method. 
F inanc e	c osts	and	debt
Finance costs of debt are allocated to periods over the term of the related debt at a constant rate on the carrying 
amount.  Arrangement fees and issue costs are deducted from the debt proceeds on initial recognition of the liability 
and are amortised and charged to the Income Statement as finance costs over the term of the debt.
Oil	and	gas	e xpenditur e	–	e xplor a tion	and	ev alua tion	assets
Capitalisation
Pre-acquisition costs on oil and gas assets are recognised in the Income Statement when incurred.  Costs incurred after 
rights to explore have been obtained, such as geological and geophysical surveys, drilling and commercial appraisal 
costs and other directly attributable costs of exploration and appraisal including technical and administrative costs are 
capitalised as intangible exploration and evaluation (“E&E”) assets.  The assessment of what constitutes an individual E&E 
asset is based on technical criteria but essentially either a single licence area or contiguous licence areas with consistent 
geological features are designated as individual E&E assets.
E&E costs are not amortised prior to the conclusion of appraisal activities.  Once active exploration is completed the 
asset is assessed for impairment.  If commercial reserves are discovered then the carrying value of the E&E asset is 
reclassified as a development and production (“D&P”) asset, following development sanction, but only after the carrying 
value is assessed for impairment and where appropriate its carrying value adjusted.   If commercial reserves are not 
discovered the E&E asset is written off to the Income Statement. 62  ::  Faroe Petroleum plc Annual Report 2010
2. Accounting policies (continued)
Impairment
The Group’s oil and gas assets are analysed into cash generating units (“CGU”) for impairment review purposes, with E&E 
asset impairment testing being performed at a grouped CGU level.  The current CGU consists of the Group’s whole E&E 
portfolio.  E&E assets are reviewed for impairment when circumstances arise which indicate that the carrying value of an 
E&E asset exceeds the recoverable amount.  When reviewing E&E assets for impairment, the combined carrying value 
of the grouped CGU is compared with the grouped CGU’s recoverable amount.  The recoverable amount of a grouped 
CGU is determined as the higher of its fair value less costs to sell and value in use.  Impairment losses resulting from an 
impairment review are written off to the Income Statement. 
Oil	and	gas	e xpenditur e	–	dev elopmen t	and	pr oduc tion	assets
Capitalisation
Costs of bringing a field into production, including the cost of facilities, wells and sub-sea equipment together with E&E 
assets reclassified in accordance with the above policy, are capitalised as a D&P asset.  Normally each individual field 
development will form an individual D&P asset but there may be cases, such as phased developments, or multiple fields 
around a single production facility when fields are grouped together to form a single D&P asset. 
Depreciation
All costs relating to a development are accumulated and not depreciated until the commencement of production.  
Depreciation is calculated on a unit of production basis based on the proven and probable reserves of the asset.  Any 
re-assessment of reserves affects the depreciation rate prospectively.  Significant items of plant and equipment will 
normally be fully depreciated over the life of the field.  However these items are assessed to consider if their useful lives 
differ from the expected life of the D&P asset and should this occur a different depreciation rate would be charged.
Impairment
A review is carried out for any indication that the carrying value of the Group’s D&P assets may be impaired.  The 
impairment review of D&P assets is carried out on an asset by asset basis and involves comparing the carrying value 
with the recoverable value of an asset.  The recoverable amount of an asset is determined as the higher of its fair value 
less costs to sell and value in use.  The value in use is determined from estimated future net cash flows.  Any additional 
depreciation resulting from the impairment testing is charged to the Income Statement.
Oil	&	gas	e xpenditur e	–	ac quisitions	and	disposals	
Commercial transactions involving the acquisition of a D&P asset in exchange for an E&E or D&P asset are accounted for 
at fair value with the difference between the fair value and cost being recognised in the Income Statement as a gain or 
loss.  When a commercial transaction involves a D&P asset and takes the form of a farm-in or farm-out agreement, the 
premium expected to be paid/received is treated as part of the consideration.
Fair value calculations are not carried out for commercial transactions involving the exchange of E&E assets. The 
capitalised costs of the disposed asset are transferred to the acquired asset. Farm-in and farm-out transactions of E&E 
assets are accounted for at cost. Costs are capitalised according to the Group’s cost interest (net of premium received or 
paid) as costs are incurred.
Proceeds from the disposal of an E&E asset, or part of an E&E asset, are deducted from the capitalised costs and the 
difference recognised in the Income Statement as a gain or loss. Proceeds from the disposal of a D&P asset, or part of a 
D&P asset, are recognised in the Income Statement, after deducting the related net book value of the asset.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  63
2. Accounting policies (continued)
Dec ommissioning
The Group recognises the full discounted cost of decommissioning when the obligation to rectify environmental 
damage arises.  The amount recognised is the present value of the estimated future expenditure determined by 
local conditions and requirements.  A corresponding property, plant and equipment asset of an amount equal to the 
provision is created unless the associated activity resulted in an Income Statement write-off.  This asset is subsequently 
depreciated as part of the capital cost on a unit of production basis.  Any change to the present value of the estimated 
decommissioning cost is reflected as an adjustment to the provision and the property, plant and equipment asset.  The 
unwinding of the discount on the decommissioning provision is included as an interest expense.
Under/O v erlif t
Lifting arrangements for oil and gas produced in certain fields are such that each participant may not receive its share of 
the overall production in each period.  The difference between cumulative entitlement and cumulative production less 
stock is “underlift” or “overlift” .  Underlift and overlift are valued at market value and included within debtors (“underlift”) 
or creditors (“overlift”).  Movements during an accounting period are adjusted through cost of sales, such that gross 
profit is recognised on an entitlement basis.  The Group’s share of any physical stock is accounted for at the lower of costs 
and net realisable value. 
O ther	pr oper t y ,	plan t	&	equipmen t
Property, plant and equipment other than oil and gas assets are stated in the Balance Sheet at cost less accumulated 
depreciation.  Depreciation is provided to write off the cost less the estimated residual value of the tangible fixed asset 
on a straight-line basis over their estimated useful lives as follows:
IT equipment  3 to 4 years  Other equipment  5 years
F inancial	assets
Financial assets which are trade investments of the Group and Company are accounted for at fair value unless this 
cannot be reliably reassessed.
In the Group accounts, financial asset which are loans provided by the parent company to subsidiary undertakings are 
carried at costs and treated as net investments in the subsidiaries and, as such, foreign currency and impairment gains 
and losses are recognised in equity.  In the Company accounts, foreign currency and impairment gains and losses on 
loans to subsidiary undertakings are recognised in the Income Statement.
I n v estmen ts
Investments in subsidiaries are included in the financial statements at cost less provisions for impairment.
T axa tion
The Income Statement tax charge comprises both current and deferred tax.  Tax is charged or credited in the Income 
Statement except on items related directly to equity, in which case it is recognised in equity.
Current tax liabilities are payable on income for the year and are based on rates of tax enacted or substantively enacted 
at the balance sheet date.
Deferred income tax is provided in full on temporary differences between the carrying value of assets and liabilities for 
financial reporting purposes and the amounts used for taxation purposes, with the following exemptions:
•	 where the temporary differences arise on initial recognition of an asset or liability in a transaction (other than a 
business combination), that at the time of the transaction affects neither accounting nor taxable profit or loss;
•	 in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, 
where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary 
differences will not reverse in the foreseeable future; and 64  ::  Faroe Petroleum plc Annual Report 2010
2. Accounting policies (continued)
•	 deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be 
available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
P ensions
The Group operates a defined benefit pension plan as part of Norwegian employees’ remuneration, which requires 
contributions to be made to a separately administered fund.  The cost of providing benefits under the defined benefit 
plan is determined using the projected unit credit actuarial valuation method.  Actuarial gains and losses are recognised 
directly in equity, and reported in the statement of changes in equity.
The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service cost 
not yet recognised and less the fair value of plan assets out of which the obligations are to be settled directly. 
Other Group employees and certain senior Norwegian employees receive contributions to personal pension plans, 
which are charged to the Income Statement on an accruals basis.
T r ade	and	other	r ec eiv ables
Trade and other receivables, which generally have 30-60 day terms, are shown at face value less any provision for 
unrecoverable debt.   Provision is made when there is objective evidence that the Group will not be able to recover 
balances in full.  Balances are written off when the probability of recovery is assessed as being remote. 
Oper a ting	leases
Rentals under operating leases are charged to the Income Statement on a straight line basis over the period of the lease.
C ash	and	cash	equiv alen ts
Cash and cash equivalents includes cash in hand and deposits held at call with banks.
Shar e	based	pa ymen ts
Employees (including senior executives) of the Group receive remuneration in the form of share-based payment 
transactions which are equity settled.  The cost of equity-settled transactions with employees, for awards granted after 
7 November 2002, is measured by reference to the fair value at the date on which they are granted. The fair value is 
determined by an external valuer using an appropriate pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the 
period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant 
employees become fully entitled to the award (”the vesting date”). The cumulative expense recognised for equity-settled 
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and 
the Group’s best estimate of the number of equity instruments that will ultimately vest. The Income Statement charge 
or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that 
period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a 
market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided 
that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense if the 
terms had not been modified. An additional expense is recognised for any modification, which increases the total fair 
value of the share based payment arrangement, or is otherwise beneficial to the employee as measured at the date of 
modification.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  65
2. Accounting policies (continued)
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense 
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled 
award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated  
as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
Emplo y ee	B enefit	 T rust
The substance of the relationship between the Group and the Employee Benefit Trust indicates that the Trust is a Special 
Purpose Entity (SPE) controlled by the Group. The activities of the Trust are being conducted on behalf of the Group in 
order to obtain benefits from its operation and on this basis the assets held by the Trust are consolidated into the Group’s 
financial statements.
I n t er est	bearing	loans	and	borr o wings
Borrowings are recognised at fair value, net of transaction costs incurred.  Borrowings are classified as current liabilities 
unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance 
sheet date.
Interest on borrowing directly attributable to the acquisition, construction or production of qualifying assets, which are 
assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those 
assets, until such time as the assets are substantially ready for their intended use. The Company has not borrowed against 
qualifying assets and has not capitalised any interest costs.
Deriv a tiv e	financial	instrumen ts	and	hedg ing
The fair value of commodity swaps contracts is calculated by reference to commodity prices for contracts with similar 
maturity profiles.  For those derivatives designated as hedges and for which hedge accounting is desired, the hedging 
relationship is formally designated and documented at its inception.  This documentation identifies the risk management 
objective and strategy for undertaking the hedge, the hedging instrument, the hedged item or transaction, the nature 
of the risk being hedged and how effectiveness will be measured throughout its duration.  Such hedges are expected at 
inception to be highly effective in offsetting changes in fair value or cash flows and are assessed on an ongoing basis to 
determine that they actually have been highly effective throughout the reporting period for which they were designated.  
For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in 
cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probably 
forecast transaction.  
A hedge of the commodity price risk of a firm commitment is accounted for as a cash flow hedge.  Any gains or losses 
arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the Income 
Statement.
C ash	flo w	hedges
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognized directly in equity, 
while the ineffective portion is recognized in profit or loss.  Amounts taken to equity are transferred to the Income 
Statement when the hedged transaction affects profit or loss, such as when a forecast sale or purchase occurs.  
If a forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to 
profit or loss.  If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or 
it its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast 
transaction occurs and are transferred to the Income Statement or the initial carrying amount of a non-financial asset or 
liability as above.  If the related transaction is not expected to occur the amount is taken to profit or loss.  66  ::  Faroe Petroleum plc Annual Report 2010
2. Accounting policies (continued)
I mpac t	of	new	standar ds	and	in t erpr eta tions
The following standards are new and effective in 2010 and have been adopted:
International Financial Reporting Standards (IFRS/IASs)   Effective date
IFRS 1   First time Adoption of International Financial  1 January 2010 
Reporting Standards – Additional Exmptions  
for First-time Adopters (Amendments)   
IFRS 2   Group Cash-Settled Share-based Payment   1 January 2010 
Arrangements    
IFRS 3  Business Combinations    1 July 2009 
IAS 27  Consolidated and Separate Financial Statements  1 July 2009 (amended)
IAS 39   Financial Instruments: Recognition and   1 July 2009  
Measurement -Eligible Hedged Items 
During the year, the IASB and IFRIC have issued the following standards and interpretations with an effective date after 
the commencement date of the accounting period for these financial statements: 
International Financial Reporting Standards (IFRS/IASs)   Effective date
IAS 24  Related Party Disclosures (Amendment)   1 January 2011
IAS 32   Financial Instruments:     1 Februrary 2010 
Presentation – Classification of Rights Issues (Amendment)
IFRS 9   Financial Instruments:     1 January 2013 
Presentation – Classification and Measurement  
International Financial Reporting Interpretations Committee (IFRIC) 
IFRIC 14 Prepayment of a minimum funding requirement (Amendment) 1 January 2011 
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments  1 July 2010
Improvements to International Financial Reporting Standards (issued 2009)
Improvements to International Financial Reporting Standards (issued 2010)
The amendments as noted above are deemed to have no impact on the financial statements of the Group.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  67
3. Revenue
Revenue recognised in the Income Statement is analysed as follows:
2010
£000
2009
£000
Oil sales 9,198 –
Gas sales 5,881 5,350
Condensate sales 289 273
Tariff income 45 6
Hedging (loss)/income (fair value through the profit and loss) (326) 1,376
                            
Total revenue 15,087 7,005
                            
The Group hedges a proportion of the forecast natural gas production using a variety of hedging instruments and 
received hedging losses, net of costs, of £326,000 (2009: £1,376,000 income) in the year.
4. Asset impairment
K ey	assumptions	used	in	the	v alue -in-use	calcula tions
The calculation of value-in-use for oil and gas assets under development or in production is most sensitive to the 
following assumptions:
•	 Production volumes;
•	 Commodity prices;
•	 Fixed and variable operating costs;
•	 Capital expenditure; and
•	 Discount rates.
Production volumes/recoverable reserves – Annual estimates of oil and gas reserves are generated internally by the 
company’s reservoir engineers.  These are reported annually to the Board in conjunction with an externally generated 
Competent Persons Report (“CPR”). The self certified estimated future production profiles are used in the life of the fields 
which in turn are used as a basis in the value-in-use calculation.
Commodity prices – Published forward prices for natural gas and Brent oil are used for the first three years of future cash 
flow and a flat real price thereafter, in accordance with the Company’s corporate assumptions. Field specific discounts 
and prices are used where applicable.
Fixed and variable operating costs – Typical examples of variable operating costs is pipeline tariffs, treatment charges and 
freight costs. Commercial agreements are in place for most of these costs and the assumptions used in the value-in-use 
calculation are sourced from these where available. Examples of fixed operating costs are platform costs and operator 
overheads. Fixed operating costs are based on operator budgets.
Capital expenditure – Field development is capital intensive and future capital expenditure has a significant bearing on 
the value of an oil and gas development asset. In addition, capital expenditure may be required for producing fields 
to increase production and/or extend the life of the field. Cost assumptions are based on operator budgets or specific 
contracts where available. 68  ::  Faroe Petroleum plc Annual Report 2010
4. Asset impairment (continued)
Discount rates – Discount rates reflect the current market assessment of the risks specific to the oil and gas sector and 
are based on the weighted average cost of capital for the Group. Where appropriate, the rates are adjusted to reflect the 
market assessment of any risk specific to the field for which future estimated cash flows have not been adjusted. The 
Company has applied a discount rate of 10% for the current year (2009: 10%).
S ensitivit y	t o	changes	in	assumptions
For certain fields, a reasonably possible change in any of the above assumptions would cause the estimated recoverable 
value to be lower than the carrying value, resulting in a further impairment loss. The assumptions which would have the 
greatest impact on the recoverable amounts of the fields are production volumes and commodity prices.
I mpairmen t	losses
The asset impairment in 2010 of £5,896,000 (2009: £3,647,000) is primarily for the Glitne field (£3,852,000) (2009: 
nil) although the Schooner, Topaz, Wissey and Enoch fields have also been impaired to a lesser degree.  The Glitne 
field operator’s increase in estimated abandonment costs for Glitne account for the majority of the impairment. A 
revision in the reserve base for Topaz occurred when the Group moved from external to internal reserve estimates. The 
impairment on Wissey is due to a mismatch between the reserves used in the valuation calculation and those used in the 
depreciation calculation, due to a “back-out agreement” with the owners of the Horne & Wren fields nearby.  Schooner 
was written down due mainly to a lower long term gas price and Enoch was written down due to small changes in 
reserve estimates. 
5. Segmental reporting 
The Group operates a single class of business being oil and gas exploration, appraisal and development and related 
activities in a single geographical area presently being Northwest Europe.  Revenue from the  customers which 
individually represent more than 10% of sales were as follows: £5,865,000 (2009: £5,315,000) arising from sales of natural 
gas and £7,462,000 and £1,751,000 arising from sales of oil (2009: nil).
The Company has no revenue.
6. Group operating loss
2010
£000
2009
£000
Group operating loss is stated after charging
Exploration asset write-off 8,633 14,016
Asset impairment (note 4) 5,896 3,647
Pre-award exploration expenditure 5,069 4,266
Depreciation of property, plant & equipment 5,011 7,485
Operating lease payments 311 269
                            
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  69
7. Auditors’ remuneration
The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for other 
services provided to the Group:
2010
£000
2009
£000
Audit of Group financial statements
66 65
Audit of subsidiaries pursuant to legislation
19 18
Other services relating to taxation
17 –
Other services 
107 20
209 103
                            
Fees paid to Ernst & Young LLP and its associates for non-audit services are not disclosed in the individual accounts of 
the company as Group financial statements are prepared which are required to disclose such fees on a Group basis.   
Fees paid to Ernst & Young LLP and its associates for the audit of Faroe Petroleum plc company in 2010 were £10,000 
(2009: £9,000)
8. Finance revenue and cost
2010
£000
2009
£000
Bank and other interest receivable 758 1,135
Total interest income for financial assets not at fair value through profit or loss 758 1,135
Realised exchange gain 766 –
Total finance revenue 1,524 1,135
                            
Bank interest payable and other loans (2,183) (1,963)
Total interest income for financial assets not at fair value through profit or loss (2,183) (1,963)
Realised exchange loss – (29)
Unwinding of discount on decommissioning provision (196) (28)
Total finance cost (2,379) (2,020) 70  ::  Faroe Petroleum plc Annual Report 2010
9. Employment costs
The aggregate payroll costs of staff and directors were as follows:
2010
£000
2009
£000
Wages and salaries 4,832 3,859
Social security costs 689 477
Pension costs     631 486
Share based payments charge (equity settled) 1,667 1,113
7,819 5,935
                            
Included in other pension costs are £210,000 (2009: £241,000) in respect of defined benefit schemes and £421,000 (2009: 
£165,000) in respect of the defined contribution scheme.  
The average number of persons employed by the Group (including executive directors) during the year was as follows:
2010
No
2009
No
Technical 15 16
Finance & Commercial 12 10
Administration 4 2
                            
(b )	Dir ec t ors ’ 	emolumen ts:
2010
£000
2009
£000
Directors’ emoluments 1,753 1,358
Aggregate contributions to pension schemes: 
   Defined benefit 56 45
   Defined contribution 90 82
Number of directors accruing benefits under: 
   Defined benefit schemes 1 1
   Defined contribution schemes 3 3
                            
The emoluments of the directors:
Fees/basic
salary
£’000
Annual
bonus 
£’000
Benefits
in kind
1
£’000
2010
Total
£’000
2009
Total
£’000
2010
P ension
£’000
2009
Pension
£’000
Aggregate remuneration 995 729 29 1,753 1,358 146 127
                                                                                                    
 
During the year no options were exercised by directors (2009: nil)
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  71
10. Taxation
(a)	 T ax	on	loss	on	or dinar y	ac tivities
2010
£000
2009
£000
C urr en t	taxa tion
Overseas tax credit 28,070 15,327
UK tax – (4,531)
Current tax credit 28,070 10,796
Amounts underprovided in previous year (409) (114)
Total current tax credit 27,661 10,682
Def err ed	taxa tion
Origination of temporary differences (21,814) (5,460)
Total deferred tax charge (21,814) (5,460)
F or eig n	e x change	diff er enc es
Differences arising from the use of year end and average exchange rates (157) (337)
Total foreign exchange differences (157) (337)
T otal	tax	cr edit	in	the	inc ome	sta t emen t 5,690 4,885
                            
There are no items charged to equity with any current or deferred tax effect.
(b )	Rec oncilia tion	of	the	t otal	tax	cr edit
The tax credit in the Income Statement for the year is higher than the standard rate of corporation tax in the UK of 28% 
(2009: 28%).  The differences are reconciled below:
2010
£000
2009
£000
Tax reconciliation 
Loss on ordinary activities before tax (26,040) (11,797)
Tax at 28% (2009: 28%)
(7,291) (3,303)
Expenses not deductible for tax purposes
420 3,555
Income not taxable for tax purposes – 7
Ring fence expenditure supplement (1,072) (892)
Unrecognised deferred tax 2,347 (636)
Financial items 830 175
Tax payable included in gain of sale of fixed assets – (2,325)
Unrelieved tax losses and other deductions arising in the period 3,483 442
Effect of foreign profits/losses charged at different rate of tax (4,267) (6,784)
Capital gains – 5,020
Foreign exchange differences (549) (258)
Underprovided in previous year 409 114
Total tax credit (5,690) (4,885)
                             72  ::  Faroe Petroleum plc Annual Report 2010
10. Taxation (continued)
The overseas tax credit of £28,070,000 (2009: £15,327,000) represents a tax refund on exploration expenditure in Norway, 
of which £5,690,000 (2009: £9,416,000) has been credited to the Income Statement and £21,814,000 (2009: £5,460,000) 
recognised as a deferred tax liability relating to exploration expenditure capitalised at 31 December 2009.  The deferred 
tax liability will be released as the capitalised exploration costs are recognised in the Income Statement by way of a 
depletion charge or write-off. 
The reconciliation of the total tax credit has been based upon the UK standard corporation tax rate of 28%  which 
the parent company is subject to. During 2010 the upstream activities of the Group on the UK Continental Shelf were 
subject to a combined tax rate of 50% and the upstream activities on the Norwegian Continental Shelf to a combined 
rate of 78%. The 12% increase in the Supplementary Charge with effect from 24 March 2011, as announced by the UK 
Chancellor of the Exchequer on 23 March 2011, is not likely to impact the tax payable in the UK for the foreseeable future 
due to the tax losses carried forward.  The Group will address the appropriate tax rate to be used in the preparation of 
future Accounts.
(c)	Unr ec og nised	tax	losses
Group
The Group has tax losses which arose in the UK of £67,653,000 (2009: £56,297,000) and in the Faroe Islands of £2,967,000 
(2009: £2,813,000) that are available indefinitely for offset against future taxable profits. A deferred tax asset has not 
been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and 
they have arisen in subsidiaries where profits are not likely to arise in the foreseeable future.
Company
The Company has tax losses which arose in the UK of £nil (2009: £nil) that are available indefinitely for offset against 
future taxable profits. A deferred tax asset has not been recognised in respect of these losses as there is uncertainty 
whether the losses may be used to offset future taxable profits.
(d)	Def err ed	tax
The deferred tax included in the balance sheet is as follows:
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
Deferred tax liability
Difference between accumulated depreciation and capital 
allowances (52,514) (30,035) – –
Recognised deferred tax liability
1
(52,514) (30,035) – –
Deferred tax assets
Difference between accumulated depreciation and capital 
allowances (10,152) (11,168) 20 28
Tax losses 33,690 28,079 – –
Other temporary differences 2,049 848 1,073 847
Excess management expenses 767 – 767 –
Unrecognised deferred tax asset 26,354 17,759 1,860 875
                                                        
1
   The year on year change in the deferred tax liability is not equal to the origination of temporary difference as in note 10 
(a) due to the foreign exchange differences.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  73
10. Taxation (continued)
(e)	Change	in	c orpor a tion	tax	r a t e
The Emergency Budget on 22 June 2010 announced that the UK Corporation tax rate will reduce from 28% to 24% over 
a period of four years from 2011.  The first reduction in the UK corporation tax rate from 28% to 27% was substantively 
enacted on 20 July 2010 and will be effective from 1 April 2011.  This will reduce the Company’s future current tax charge 
accordingly.  Any deferred tax expected to reverse in the year to 31 December 2010 has been remeasured using the 
reduced rate.  
The aggregate impact of the proposed reductions from 27% to 24% would reduce the deferred tax assets and deferred 
tax liabilities by approximately £266,000 and £nil, respectively.
11. Loss per share 
Basic loss per share amounts are calculated by dividing loss for the year attributable to ordinary equity holders of the 
parent by the weighted average number of ordinary shares outstanding during the year.  
Diluted loss per share amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent 
by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of 
ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
All of the potential ordinary shares of the Company are anti-dilutive and as a result the diluted loss per share is equal to 
the basic loss per share for 2010 and 2009.  
The following reflects the loss and share data used in the basic and diluted loss per share computations:
2010
£000
2009
£000
Basic and diluted loss attributable to equity holders of the parent
20,350 6,912
2010
T housands
2009
Thousands
Basic and diluted weighted average number of shares 
152,770 104,745
                             
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting 
date and the date of completion of these financial statements. 
2010
P enc e
2009
Pence
Loss per share (basic and diluted)
	(13.3)	  (6.6) 
                              74  ::  Faroe Petroleum plc Annual Report 2010
12. Intangible assets and property, plant & equipment
Intangible Property, Plant & Equipment
Exploration
and 
evaluation
costs
£000
Development
and
production 
costs
£000
Other
£000
Total
£000
Group
Cost
At 1 January 2009 66,513 29,833 977 97,323
Exchange adjustments (2,126) – 62 (2,064)
Additions 24,783 3,577 123 28,483
Disposals (9,696) – – (9,696)
Write-offs (14,438) – – (14,438)
At 31 December 2009 and 1 January 2010 65,036 33,410 1,162 99,608
Exchange adjustments 518 – 2 520
Additions 45,767 6,778 229 52,774
Write-offs (8,633) (6) – (8,639)
A t	31	Dec ember	2010 102,688 40,182 1,393 144,263
Depreciation and impairment 
At 1 January 2009 – 8,978 704 9,682
Depreciation charge for year – 7,287 198 7,485
Exchange adjustments – – 52 52
Impairment loss (note 4) – 3,647 – 3,647
At 31 December 2009 and 1 January 2010 – 19,912 954 20,866
Depreciation charge for year – 4,882 129 5,011
Exchange adjustments – – (2) (2)
Impairment loss (note 4) – 5,896 – 5,896
A t	31	Dec ember	2010 – 30,690 1,081 31,771
Net book value
At 31 December 2010 102,688 9,492 312 112,492
At 31 December 2009 65,036 13,498 208 78,742
                                                           
The write-offs in 2010 of £8,633,000 (2009: £14,438,000) are of E&E assets where active exploration has been completed 
and commercial reserves have not been discovered.
The borrowing base facility with Société Générale (note 18) is secured by a floating charge over the assets of the Faroe 
Petroleum (U.K.) Limited.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  75
12. Intangible assets and property, plant & equipment (continued)
Property,
plant and
equipment
Other
£000
C ompan y
Cost
At 1 January 2009 229
Additions 55
At 31 December 2009 and 1 January 2010 284
Additions 28
At 31 December 2010 312
Depreciation
At 1 January 2009 201
Charge for year 18
At 31 December 2009 and 1 January 2010 219
Charge for year 22
At 31 December 2010 241
              
Net book value
At 31 December 2010 71
At  31 December 2009 65
              
13. Financial assets
C ost	and	net	
book	v alue
2010
£000
Cost and net 
book value
2009
£000
Group
Financial assets – non current
Trade investments 13 14
Other financial assets – current
Commodity hedging contracts – 37
                            
C ompan y
Financial assets – non current
Loans to subsidiaries 85,338 95,391
                             76  ::  Faroe Petroleum plc Annual Report 2010
13. Financial assets (continued)
The Group’s trade investment consists of a l4% holding of the shares in Atlantic Supply Base P/F (“ASB”).  ASB was 
established in 1999 as a private limited company incorporated in the Faroe Islands.  There is no intention to dispose of 
this investment.  
Unquoted equity investments are held at cost less impairment charges because the fair value of the financial asset 
cannot be reliably measured.
14. Investments in subsidiary undertakings
Company
Investments 
in subsidiary 
undertakings
£000
Cost and net book value
At 1 January 2009 2,654
Additions 270
At 31 December 2009 2,924
Conversion of intercompany loan to share capital 21,968
Additions 858
At 31 December 2010 25,750
              
During the year £21,968,000 (NOK 200,000,000) of an intercompany receivable in Faroe Petroleum plc from Faroe 
Petroleum Norge AS was converted into share capital in Faroe Petroleum Norge AS.  This transaction increased the 
investment in Faroe Petroleum plc and decreased intercompany balances.
At 31 December 2010, the subsidiary undertakings of the Company and Group were:
C ompan y
C oun tr y	 
of	I nc orpor a tion Na tur e	of	Business
P r opor tion	of	shar es	and	
v oting	righ ts	held
Føroya Kolvetni P/F Faroe Islands Oil and gas exploration 100% ordinary 
Faroe Petroleum (U.K.) Limited England Oil and gas exploration 100% ordinary
Faroe Petroleum Norge AS Norway Oil and gas exploration 100% ordinary
Faroe Petroleum (Energy) Limited England Investment activities 100% ordinary
Greenland Oil Company AS* Greenland Oil and gas exploration 100% ordinary
* Held by subsidiary undertaking, Faroe Petroleum (Energy) Ltd.  The Company was established in 2009.  There were no 
other changes to the Group structure during 2010. 
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  77
15. Inventories
2010
£000
2009
£000
Materials and equipment 645 497
                            
16. Trade and other receivables
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
Amounts falling due within one year:
Other receivables 4,512 5,136 272 67
Prepayments and accrued income 3,002 847 57 64
7,514 5,983 329 131
Current tax receivable 28,070 12,621 – –
Total receivables 35,584 18,604 329 131
                                                        
The 2010 prepayment balance includes £644,000 held on deposit with Barclays.  The 2009 prepayment balance does not 
include any amounts held in secure deposits. 
The current tax receivable relates to a tax rebate in Norway of 78% of Norwegian exploration expenditure.  The amount 
is expected to be received within the year.
The credit quality of other receivables that are neither past due nor impaired is assessed by reference to external credit 
ratings where available, otherwise historical information relating to counterparty default rates is used.
Counterparties with external credit ratings:
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
A2
497 470 – –
A-
1,826 1,510 – –
Counterparties with internal credit rating
2,189 4,096 272 67
4,512 5,136 272 67
                                                         78  ::  Faroe Petroleum plc Annual Report 2010
17. Cash and cash equivalents
Group   
2010
£000
Group   
2009
£000
C ompan y
2010
£000
Company
2009
£000
Cash at bank and in hand 12,542 28,344 4,916 1,518
Short-term deposits 119,608 15,239 119,608 9,917
132,150 43,583 124,524 11,435
                                                        
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying 
periods of between one and three months depending on the immediate cash requirements of the Group, and earn 
interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is £132,150,000 (2009: 
£43,583,000).  At 31 December 2010, the Group had available £9,701,000 (2009: £35,483,000) of undrawn committed 
borrowing facilities in respect of which all conditions precedent had been met.  The fair value of cash and cash 
equivalents of the company is £124,524,000 (2009:  £11,435,000).
18. Trade and other payables and current financial liabilties 
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
A moun ts	falling	due	within	one	y ear:
Trade payables 7,260 2,688 1,035 191
Other payables 2,774 845 606 62
Accruals and deferred income 10,900 8,921 26 420
Trade and other payables 20,934 12,454 1,667 673
                                                        
Short-term bank borrowing 17,575 22,699 – –
Financial liabilities 17,575 22,699 – –
                                                        
Facility for Norway exploration
During 2010 Faroe Petroleum Norge AS (“FPN”) had a NOK 500,000,000 (£54,921,500) facility agreement with Bank of 
Scotland to finance 75% of FPN’s exploration, appraisal and supporting expenditure in Norway. The revolving facility 
is repaid by and secured against the annual tax rebate under which 78% of all allowable expenditure is repaid to the 
claimant (together with interest thereon) 12 months after the end of the tax year. Utilisations can be made under the 
existing facility up until 31 December 2011. At 31 December 2010 NOK 160,000,000 (£17,574,880) was drawn under the 
facility.  Further drawdowns of NOK 60,000,000 (£4,393,720) have been made to date in 2011.
Reserve based facility
Faroe Petroleum (U.K.) Limited has in place a multi-currency revolving reserve based facility initially of £25,000,000 
with Société Générale to finance its principal producing fields and future developments. The size of the facility reduces 
over a seven year period to 1 January 2015, the first reduction was to £22,500,000 on 1 January 2010, and the second 
to £20,000,000 on 1 January 2011. The facility is secured by a floating charge over its assets and a charge over its shares 
granted by Faroe Petroleum plc.  At 31 December 2010 there was no balance drawn under the facility.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  79
19. Provision 
Group
Decommissioning
provision
£000
At 1 January 2009 1,736
New provisions and changes in estimates 56
Unwinding of discount (note 8) 28
At 31 December 2009 and 1 January 2010 1,820
New provisions and changes in estimates 6,318
Unwinding of discount (note 8) 196
At 31 December 2010 8,334
              
The decommissioning provision of £8,334,000 (2009: £1,820,000) relates primarily to the Group’s production and 
development facilities. These costs are expected to be incurred at various intervals over the next 12 years. The provision 
has been estimated using existing technology at current prices, escalated at 2.5% and discounted at 7%. The economic 
life and the timing of the decommissioning liabilities are dependent on Government legislation, commodity prices and 
the future production profiles of the production and development facilities. In addition, the costs of decommissioning 
are subject to inflationary changes in the service costs of third parties.
20. Called up share capital
Gr oup	and
C ompan y
2010
£000
Group and
Company
2009
£000
Authorised
212,350,278 (2009: 180,000,000) ordinary shares of £0.10 21,235 18,000
                            
Allotted, called up and fully paid
212,350,278 (2009: 104,745,161) ordinary shares of £0.10 21,235 10,475
                            
2010
T housands
2009
Thousands
2010
£000
2009
£000
Ordinary shares of  £0.10 each 
At 1 January 104,745 104,745 10,475 10,475
Issued on exercise of share options 63 – 6 –
Rights issue 69,824 – 6,982 –
Placing 37,718 – 3,772 –
212,350 104,745 21,235 10,475
                                                         80  ::  Faroe Petroleum plc Annual Report 2010
20. Called up share capital (continued)
During 2010, 107,605,117 new ordinary shares were issued (2009: no new shares issued).  At 31 December 2010 the 
issued share capital of the Company was represented by 212,350,278 ordinary shares of £0.10 each (2009: 104,745,161).  
At 31 December 2010, there were 17,449,748 (2009: 12,735,497) outstanding options under various share option 
schemes, exercisable over various periods up to 2020, to acquire shares of the Company at prices ranging from £0.1536 
to £1.7725 (2009: £0.175 to £1.5925). Further details are contained in note 23.
21. Financial instruments, financial risk factors and capital management
The accounting classification of each category of financial instruments is set out below.  Other than the derivative 
financial assets which are classified as Level 2, all the balances in table are classed as Level 3 fair value measurement 
(excluding those classified at amortised cost):
Group
2010			
£000
Group
2009   
£000
C ompan y
2010			
£000
Company
2009   
£000
Financial assets
Investments (available for sale*) 13 14 – –
Trade and other receivables (at amortised cost) 4,512 5,136 272 67
Loans to subsidiaries – – 86,466 95,661
Cash 132,150 43,583 124,524 11,435
Derivative financial assets – 37 – –
Financial liabilities
Trade and other payables (at amortised cost) (10,034) (3,533) (1,641) (253)
Short-term bank borrowing (at amortised cost) (17,575) (22,699) – –
109,066 22,538 209,621 106,910
                                                        
* Stated at cost as the value cannot be reliably estimated. 
There is no material difference between the carrying value and the fair value of the financial instruments due to their 
short-term nature. The investments are carried at cost because cannot determine a reliable value.  
The Group and Company is exposed to financial risks arising out of market risks (relating to commodity prices, foreign 
currency exchange rates, interest rates), credit risks and liquidity risks.  Details of these areas of risk are described below.
(a)	M ark et	risk
Market risk is the risk arising from possible market price movements and their impact on the future performance of the 
business.  The Group is currently exposed to commodity price risks in the form of oil and gas prices, movement in foreign 
currency exchange rates and interest rates.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  81
21. Financial instruments, financial risk factors and capital management (continued)
(i) Commodity price risk
The Group is exposed to commodity price risk.  Where and when appropriate the Group will put in place suitable 
hedging arrangements to mitigate the risk of a fall in commodity prices.  At 31 December 2010, the Group had in place 
no fixed-for-floating gas swaps (2009 aggregate fair value: £37,000). At 31 December 2010 there were no outstanding 
contracts in place.  In 2009 the contracts in place were designated as cash flow hedges of forecast sales, a 20% 
increase/(decrease) in commodity prices had  no effect on reported profit or loss but (decreased)/increased net equity 
(respectively) by £297,000). The fair value of these instruments was determined directly by reference to published price 
quotations in an active market.  Since the year end fixed-for-floating gas swap contracts and put option contracts were 
put in place to hedge a proportion of production expected in 2011.
(ii) Cash flow hedge accounting
At 31 December 2010 the Group held no cash flow hedges.  The 2009 balance relates to certain financially settled fixed-
for-floating gas swaps which the Group designated as cash flow hedges.  At 31 December 2009 the Group held 23 such 
contracts designated as hedges for highly probably forecast sales of natural gas expected to occur during 2010. The 
terms of the gas swap contracts were negotiated to match the terms of the gas sales contract. The cash flow hedges 
were assessed to be highly effective and an unrealised gain of £37,000 was deferred in a hedge reserve within equity 
in relation to the 2009 contracts.  In 2010 the forecast transactions under the cash flow hedge occurred and the Group 
decided not to continue with its policy to adopt cash flow hedge accounting.
(iii) Foreign currency exchange risk
The Group and Company have potential currency exposures in respect of items denominated in foreign currencies 
relating to transactional exposure in respect of operating costs and capital expenditure incurred in currencies other than 
the functional currency of operations.  Currency risk in respect of non-functional currency expenditure is reviewed by 
the Board.  There are no currency hedging arrangements in place.  Loans to subsidiaries with a functional currency other 
than Sterling are denominated in the functional currency of the subsidiaries.  Foreign currency exchange differences 
arising on these loans are recognised in the Company’s Income Statement as a gain or loss.  In the Group accounts, these 
differences are taken to equity.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, being 
the currency which the Group is primarily exposed to, with all other variables held constant, on the Group’s loss before 
tax and the Group’s equity.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, being 
the currency which the Group is primarily exposed to, with all other variables held constant, on the Group’s loss before 
tax and the Group’s equity.
Increase/
decrease in
US Dollar 
rate
Effect on
profit before
tax
£000
Effect on
Equity
£000
2010
+/–10% 394	/	(394) –
2009
+/–10% 1,026 / (1,026) – 82  ::  Faroe Petroleum plc Annual Report 2010
21. Financial instruments, financial risk factors and capital management (continued)
(iv)  Interest rate risk
The Group is exposed to interest rate risks through the Group’s bank loan in Norway and the UK (see note 18 for terms). 
The possible effect of changes in interest rates is shown in the table below:
Increase/
decrease in
basis points
Effect on
profit before
tax
£000
2010
Nor w eg ian	k r oner
+/-100 178/(178)
P ounds	S t erling
+/-100 0/(0)
2009
Norwegian kroner
+/-100 222/(222)
Pounds Sterling
+/-100 5/(5)
(b )	Cr edit	risk
Credit risk is the risk that a customer or partner fails to pay amounts due causing financial loss to the Group and 
Company.  The Group has very limited exposure to such credit risk and has put procedures in place to mitigate such 
risks.  The maximum exposure for the Group at 31 December 2010 was £497,000 (2009: £489,000). The Company had no 
exposure to credit risk at 31 December 2010 (2009: £nil) from customers or partners.  The exposure to subsidiaries failing 
to repay loans to the Company at 31 December 2010 was £86,466,000 (2009: £95,661,000).
(c)	Liquidit y	risk
Liquidity risk is the risk that sources of funding for the Group’s and Company’s business activities are not available.  
As a business which primarily focuses on oil and gas exploration and appraisal, the primary source of funding of the 
Group’s and Company’s activities is equity.  The Group and Company have been successful in raising equity on a number 
of occasions, most recently in November 2010, when £62.2 million (before issue costs) was raised via a share placing 
and May 2010, when £69.8m (before issue costs) was raised via a rights issue.  When appropriate, the Group seeks to 
supplement equity funding with borrowing. The Board always ensures that there is sufficient funding available before 
committing to any significant expenditure.  
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  83
21. Financial instruments, financial risk factors and capital management (continued)
The table below shows the maturity analysis of the Group’s financial liabilities.
31	Dec ember	2010
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
1 to 5
years
£000
>5 years
£000
Total
£000
Trade and other payables
– 10,034 – – – 10,034
Short–term bank borrowing*
– 193 18,163 – – 18,356
31	Dec ember	2009
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
1 to 5
years
£000
>5 years
£000
Total
£000
Trade and other payables
– 3,533 – – – 3,533
Short-term bank borrowing*
– 10,668 12,483 – – 23,151
*Includes the interest borne on these short-term bank borrowings. 
The Company’s financial liabilities consist of trade and other payables of £1,667,000 (2009: £253,000) which are due 
within three months.
C apital	managemen t
The Group defines capital as the total equity of the Group.  The objective of the Group’s capital management is to ensure 
that it makes the maximum use of its capital to support its business and maximise shareholder value. There are no 
external constraints on the Group’s capital.
As the Group’s primary focus is on exploration, equity is the principal form of funding. The Group’s policy is to utilise debt 
where possible.  A credit facility has been arranged in Norway to bridge the tax rebate receivable and a facility is in place 
to finance its Southern North Sea gas development and producing assets. 
At 31 December 2010 the net debt ratio was 10% (2009: 31%)
2010
£’000
2009
£’000
Borrowing
17,575 22,699
Equity
181,137 74,194
Debt ratio
10% 31% 84  ::  Faroe Petroleum plc Annual Report 2010
22. Pension scheme
In the UK and for certain Norwegian employees the Group makes contributions to defined contributions schemes 
nominated by employees for which the pension cost for the year amounted to £421,000 (2009: £165,000).  There were no 
prepaid or accrued contributions at either the beginning or the end of the financial year.  
The Group also operates a defined benefit pension scheme for certain employees in Norway providing benefits based 
on final pensionable pay.  A full actuarial valuation was carried out at 31 December 2010 by a qualified independent 
actuary.  The Group’s contributions for 2011 are expected to be £197,000.
The table below is a summary of the net liabilities position of the pension scheme:
2010			
£000
2009   
£000
Present value of scheme liabilities
(709) (675)
Total market value of assets
326 400
Net pension liability
(383) (275)
                            
No further disclosures have been provided on the defined benefit pension scheme due to the insignificance of the 
amounts in the context of the financial statements. 
23. Share based payments 
During the period, the Company operated two share schemes to incentivise employees, the Faroe Petroleum 
Unapproved Share Option Scheme (“Option Scheme”) and the Faroe Petroleum Co-Investment Plan (“CIP”), details of 
which are summarised below: 
Shar e	options: The Company’s policy on the granting of share options under the Option Scheme is to make such awards 
as are necessary to recruit and retain executives.  The Option Scheme provides for a grant price equal to the quoted 
market price of the Group shares on the date of grant.  The vesting period is generally three years.  The options expire if 
they remain unexercised after the exercise period has lapsed.  Furthermore options are forfeited if the employee leaves 
the Group before the options vest.  The options are equity settled.
CIP: under this plan key employees can invest up to 50% of base salary in any financial year to purchase Company shares 
(“Investment Shares”).  Investment Shares will be matched by new shares to be issued by the Company dependent upon 
the Company’s performance over a three year period. The maximum match will be 3:1 (i.e. three new shares for every 
Investment Share) but will require the Company to satisfy stretching share price growth targets and be subject to a 
comparative total shareholder return underpin.
The Group has applied the requirements of IFRS 2 “Share-based payment” and has elected to adopt the exemption to 
apply IFRS 2 only to awards made after 7 November 2002 and which had not vested on 1 January 2006. 
The Group recognised total expenses of £1,667,000 (2009: £1,113,000), all of which related to equity settled share-based 
payment transactions under the Current Schemes.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  85
23. Share based payments (continued)
Shar e	options
The following table sets out details of all outstanding options under the option scheme:
2010 2009
Options
No
W eigh t ed
a v er age
e x er cise	
pric e
£
Options
No
Weighted
average
exercise 
price
£
Outstanding at beginning of period 12,175,638 1.01 9,368,738 1.24
Impact of rights issue 1,529,300 0.89 – –
Granted during the period 5,128,880 1.17 4,261,400 0.70
Lapsed during the period – – (1,138,700) 1.65
Forfeited during the period
(1,188,900) 0.95 (315,800) 1.30
Exercised during the year
2
(145,170) 1.03 – –
Outstanding at the end of the period
1
17,449,748 0.97 12,175,638 1.01
Exercisable at the end of the period
5,365,055 0.82 3,911,853 0.95
                                                                    
1
 The options outstanding at 31 December 2010 had a weighted average remaining contractual life of 7.33 years  
(7.43 years in 2009).  
2
 The weighted average share price at the date of exercise for the options exercised is £1.73.
The estimated fair values of options which fall under IFRS 2, being those options issued after 7 November 2002, and the 
inputs used in the Monte Carlo Simulation model to calculate those fair values, are as follows:
Date of grant Estimated 
fair value
Share 
price
Exercise 
price
Expected
 volatility
Expected 
life
Risk free 
rate
Expected
 dividends
7 May 2004 £0.19 £0.60 £0.60 29.86% 5.0 5.08% 0.00%
29 March 2005 £0.44 £1.23 £1.24 37.87% 5.0 4.46% 0.00%
18 April 2006 £0.55 £1.59 £1.59 36.93% 5.0 4.61% 0.00%
11 May 2006 £0.64 £1.75 £1.72 36.97% 5.0 4.85% 0.00%
20 October 2006 £0.42 £1.14 £1.12 38.57% 5.0 4.95% 0.00%
14 March 2007 £0.38 £1.10 £1.13 39.88% 5.0 5.04% 0.00%
1 October 2007 £0.48 £1.12 £1.19 40.21% 5.0 4.99% 0.00%
22 April 2008 £0.54 £1.59 £1.59 40.55% 5.0 4.55% 0.00%
12 September 2008 £0.49 £1.37 £1.35 41.53% 5.0 4.41% 0.00%
18 May 2009 £0.30 £0.69 £0.75 60.14% 5.0 2.46% 0.00%
23 July 2009 £0.32 £0.70 £0.69 59.18% 5.0 3.26% 0.00%
6 May 2010 £0.47 £1.07 £1.16 62.18% 5.0 2.67% 0.00%
4 November 2010 £0.88 £1.83 £1.77 63.93% 5.0 1.78% 0.00%
25 November 2010 £0.87 £1.78 £1.77 64.05% 5.0 2.17% 0.00% 86  ::  Faroe Petroleum plc Annual Report 2010
23. Share based payments (continued)
Details of all options outstanding as at 31 December 2010 are included in Note 20.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may 
occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which 
may also not necessarily be the actual outcome.
C o -in v estmen t	plan	
During 2007 the Group introduced a Co-Investment Plan.  Under this plan, shares are released on the third anniversary 
of the date of grant provided that TSR performance conditions have been satisfied and the participant is still being 
employed on the anniversary date. 
2010	
	CIP	Shar e
	A w ar ds
No
2009 
 CIP Share
 Awards
No
Outstanding at the beginning and end of the period 559,859 597,548
Adjustment to opening balance 60,205 –
Granted during the period 1,932,400 –
Lapsed during the period (530,880) (37,689)
Impact of rights issue 12,411 –
Outstanding at the end of the period 2,033,995 559,859
                              
The estimated fair value of the share award under the CIP and the inputs used in the Monte Carlo Simulation model to 
calculate the fair values, are as follows:
Date of grant
Estimated 
fair value
Share 
price
Exercise 
price 
(nominal 
value)
Expected
 volatility
Expected 
life
Risk free 
rate
Expected
 dividends
30 May 2007 £0.47 £1.15 £0.00 39.82% 3.0 5.73% 0.00%
12 Sept 2008 £0.63 £1.37 £0.00 41.53% 3.0 4.50% 0.00%
23 Sept 2008 £0.60 £1.27 £0.00 42.47% 3.0 4.52% 0.00%
13 May 2010 £0.66 £1.19 £0.00 62.91% 3.0 1.69% 0.00%
19 Nov 2010 £0.94 £1.73 £0.00 64.01% 3.0 1.41% 0.00%
All vested Co-Investment Plan shares have lapsed as performance conditions were not met.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  87
24. Reconciliation of loss on ordinary activities to net cash flow from operating activities
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
Loss before tax
(26,040) (11,797) (1,971) (2,456)
Depreciation charges
5,011 7,485 22 18
Exploration asset write-off
8,633 14,016 – –
Gain on disposal of asset
– (17,696) – –
Asset impairment
5,896 3,647 – –
Exploration and evaluation
– (23,053) – –
Fair value of share based payments
1,667 1,113 806 497
(Increase)/decrease in trade and other receivables
(85) 878 (198) 93
Increase in inventories
(140) (111) – –
Increase in trade and other payables
8,439 944 1,001 361
Foreign exchange movements
(768) (29) 642 419
Intercompany service charge uplift
– – (16) (140)
Interest received
(757) (1,135) (482) (56)
Interest paid (net of accretion)
2,151 1,991 – –
Net cash inflow/(outflow) from operating activities
4,007 (23,747) (343) (1,264)
                                                        
25. Contingent liabilities
Under the terms of a sale and purchase agreement between Faroe Petroleum (U.K.) Limited (“FPUK”) and ConocoPhillips 
(U.K) Alpha Limited and ConocoPhillips (U.K.) Theta Limited, FPUK are liable to pay deferred consideration of $875,000 
upon first gas sales from the Minke Graben field and $875,000 upon first gas sales from the Orca field. As the decision 
to develop these fields is yet to be taken by the joint venture partners, it is very uncertain whether the deferred 
consideration will be paid.
26. Commitments
Pre-tax capital commitments at the end of the financial year for which no provision has been made, in relation to the 
Group’s UKCS licences and Faroese licences, amount to £80,435,000 (2009: £58,924,000) as follows:
Group
2010
£000
2009
£000
UKCS contracted 7,059 5,706
Faroes contracted – 1,174
Norway contracted 73,376 52,044
                            
C ompan y
As at 31 December 2010, the Company has no future capital commitments (2009: £nil).  The Company has provided a 
guarantee for all the licence costs of its subsidiaries. 88  ::  Faroe Petroleum plc Annual Report 2010
27. Obligations under operating leases
Annual commitments under non-cancellable operating leases for land and buildings are as follows:
Group
2010
£000
Group
2009
£000
C ompan y
2010
£000
Company
2009
£000
Future minimum lease payments under operating leases:
Within one year 194 282 72 72
Two to five years 242 248 242 248
After five years – – – –
436 530 314 320
                                                        
Rentals due under operating leases are charged against income on a straight line basis over the term of the lease.  
In 2010 lease payments of £311,000 (2009: £269,000) were charged against income.  The operating leases relate 
predominantly to office leases with rent payable on a monthly basis.
28. Related party disclosures
For the purpose of related party disclosure in accordance with IAS 24, only directors are considered to be key 
management personnel.  
Compensation of key management personnel:
2010
£000
2009
£000
Short-term employee benefits 1,753 1,358
Post-employment benefits 146 127
Other long-term benefits – –
Share-based payment 638 368
2,537 1,853
                            
There are no other related party transactions requiring disclosure for the Group. Note 9 contains additional information.  
During the year the Company entered into transactions, in the ordinary course of business, with other related parties.  
Trading balances outstanding at 31 December with other related parties, are as follows:
2010
£000
2009
£000
Loans to subsidiaries 85,338 95,391
                            
Interest is not charged on the loans to subsidiaries.  The loans are denominated in the functional currency of the 
subsidiary.  The loans fall due at various times but repayment is not required if the subsidiaries’ total liabilities excluding 
amounts to the Company exceed the current assets.
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  89
29. Subsequent events
A c quisition	of	P er th	in t er est: In January 2011 the company acquired a 28% interest in each of UK licences P218 and 
P588 containing the undeveloped Perth oil field and the company is going through the completion process with 
completion expected in the near future.
C ompletion	of	fur ther	S chooner	in t er est: In October 2010 the company announced its increased 2.07% stake in the 
producing Schooner gas field (enlarged equity 6.96%).  This transaction completed on 31 January 2011.
A c quisition	of	Blane	in t er est: In October the company announced the purchase of an 18% interest in the Blane oil field 
from ENI UK Limited and ENI ULX Limited and the company is going through the completion process with completion 
expected in the near future.
2010	Nor w eg ian	AP A	Lic ensing	Round: In January 2011 the company was granted three new licences in the Norwegian 
Sea under the 2010 Norwegian APA Licence Round. 
•	 Licence PL475CS, Blocks 6406/3 (part) and 6507/10 (part) – “Maria Extension” .  
•	 Licence PL590, Blocks 6507/7 (part), 6507/10 (part) and 6507/11 (part) – “Milagro” 
•	 Licence PL592 Block 6506/9 (part) “Grayling” 
F ulla	farm	out: In December 2010 the Company entered into a farm-out with Canadian Overseas Petroleum Limited 
concerning a 50% interest in the West of Shetland licence P .1161. This was approved by the Secretary of State in January 
2011 and an associated commitment has now been made to drill an exploration well on the Fulla prospect in the 
summer of 2012.  
Glenshee	r elinquishmen t: Following the further technical evaluation a decision has been made to relinquish the 
Glenshee licence P .1407 at the end of March 2011.  As such the net book value of the asset £426,000 was written off to 
the Income Statement as an adjusting post balance sheet event.
30. Jointly controlled assets 
F ields	in	pr oduc tion	or	under	dev elopmen t	as	a t	31	Dec ember	2010
C oun tr y Lic enc e Block	Desig na tion F ield	Name F ield	Oper a t or
Net	unit	
I n t er est	%
UK P039 53/4d Wissey Tullow Oil UK 18.75
UK P520 49/1a,2a,2b Topaz RWE DEA UK SNS 7.50
UK P689 43/30a, 44/26a Schooner Tullow Oil UK 4.83
Norway PL048b 048b Glitne Statoil Petroleum 9.30
Norway PL048d 15/5f Enoch Talisman North Sea 1.86 90  ::  Faroe Petroleum plc Annual Report 2010
30. Jointly controlled assets (continued)
Explor a tion	acr eage	and	disc o v eries	as	a t	31	Dec ember	2010
C oun tr y Lic enc e Block	Desig na tion Lic enc e	Name Operator
Net	%	
I n t er est
UK P454 44/29b Orca Minke Median Ltd 5.89
UK P611 44/24a Orca Minke Median Ltd 5.89
UK P1161 206/5a, 206/10a Freya / Fulla     Faroe Petroleum 50.00
UK P1165 217/3a, 217/4a, 217/5, 221/28a, 
221/29a, 221/30a
Talisker Chevron, North Sea 
Limited
12.50
UK P1190 204/13 Tornado OMV (U.K.) Limited 10.00
UK P1192 213/20b, 214/16b, 213/25C N. Uist / Cardhu BP Exploration  
Operating Company 
Limited
6.25
UK P1195     214/30 Glenlivet DONG E&P (UK) Limited 10.00
UK P1196 217/10, 217/14, 217/15 Lagavulin      Chevron, North Sea 
Limited
10.00 
UK P1407 217/21, 22, 26 & 216/30 Glenshee     Chevron U.K  Limited 20.00
UK P1593 44/29c Narwhal    GDF Suez E&P UK Ltd 20.00
UK P1740 164/4a, 164/5a, 165/1a, 174/28, 
174/29, 174/30 and 175/6a 
Rannvá Faroe Petroleum 100.00 
UK P1839 205/13b, 205/14, 205/18, 205/19 Aileen    Faroe Petroleum 50.00
UK P1851 219/2, 219/3, 223/26, 223/27 Balblair Faroe Petroleum 50.00
UK P1852 222/28, 222/29 Ardbeg  Faroe Petroleum 50.00
UK P1853 217/11a, 217/12, 217/13a, 217/16a, 
217/17a, 217/18a, 217/19a, 217/20, 
218/11 a, 218/12a, 218/16, 218/17, 
218/22a
Grouse     Faroe Petroleum 37.50
Norway PL006C 2/5 part SE Tor Lundin Norway AS 10.00
Norway PL006D 2/5 part Hyme Lundin Norway AS 10.00 
Norway PL289   3/7 part Musling Dong E&P Norge AS 14.00
Norway PL405 7/9&12, 8/7, 8, 10&11 Butch Centrica 
Resources   (Norge) AS
15.00 
Norway PL405 B 7/12 part Butch  Extension Centrica 
Resources   (Norge) AS
15.00
Norway PL414 25/3,5&6  Kalvklumpen Det norske oljeselskap 
ASA
20.00
Norway PL431 6506/12, 6406/2&3 part T-Rex Maersk Oil Norway AS 30.00 
Norway PL433 6506/9&12 part  Fogelberg Centrica 
Resources   (Norge) AS
15.00
Norway PL440S 2/8 part Clapton Faroe Petroleum 40.00
Norway PL475 6407/1, 6406/3 parts Santana Wintershall Norge ASA 30.00
Norway PL475BS 6406/3, 6407/1 parts Maria Wintershall Norge ASA 30.00
Norway PL475CS 6406/3 and 6507/10 Maria Ext Faroe Petroleum Norge 
AS 30.00 
Norway PL477 6506/11 part Cooper Centrica 
Resources   (Norge) AS 30.00
Norway PL477B    6506/11 part Zappa Centrica 
Resources   (Norge) AS 30.00
Norway PL478  6507/7, 6507/10 parts Manilow Centrica 
Resources   (Norge) AS 30.00
Norway PL507 25/2,3, 30/11,12, 31/10 parts Tetrao Wintershall Norge ASA 30.00 
Notes to the accounts continued Faroe Petroleum plc Annual Report 2010  ::  91
30. Jointly controlled assets (continued)
C oun tr y Lic enc e Block	Desig na tion Lic enc e	Name Operator
Net	%	
I n t er est
Norway PL534 7224/7, 8 and 11 Samson Dome/ 
Hegg
BG Norge 20.00
Netherlands D15b D15b Orca Minke Energie Beheer 
Nederland B.V.
5.00
Netherlands D18a D18a Orca Minke Energie Beheer 
Nederland B.V.
2.50
Faroe 005 6004/1,2,3,6,7 & 8 Anne Marie ENI Denmark 12.50
Faroe 016 6201/1,2,6, 6202/ 4,5,6,7,8,
9,10,11,12,13,14,15,16,17,1
8,21,22, 6203/13,14,15,16, 
17,18,19,20,21,22,23,24,25 
Kùlubøkan Statoil Færøyene AS 10.00
Faroe 012 6007/21, 22, 23, 24, 28 (part),29 (part) Rannvá Faroe Petroleum 100.00
Faroe 017 6007/16 (part), 26,27, 6008/19, (part), 
20 (part) 24,25,30,29 (part)
Rannvá Extension Faroe Petroleum 100.00
F ields	in	pr oduc tion	or	under	dev elopmen t	as	a t	31	Dec ember	2009
C oun tr y Lic enc e Block	Desig na tion Lic enc e	Name Operator
Net	%	
I n t er est
UK P039 53/4d Wissey Tullow Oil UK 18.75
UK P520 49/1a,2a,2b Topaz RWE DEA UK SNS 7.50
UK P689 43/30a, 44/26a Schooner Tullow Oil UK 4.83
Norway PL048b 048b Glitne Statoil Petroleum 9.30
Norway PL048d 15/5f Enoch Talisman North Sea 1.86 92  ::  Faroe Petroleum plc Annual Report 2010
30. Jointly controlled assets (continued)
Explor a tion	acr eage	and	disc o v eries	as	a t	31	Dec ember	2009
C oun tr y Lic enc e Block	Desig na tion Lic enc e	Name Operator
Net	%	
I n t er est
UK P1196 217/10, 14, 15 Lagavulin Chevron North Sea 10.00
UK P1165 217/3a, 217/4a, 217/5, 221/28a, 
221/29a, 221/30a
Talisker Chevron North Sea 12.50
UK P1192 213/20, 214/16, 213/25c Cardhu BP 6.25
UK P1190 204/13 Tornado OMV 10.00
UK P1161 206/5a, 206/10a Freya Faroe *100.00
UK P1407 217/21, 22, 26 & 216/30 Glenshee Chevron North Sea 20.00
UK P1195 214/30 Glenlivet DONG E&P (UK) 10.00
UK P454 44/29b Orca Minke GDF Suez 5.89
UK P611 44/24a Orca Minke GDF Suez 5.89
UK P1593 44/29c Narwhal GDF Suez 20.00
Norway PL006C 2/5 part SE Tor Lundin Norway 10.00
Norway PL006D 2/5 part Hyme Lundin Norway 10.00
Norway PL289 3/7 part Marsvin DONG E&P Norge 14.00
Norway PL376 35/6, 35/9 Grosso StatoilHydro 10.00
Norway PL405 7/9 &12, 8/7, 8, 10 & 11 Butch Cassidy Centrica 15.00
Norway PL405B 7/12 part Butch Cassidy (ext) Centrica 15.00
Norway PL414 25/3, 5 & 6 part Kalvklumpen Pertra 20.00
Norway PL431 6506/12, 6406/2&3 part T-Rex Maersk Oil Norway 30.00
Norway PL433 6506/9&12 part Fogelberg Centrica 15.00
Norway PL440S 2/8 part Clapton Det Norske Olieselskap 20.00
Norway PL475 6407/1, 6406/3 parts Santana Wintershall 30.00
Norway PL475BS 6406/6, 6407/1 parts Maria Wintershall 30.00
Norway PL477 6506/11 part Cooper Centrica 30.00
Norway PL478 6507/7, 6507/10 parts Manilow Centrica 30.00
Norway PL507 25/2,3, 30/11, 12, 31/10 parts Tetrao Wintershall 30.00
Norway PL510 6406/5, 6406/6 parts Glinda Centrica 20.00
Norway PL534 7224/7, 8 &11 Samson Dome BG 20.00
Netherlands D15b D15b Orca Minke GDF Nederland 5.00
Netherlands D18a D18a Orca Minke GDF Nederland 2.50
Faroe Islands 002 Part Blocks: 6004/12, 16 & 17 Orodruin Føroya Kolvetni *100.00
Faroe Islands 005 6004/1, 2, 3, 6, 7 & 8 Anne Marie ENI Denmark 12.50
Faroe Islands 009 6105/22, 23, 24, 26, 27, 28, 29, 6005/1, 
2, 3, 4 (part) 
Sildrekin Statoil Faeroyene 10.00
Faroe Islands 012 6007/21, 22, 23, 24, 28 (part), 29 (part) Rannvá Føroya Kolvetni *100.00
Faroe Islands 012 6007/21, 22, 23, 24, 28 (part), 29 (part) Rannvá Føroya Kolvetni *100.00
Faroe Islands 016 6201/1,2,6, 6202/ 4,5,6,7,8,9,  
10,11,12,13,14,15,16,17,18,  
21,22, 6203/13,14,15,16, 
17,18,19,20,21,22,23,24,25
Kùlubøkan Statoil Færøyene 10.00
Faroe Islands 017 6007/16 (part), 26,27, 6008/19, (part), 
20 (part) 24,25,30,29 (part)
Rannvá 
Extension
Føroya Kolvetni *100.00
* Not jointly controlled as these licences belong 100% to the Group. 
Notes to the accounts continued Cover design
Faroe Petroleum ran a competition 
challenging 3rd year graphic design  
students at Gray’s School of Art, part of 
Aberdeen’s Robert Gordon University,*  
to come up with a design theme for our  
2010 Annual Report. 
The honours were shared between Iain 
Currie and Asa Rodger whose richly coloured 
dynamic designs reflect our theme of 
‘continuing success’ , and the momentum  
of a growing business operating in an  
exciting environment.
*  Sunday Times Scottish University of the Year 2011  
Best modern university in the UK (The Times Good 
University Guide 2011)
Officers and professional advisers 
Directors
Mr J W S Bentley
Mr G D Stewart
Mr I M Lanaghan
Mr H A Hammer
Mr R C Witts
Mr T P Read
Ms H Harlem
Group head office
24 Carden Place 
Aberdeen  
AB10 1UQ
Secretary and registered office
Mr J G M Riddick 
51 Eastcheap 
London  
EC3M 1JP
Principal bankers
Bank of Scotland 
39 Albyn Place 
Aberdeen  
AB10 1YN
Auditors
Ernst & Young LLP
Blenheim House
Fountainhall Road
Aberdeen
AB15 4DT
Solicitors
Hunton & Williams LLP 
30 St Mary Axe 
London 
EC3A 8EP
McGrigors LLP
Johnstone House
52-54 Rose Street
Aberdeen
AB10 1UD
Joint stockbroker and Nomad
Panmure Gordon (Broking) Limited  
Moorgate Hall 
155 Moorgate 
London   
EC2M 6XB
joint stockbroker    
Oriel Securities Limited 
125 Wood Street 
London 
EC2V 7AN
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA Annual Report & Accounts 2010
Faroe Petroleum Annual Report & Accounts 2010
Communiqué Associates Limited, Edinburgh www.communique-associates.co.uk
Faroe Petroleum 
24 Carden Place
Aberdeen
AB10 1UQ
www.faroe-petroleum.com