Faroe Petroleum plc  
Annual Report & Accounts 2012
Maximising
our
 Faroe Petroleum plc Annual Report & Accounts 2012 Highlights 02
At a glance 04
Our potential – Pioneering 06
Our potential – Disciplined 08
Our potential – Expertise 10
Chairman’s letter 12
Overview 02
CEO’s review 14
Operational review – Exploration 21
Operational review – Production and development 29
Finance review 32
Review of the year 14
Board of Directors 36
Directors’ report 38
Statement of Directors responsibilities 45
Report on Directors’ remuneration 46
Governance 36
Accounts 51
Independent auditors’ report 51
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
Condensed Group cash flow statement 56
Condensed 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 92
Glossary
Contents “ This has been a particularly active year for the 
Company, with a dramatic boost to production, 
and cash flow, together with a steady, fully  
funded exploration programme. We have  
increased our portfolio significantly through  
a large number of licence awards, including  
our first award in Iceland, and outstanding  
results in the 2012 APA round in Norway and  
UK 27th Round.
“ This success demonstrates Faroe’ s ability to 
continue to deliver solid value for shareholders 
through the drill-bit, licence awards and 
transactions; further differentiating ourselves  
and securing our position as one of the most  
active UK listed explorers. The considerable 
increase in cash flow from our production  
base, combined with healthy cash balances  
and debt facilities ensures we are well financed 
going forward.”
Graham Stewart
Chief Executive
Faroe Petroleum plc  Annual Report & Accounts 2012 01 Disciplined
Expertise
p10
p08
Pioneering
p06
We aim to maximise  
our potential through  
3 key attributes
bcf billion cubic feet
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
EBITDAX  Earnings before interest, taxation, depreciation, amortisation and exploration  
expenditure (gross profit plus depreciation on producing assets)
mmbbls million barrels
mmboe million barrels of oil equivalent
Glossary 
Printed by CPI Colour on Hello Silk – an FSC
®
 Mix certified grade and is produced at a mill that 
is certified to the ISO14001 and EMAS environmental management standards.
Designed and produced by SampsonMay
Telephone: 0207 7403 4099 www.sampsonmay.com “ This has been a particularly active year for the 
Company, with a dramatic boost to production, 
and cash flow, together with a steady, fully  
funded exploration programme. We have  
increased our portfolio significantly through  
a large number of licence awards, including  
our first award in Iceland, and outstanding  
results in the 2012 APA round in Norway and  
UK 27th Round.
“ This success demonstrates Faroe’ s ability to 
continue to deliver solid value for shareholders 
through the drill-bit, licence awards and 
transactions; further differentiating ourselves  
and securing our position as one of the most  
active UK listed explorers. The considerable 
increase in cash flow from our production  
base, combined with healthy cash balances  
and debt facilities ensures we are well financed 
going forward.”
Graham Stewart
Chief Executive
Faroe Petroleum plc  Annual Report & Accounts 2012 01 Highlights
Overview
“ The year saw a period of growth and consolidation across  
the portfolio of exploration, appraisal and production.  
Faroe’s focused portfolio exploration strategy, now largely  
self-funded, continues to serve us well and we now occupy  
a very strong position from which to grow.”
 Graham Stewart 
 Chief Executive
Balanced
Maximising our potential 
through a balanced northern 
seas portfolio of outstanding 
exploration and appraisal 
opportunities, underpinned 
by high quality non-operated 
Norwegian and UK production
20.1 mmboe
2P reserves of 20.1 mmboe at 
31 December 2012 (including 
East Foinaven
1
), 95% of which 
is associated with fields on 
production
6,900 boepd
2012 total average production 
of approximately 6,900 boepd 
(2011: 2,500 boepd average 
production). Including East 
Foinaven 2012 average 
production was approximately  
7,200 boepd
Discoveries
Exploration successes with 
discoveries in Butch and 
Rodriguez (post year-end) 
in Norway mitigating an 
otherwise mixed year for 
exploration results
 1 6 awards
Portfolio increased 
substantially to over 60 licences 
with 16 awards, with high 
equity stakes
•  UK: seven new licences, 
including three operatorships
•  Norway: eight new  
licences, including  
three operatorships  
(post year-end)
•  Iceland: frontier licence  
as operator
1.
  In 2012 the Company commenced reporting its own reserves estimates (as explained 
more fully on Page 31) and had no asset related impairments in the year. The Group’s 
2P reserves at 31 December 2012 have been estimated at 18.9 mmboe. When including 
the reserves in East Foinaven (this transaction has an effective date of 1 January 2012 
and is expected to complete in H1 2013) 2P reserves stand at 20.1 mmboe.
£161.4 million 
Development and exploration  
capital expenditure during the year
(201 1: £96.2 million) 
Funded from cash, cash flow  
and Norwegian tax rebate
£72.9 million cash
(2011: £111.6 million)
Excluding restricted cash of  
£2.7 million (2011: £0.7 million)
US$425 million
Committed credit facilities doubled 
and extended during 2012
Reserve Based Lending and  
Norwegian Exploration facility
£158.8 million
Turnover – nearly doubled year 
on year
(201 1: £80.2 million)
 
Financial
 
Activity
02 Faroe Petroleum plc Annual Report & Accounts 2012 World class
Transformation into strong E&P Company  
with world class exploration and appraisal 
opportunities
Well positioned
Well positioned and funded to achieve 
significant growth through exploration  
and acquisition
Fully funded
Planned drilling programme fully funded 
from cash, cash flow and Norwegian 
tax rebates
Active programme
Exploration and development capital  
expenditure for 2013 forecast at approx.  
£170 million
£96.0 million
EBITDAX increased 135% 
(201 1: £40.9 million)
£79.7 million
Expensed exploration 
expenditure 
(201 1: £42.3 million)
Includes pre-licence expenditure 
of £8.6 million and write offs  
of £71.1 million 
-£5.2 million
Loss after tax 
(201 1: £47 .4 million profit)
2011 profit included £40.0 million 
exceptional gain on disposal of 
Maria interest
£170 million 
capital expenditure 
in 2013
Including around £120 million 
on exploration (pre-tax rebate 
in Norway) and approximately 
£50 million on developments 
and producing fields – all fully 
funded
•  Provides shareholders with 
multiple opportunities for 
step-change in value growth 
•  Exciting exploration  
and appraisal programme 
continues, targeting 
substantial upside potential 
with five firm wells planned 
for 2013
•  Preparing to operate the 
Novus exploration well on  
the Halten Terrace, Norway  
in H2 2013
•  Production to benefit  
from newly developed  
Hyme satellite field  
tied-back sub-sea to Njord 
Licence 
rounds
Active preparations to secure 
further licences in near-term 
licensing rounds
New areas
Assessing opportunities to 
extend our exploration model 
into new areas over the  
medium term 
 
7–9,000 boepd 
2013 production guidance 
Acquisitions
Assessing potential to acquire 
further production to enhance 
tax efficient cash flow
 
Outlook
Faroe Petroleum plc  Annual Report & Accounts 2012 03
Overview At a glance
Faroe Petroleum is an independent oil and gas  
company focusing principally on exploration,  
appraisal and production opportunities in the  
Atlantic Margin, the North Sea and Norway.
Overview
Barents 
Sea
North 
Sea
Norwegian 
Sea
Atlantic 
Margin
Iceland
Where we operate
5
We hold licences in 5 Northern Seas areas:
Atlantic Margin (UK) 
North Sea (UK & Norway) 
Norwegian Sea
Barents Sea
Iceland
  
 New licences awarded in 2012/13
 Exploration wells planned for 2013
 
 Principal producing fields
 
To learn more about our portfolio visit 
www.faroe-petroleum.com
9
1
5
1
1
2
2
3
1
04 Faroe Petroleum plc Annual Report & Accounts 2012 firm wells planned  
for 2013
wells drilled during 2012
6
See p21 for more on exploration and appraisal.
A throughput of new  
prospects is continuously 
worked up and matured  
to deliver a sustainable  
and active programme of  
high impact wells across  
a multitude of exciting and 
diverse exploration plays.
5
Exploration and appraisal
6,900
*
average boepd (2012)
7,000–9,000
boepd forecast  
production for 2013
* excludes economic production from 
East Foinaven
principal fields  
on production:
Njord
Brage
Ringhorne East
Blane
We have built a strong 
production portfolio  
generating tax efficient cash 
flow to fund our exploration 
and appraisal programme, 
setting us apart from a number 
of E&P companies.
4
See p29 for more on production and development.
Production and development
I6
Licence portfolio
See p21 for more on our exploration portfolio.
licences awarded  
in licence rounds 
Over the years we have 
built a balanced, world class 
portfolio of assets in the 
Atlantic margin, the North  
Sea and Norway, where  
we have secured material  
interests in over 60 licences.
See p27 for expected  
drilling programme
licences
60+
Faroe Petroleum plc  Annual Report & Accounts 2012 05
Overview Faroe Petroleum holds 
one of the largest acreage 
positions in Norway.
Overview
06 Faroe Petroleum plc Annual Report & Accounts 2012 Strong partnerships
Faroe has a commitment to long term partnerships 
and many of our new licences have been granted 
with Faroe as operator, with some of the world’ s 
leading industry players, such as E.ON, Statoil and 
T otal, as well as the Norwegian State-owned oil 
company Petoro AS.
Frontier explorer
Our core areas are among the most sought after 
exploration plays in the world, and, in addition to  
the North Sea and Norwegian Sea, include areas 
that are under-explorated (the Barents Sea and the 
Atlantic margin) and unexplored (Iceland).
Dynamic portfolio
A steady programme of exploration drilling 
throughout the years ahead is in prospect. Further 
advances are planned in building our production 
portfolio and from our strong financial position  
we plan to continue to win attractive new licences 
from which to generate further prospects for  
future drilling.
Overview
Faroe Petroleum plc Annual Report & Accounts 2012 07 Faroe is a high impact explorer.  
We balance our frontier activities 
with near-field exploration. 
Overview
08 Faroe Petroleum plc Annual Report & Accounts 2012 Sustainable growth
We have managed our finances such that we  
are able to sustain what we consider to be one  
of the most active and attractive drilling programmes 
of any small cap independent oil company. 
Balanced portfolio
The Company continues to build a balanced  
portfolio of exploration, appraisal, development  
and production assets with significant emphasis 
on the delivery of a high impact exploration and 
appraisal drilling programme.
Mitigating risk
Pursuing a portfolio exploration business model 
mitigates exploration risk while the monetisation 
of discoveries mitigates financial risk – two key 
characteristics of Faroe’ s disciplined approach  
to value creation.
Overview
Faroe Petroleum plc Annual Report & Accounts 2012 09 We are well positioned  
to deliver with expert 
technical teams and a 
highly experienced board 
and management team.
World class  
technical capabilities
Faroe’ s strong reputation and technical excellence  
have allowed us to pursue and deliver growth.
Financial discipline
Through prudent portfolio and financial 
management, the Company has at all times 
ensured that it has the necessary funding in place 
to participate with high stakes in a multi-well 
exploration programme.
Overview
10 Faroe Petroleum plc Annual Report & Accounts 2012 Experienced Board 
and strong management
Faroe Petroelum has an outstanding team of 
professionals who are deeply committed to  
creating value and achieving material success for  
our shareholders. We intend to take full advantage  
of our capabilities and strong growth platform  
going forward and are confident of delivering 
outstanding success in the years ahead.
Overview
Faroe Petroleum plc Annual Report & Accounts 2012 11 Faroe has maintained a consistent strategy 
since inception, focused on creating exceptional 
shareholder value from portfolio exploration. 
Through prudent portfolio and financial 
management, the Company has at all times 
ensured that it has the necessary funding in place 
to participate with material stakes in a multi-
well exploration programme on a consistent and 
sustainable basis. Indeed, for the past three years 
all of the Company’s investments have been 
funded from cash, operational cash flow and 
Norwegian tax rebates. This largely self-funding 
approach to our business model is one of Faroe’s 
great strengths particularly in these times of equity 
capital markets uncertainty. 
Faroe Petroleum has, through its highly successful 
application process, increased its number of licences 
to approximately 60. The Group has steadily grown 
to become one of the most successful applicants 
in the UK, Norway and recently Iceland. During 
the last year we secured a total of 16 new licences, 
our greatest award success to date. It is notable  
that many of the new licences have been granted 
with Faroe as operator, and in partnership with  
some of the world’s leading industry players, such 
as E.ON, Statoil and Total, as well as the Norwegian 
State-owned oil company Petoro AS. 
Dear shareholder,
The year delivered another busy period for the 
business, beginning and ending on a high, first  
with the Butch discovery and finally with the 
Rodriguez discovery, both of which are significant 
and with substantial upside. The Group had  
hoped for a repeat of the high exploration hit 
rates we achieved in 2010 and 2011, but we had 
a number of disappointing wells in 2012. It is 
important to acknowledge however, that such is 
the uncertain nature of exploration. The ongoing 
programme will test a variety of exploration plays, 
with a spread of risk and reward; this should be 
assessed on a portfolio basis, and with one of the 
largest in the UK and Norway, we remain confident 
with an overall discovery rate well ahead of the 
industry average. 
“ The year delivered another 
busy period for the business, 
beginning and ending on  
a high, first with the Butch 
discovery and finally with the 
Rodriguez discovery, both of 
which are significant and with 
substantial upside.”
Chairman’s letter
Overview
12 Faroe Petroleum plc Annual Report & Accounts 2012 As Faroe grows in size, so must the materiality  
of our exploration drilling programme. In order 
to deliver a growing high impact exploration 
programme into the future, we have commenced 
a process of assessing the potential for participation 
in new positions beyond our current geographic 
footprint, where we may expect to drill attractive 
frontier exploration wells in the medium term.  
Such expansion, if executed, would be designed  
to capitalise on our technical strengths, experience 
and competitive edge and would target play types 
similar to our existing assets.
In exploration we had an exciting programme in 
2012 with a total of seven wells drilled, two of which 
were significant successes, Butch and Rodriguez 
(completed post year-end), both in Norway. T echnical 
discoveries were also made on T -Rex and Cooper. 
Cooper is the subject of continuing work to assess 
the merits of a second well on the block. Although  
it did not find hydrocarbons, Clapton, the Group’ s 
first Norwegian well as operator, was drilled 
successfully, on budget and safely – an important 
achievement for the Company. 
During 2012 Faroe matured its asset base, 
building on the low cost exclusive acquisitions 
and swaps from 2011 and earlier. By making 
significant investments in its existing production 
and development assets the Company has further 
enhanced its high quality non-operated UK and 
Norwegian oil and gas production portfolio. 
These investments included the fast-track sub-sea 
development of Hyme and infill wells on Njord, 
Brage and Ringhorne East. Faroe now has a strong 
cash position, greatly enhanced cash flows from 
its production, boosted by currently high and stable 
oil prices, significantly increased committed debt 
facilities and access to Norway’s unique and highly 
attractive exploration tax rebate system. Faroe 
can therefore confidently continue its programme 
of high impact exploration and in-fill wells while 
pursuing its aggressive growth plans.
Iain Lanaghan is leaving the Board in 2013  
after four years as Group Finance Director. He 
has overseen a significant strengthening of the 
Company’s cash flow and balance sheet, including 
the formation of a strong international bank 
group to provide US$425 million of committed 
bank facilities. I would like to take this opportunity 
to thank Iain for all his diligent and hard work  
in guiding the Company into its position of financial 
strength and sustainability and wish Iain all the 
best for his future. The search for a replacement 
is well advanced and an announcement of the 
new appointee will be made in the near future.
Faroe’s strong reputation and technical excellence 
has allowed us to pursue and deliver growth in  
some of the most sought after oil and gas plays 
in the world. In addition we have built a highly 
profitable production portfolio to generate  
the cash flow we need to fund our wells. This  
has been achieved through focus, professionalism 
and a commitment to long term partnerships 
with some of the leading companies and 
Governments in the world of oil and gas. 
Faroe Petroleum has a truly outstanding team 
of professionals who are deeply committed to 
creating value and achieving material success for  
our shareholders. We intend to take full advantage 
of our capabilities and strong growth platform  
going forward and are confident of delivering 
outstanding success in the years ahead.
John Bentley
Chairman
Faroe Petroleum plc  Annual Report & Accounts 2012 13
Overview I am pleased to announce the audited results  
for the year ended 31 December 2012, a year 
of significant progress. The year saw a period 
of growth and consolidation across the portfolio 
of exploration, appraisal and production. Faroe’s 
focused portfolio exploration strategy, now largely 
self-funded, continues to serve us well and we now 
occupy a very strong position from which to grow.
Strategy – clear and focused 
Pursuing a portfolio exploration business model 
mitigates exploration risk and increases the 
probability of success by drilling a significant  
number of high impact wells every year. We have 
built solid foundations in the three main elements  
of our business model; exploration (application, 
licence awards, prospect maturation, discovery); 
monetisation (appraisal, sale, swap/trade into 
production); and financing (cash reserves, cash  
flow, debt facilities and tax efficiency). Each  
of these areas commands substantial attention 
and resource for the business cycle to perform 
optimally. As demonstrated over the years,  
we focus on monetising our discoveries in the  
near term wherever we can in order to realise  
value, generate cash flow, and maintain a good 
portfolio balance, without excessive financial 
exposure to a single asset. 
Over the years we have built a balanced, world class 
portfolio of assets in the Atlantic margin, the North 
Sea and Norway, where we have secured material 
interests in approximately 60 licences. Our core areas 
are among the most sought after exploration plays 
in the world, and, in addition to the North Sea  
and Norwegian Sea, include areas that are under-
explored (the Barents Sea and the Atlantic margin) 
and un-explored (Iceland). 
The Company’s exploration portfolio is directed 
towards high impact wells in both near-field (close  
to existing infrastructure) and frontier positions.  
The vast majority of our licences have been won 
through licence rounds, having been successful year 
after year in competitive licensing rounds in the UK, 
Norway, Faroe Islands and now Iceland. 
“ Our model has worked very  
well, our entire 2012 drilling 
programme (exploration, 
appraisal and development) 
was funded from a combination 
of existing and operational cash  
flow and Norwegian tax rebates.”
CEO’s review
Review of the year
14 Faroe Petroleum plc Annual Report & Accounts 2012 “ 2013 kicked off with a significant discovery at Rodriguez, 
and our portfolio of exploration licences ensures  
Faroe has an exciting and material drilling programme 
ahead with five firm high impact exploration and  
appraisal wells planned; including the Darwin prospect  
in the Barents Sea and a continuing programme of 
production in-fill wells. We look forward to an exciting 
period ahead.”
A throughput of new prospects is continuously 
worked up and matured to deliver a sustainable  
and active programme of high impact wells across  
a multitude of exciting and diverse exploration plays. 
In this way we ensure our model is sustainable, 
with the aim of drilling four or more high impact 
wells every year, and delivering high value growth 
for shareholders. 
We have chosen to build a strong production 
portfolio to generate tax efficient cash flow to  
fund our exploration and appraisal programme, 
which is an enviable position, setting us apart  
from a number of E&P companies. This model has 
worked very well for us such that our entire 2012 
drilling programme, encompassing exploration, 
appraisal and development wells was funded from  
a combination of existing cash, operational cash 
flow and Norwegian tax rebates. 
Faroe Petroleum has been particularly active on the 
Norwegian Continental Shelf, recognised in recent 
years as one of the most important and successful 
exploration provinces in the world. In the past  
two years giant new oil field discoveries were made, 
most notably Skrugard and Havis, representing  
a breakthrough for exploration in the Barents Sea, 
and Avaldsnes and Aldous (now known as Johan 
Sverdrup) on the Utsira High in the Norwegian North 
Sea. Combining Norway’s under-explored oil and gas 
potential with its unique tax refund system, designed 
to encourage exploration by shielding explorers  
from 78% of exploration costs, Faroe is well placed 
to achieve great success there. This tax regime allows 
us to hold much larger equity positions in wells than 
would be possible in the UK or elsewhere.
At the same time we have continued to build one  
of the largest exploration acreage positions among 
UK independents in the West of Shetland area, 
where we have several material large frontier 
well opportunities, including the Grouse and 
Aileen prospects. 
In Iceland, we have chosen to build a position in the 
northerly waters to the south of Norwegian owned 
Jan Mayen Island. The main attraction is the very 
large prospect sizes there, but also the expectation 
that, like Greenland and the Barents Sea, this area 
will attract the attention of the major oil companies 
seeking high impact exploration opportunities in 
frontier virgin basins.
See p19 for  
our business  
model.
Faroe Petroleum plc  Annual Report & Accounts 2012 15
Review of the year Exploration performance – growing activity
The year was a particularly active year of exploration 
drilling for us with Butch, T -Rex, Kalvklumpen, 
Cooper, Clapton and Rodriguez being drilled in 
Norway, and North Uist being drilled in UK, West  
of Shetland, and Spaniards in UK Central North Sea. 
Butch delivered a very exciting new discovery with 
light oil in excellent quality reservoir sands. It also 
delivered a new play with significant appraisal and 
exploration follow up potential, and further wells 
scheduled for H2 2013 and H1 2014, with the 
intention of proving up more resource ahead of  
a development decision. The T -Rex well in Norway’s 
Halten Terrace was Faroe’s first well targeting  
a new play type in Cretaceous reservoirs. The  
well confirmed the presence of oil but in a thinner 
than expected reservoir interval. We have since  
the year-end announced success in the Cretaceous 
on the Rodriguez well and this may represent  
a significant breakthrough for this new play type. 
While the Kalvklumpen well in the North Sea 
encountered excellent reservoirs, no hydrocarbons 
were encountered. However, an extensive data 
gathering programme was undertaken, and despite 
this initial disappointment, the data indicate good 
follow up potential in this and adjacent licences. 
Clapton was Faroe’s first well as operator in  
Norway, and the Company demonstrated its ability 
to operate both safely and successfully, delivering  
a well without serious incident, on schedule and  
on budget. 
The Cooper well in the Norwegian Sea encountered 
hydrocarbons but none were flowed to surface in 
the subsequent drill stem test. Despite this, further 
technical work is being carried out on the Cooper 
well results with a view to potentially drilling 
a further well on the licence in a better location. 
Operations on the North Uist well in the West of 
Shetlands basin are finally being brought to a close 
and an announcement of the results is expected 
in the near future.
Faroe’s drilling programme has achieved a high 
success rate and many significant discoveries.  
This performance has not only served to validate  
the corporate strategy but has also enabled 
successful execution of several asset deals where 
discoveries have been exchanged for cash or 
material, long-life production assets. The ability  
to monetise the exploration portfolio is key to the 
Company’s business model and, with multiple 
high-impact prospects planned to be drilled over  
the months and years ahead, we would fully expect 
to see further value-accretive deals completed in  
due course. 
 
Licence applications – high success rate
As a fundamental feature of our business model,  
the addition of new licences through licence  
rounds in 2012 and the start of 2013 exceeded 
expectations. The Company was awarded a total  
of 16 new licences: seven in the UK 27th Round 
(three of which are operated); a further eight 
new licences in the 2012 Norwegian Awards in 
Predefined Areas (“APA”) Licence Round (three 
of which are operated); and a frontier licence in 
Iceland (as operator), each with high equity levels. 
The majority of these were generated by our own 
in-house team and the high number of awards  
in very competitive rounds further demonstrates  
the level of confidence held in the Company by  
the respective host authorities. 
Production portfolio – balanced with  
good upside
In 2011 Faroe completed the landmark swap 
transaction with Petoro (Norwegian State oil  
and gas company) of its 30% share in the Maria  
oil field discovery in Norway for Petoro’s interests 
primarily in three high quality producing oil and gas 
fields, Brage, Njord and Ringhorne East. Faroe’s 
entire portfolio of producing assets (which includes 
the UK fields Blane and Schooner, generated 
average production in 2012 of around 6,900 boepd, 
with around 68% oil and 32% gas and condensate. 
This significant increase in average production from 
2,500 boepd in 2011 to 6,900 boepd in 2012  
gives the Group far greater cash flow than ever 
before. This low cost production (opex per boe was 
US$34 in 2012 compared to a realised average oil 
price of US$113 per barrel, and an overall average 
realised price per boe of US$95) benefits significantly 
from carried forward tax losses in the UK and capital 
allowances in Norway.
Review of the year
16 Faroe Petroleum plc Annual Report & Accounts 2012 Following the growth of our production portfolio, 
we have the complementary route to add significant 
potential value in our producing fields through  
active in-fill drilling, field tie-backs and near field 
exploration programmes. During the year £49.3 
million was invested in further development and 
extending production in these fields. In particular, 
there was significant investment in the Hyme 
sub-sea development, which came on stream in 
February 2013, and is expected to deliver around  
10 to 15% of Faroe’s production volumes in 2013.  
In September 2012 the Group announced the 
acquisition from Marubeni of a 10% share in East 
Foinaven (together with a 0.5% interest in the West 
of Shetland Pipeline System) with an effective date  
of 1 January 2012 and completion is expected in the 
coming period. The cashflows from East Foinaven 
will be sheltered from UK tax due to the carried 
forward tax losses.
Finances – strong and tax efficient
The Group is in a strong financial position with  
2012 year-end unrestricted cash of £72.9 million, 
net of short term borrowings, a robust cash 
generating production base and significant  
debt capacity (Faroe has up to US$250 million  
of committed reserve-based lending and up to  
NOK 1 billion of committed Norwegian exploration 
facilities). The Company also aims to utilise its  
UK tax loss position against its future UK production 
revenues to ensure that tax on profits is minimised 
and the value of existing and near-term production 
barrels is maximised. This position is enhanced 
by strong cash flows from production in the UK and 
Norway, supported by continuing strong commodity 
prices. The combination of cash, operational cash 
flows and available debt facilities are expected to 
fund the Group’s planned exploration, appraisal  
and development programme while also providing 
headroom for growth. 
“ The Group is in a strong financial 
position with 2012 year-end 
unrestricted cash of £72.9 million.”
“  Significant incr ease  
in average production 
from 2,500 boepd in 
2011 to 6,900 boepd 
in 2012.”
Faroe Petroleum plc  Annual Report & Accounts 2012 17
Review of the year
Faroe Petroleum plc Annual Report & Accounts 2012 17 The Hyme field came on stream in February  
2013 with net production in 2013 expected to  
be approximately 1,200 boepd. In addition several 
in-fill wells are planned for 2013 on the Njord, 
Brage, Ringhorne East and Schooner fields. 2013 
production is expected to be 7,000–9,000 boepd.
Going forward we plan to apply our skills, 
knowledge and know-how to strengthen further 
our presence in our core areas and, if appropriate, 
extend these into new geographies to continue the 
generation of a strong future drilling programme. 
We will at all times focus on opportunities which 
capitalise on our technical and commercial strengths. 
With a robust balance sheet, strong cash flows and 
an excellent and strongly motivated team, we look 
forward to the period ahead with great excitement. 
Graham Stewart
Chief Executive
Outlook – active drilling and more deals
A steady programme of exploration drilling 
throughout the years ahead is in prospect. Further 
advances are planned in building our production 
portfolio and from our strong financial position  
we plan to continue to win attractive new licences 
from which to generate further prospects for future 
drilling. As a central component of our model,  
Faroe will also continue to prioritise the monetisation 
of discoveries and seek to capitalise on attractive 
new growth opportunities. 
Specifically, 2013 capital expenditure plans will be 
significant at approximately £170 million in total, 
including around £120 million on exploration  
(pre-tax rebate in Norway) and approximately 
£50 million on producing fields. These investments 
are all fully funded from existing cash, operational 
cash flow, and Norwegian tax rebates. This 
programme will provide shareholders with five wells 
planned for the remainder of 2013: four in Norway 
(Darwin, Snilehorn, Novus and Butch East), and one 
in UK (Perth appraisal well). The Novus exploration 
well in the Norwegian Sea, will be operated by  
Faroe and is scheduled for Q4 2013. 
Strategic vision Strategic drivers
Through the expansion  
of our world-class asset 
portfolio, we aim to become 
the leading independent 
exploration and production 
oil and gas company who  
are a trusted partner and 
employer of choice.
Win licences
•  Leverage our technical expertise
• Replenish exploration prospects
• Secure material equity stakes
Drill and discover
• Drill five material wells per year
• Spread risk and cost optimally
•  Partner with strong aligned 
companies
Monetise assets
• Exploit drilling success
• Trade assets across value cycle
• Maximise trade value
Generate revenue and create  
value for stakeholders
•  Increasingly fund wells from  
cash flow
•   Continue to build balanced  
production portfolio
• Achieve tax efficiency
Review of the year
18 Faroe Petroleum plc Annual Report & Accounts 2012 A robust business model
We have built solid foundations in the 
three main elements of our business model: 
exploration (application, licence awards, 
prospect maturation, discovery); monetisation 
(appraisal, sale, swap/trade into production); 
and financing (cash reserves, cash
flow, debt facilities and tax efficiency). 
Each of these areas commands substantial 
attention and resource for the business 
cycle to perform optimally. As demonstrated 
over the years, we focus on monetising our 
discoveries in the near term wherever we 
can in order to realise value, generate cash 
flow, and maintain a good portfolio balance, 
without excessive financial exposure to 
a single asset.
Performance (KPIs)
Consolidate value, grow reserves, production and cash ﬂow
Prudent ﬁnancial management
Realise value of exploration discoveries
Exploit M&A skills and experience
Leverage competitive edge
Target ﬁve material high impact wells per year: near ﬁeld and frontier
Monetisation
Cash
Exploration
Production (boepd)
2012 6,900
2011 2,500
2010 1,200
2009 1,015
2012 6
3
4
4
2011
2010
2009
Wells drilled per year
2012
2011
2010
96,278
40,882
5,995
EBITDAX (in £’000)
2009 5,211
Turnover (in £’000)
2012
2011
2010
158,792
80,233
15,087
2009 7,005
2012
2011
2010
2009
Profit/(loss) after tax (in £’000)
–5,178
47,407
–20,350
–6,912
Faroe Petroleum plc  Annual Report & Accounts 2012 19
Review of the year Licences
in some of the world’s  
most sought after frontier 
exploration provinces.
Operational review
Review of the year
20 Faroe Petroleum plc Annual Report & Accounts 2012 Exploration
Faroe Petroleum remains focused on 
delivering exploration success in its core 
areas in the North Sea (UK and Norway), 
Norwegian Sea, Barents Sea (Norway)  
and Atlantic margin supported by and 
financed largely by its production assets. 
The Company possesses considerable 
detailed knowledge and expertise in  
each of these areas, which was clearly 
demonstrated last year by the successful 
licence awards both in the UK and  
Norway. The Company is also focussing 
on new Arctic frontier regions which 
contain high impact exploration 
opportunities such as in Iceland, where  
a new large exploration licence was won.  
The Company continues to build  
a balanced portfolio of exploration, 
appraisal, production and development 
assets with significant emphasis on the 
delivery of a high impact exploration  
and appraisal drilling programme. 
Faroe Petroleum plc  Annual Report & Accounts 2012 21
Review of the year  Ex plo r a tion (continued)
UK
Exploration activity
Significant new development projects include the 
Laggan-Tormore gas project, which is the first gas 
development in this area and the installation of  
new gas export infrastructure has led to increased 
interest in exploration for gas. New tax incentives  
for deep water developments were introduced 
by the UK Government early last year and this has 
further stimulated exploration and development 
activity. The planning of Chevron’s Rosebank 
project is underway, which is expected to lead to 
further activity and installation of new deep water 
infrastructure in the area.
The Atlantic margin remains an important focus area 
for Faroe Petroleum. The Company currently holds 
one of the largest acreage positions in the Atlantic 
margin which includes ten licences, of which six 
are operated by Faroe, covering over 5,000 km
2
. 
The portfolio is diversified with several promising 
and independent exploration plays being pursued 
in parallel which are expected to generate an active 
programme of exploration drilling in the coming 
years. Since 2009, the Company has drilled five 
exploration wells in the Atlantic margin of which 
three were discoveries. 
Review of the year
“ We are looking forward to an exciting 
drilling programme which includes two 
wells to follow up the Butch discovery 
from last year, an appraisal on the 
Rodriguez discovery, as well as our  
next Faroe-operated well, Novus, 
in the Norwegian Sea. ”
Helge Hammer
Chief Operating Officer
22 Faroe Petroleum plc Annual Report & Accounts 2012 The Atlantic margin is a considerable  
oil and gas province and contains some  
of the UK’ s largest producing oil fields;  
Clair, Foinaven and Schiehallion. 
Operations on the BP operated North Uist exploration 
prospect (Faroe 6.25%) are in the final stages. Drilling 
of this deep-water well commenced in March 2012, 
but due to extensive drilling related technical issues, 
significant delays have been experienced. The North 
Uist well is targeting a very large structure to the 
north of the Rosebank discovery. T o manage the  
high cost of this well, Faroe secured a financial carry 
of a portion of the well cost, and retained a relatively 
small 6.25% licence equity. 
The Grouse prospect (Faroe 50% and operator) 
is a very large structural prospect with an exciting 
seismic anomaly indicating the possible presence 
of light hydrocarbons. The prospect is located 
on the northern part of the Corona Ridge in post 
basalt Eocene layers. An electromagnetic survey was 
acquired over the prospect during the summer and 
the final evaluation of the prospect is in progress 
ahead of a drilling commitment decision. 
In July 2011, the Company drilled an exploration 
well on the Fulla prospect which found the Clair 
and Whiting reservoir sands oil bearing. Extensive 
technical work was undertaken to establish the 
resource potential and assess a means of economically 
developing the Fulla discovery in conjunction with  
the 1980 Freya discovery, located immediately to  
the south in the adjoining Block 206/10a. The results 
of this work confirmed both relatively poor quality 
oil and a smaller than expected resource size and 
accordingly this acreage has been relinquished.
In the Central North Sea, south of the Perth field, 
on Block 15/21a Faroe participated in the Spaniards 
exploration well (Faroe 8.4%) with Premier Oil as 
operator. While the well was not a success, Faroe’s 
costs were fully carried. 
New licence awards
In October, Faroe announced that it had been 
awarded seven new exploration licences in the  
UK’s 27th Offshore Licensing Round, one of which 
has since been incorporated within the Grouse 
P .1853 licence. 
In the Atlantic margin, the Glenfarclas (Faroe 
33.34%), Dunvegan (Faroe 50%) and Ribbon  
(Faroe 50%) traditional licences contain a 
combination of large structural and stratigraphic 
traps of Palaeocene and Cretaceous age. The  
new licences are located along the flanks of the 
Faroe-Shetland basin in an emerging exploration 
play where several gas discoveries have already  
been made including Faroe’s Glenlivet discovery  
and Total’s Edradour discovery. Faroe was awarded 
operatorship of the Glenfarclas and Dunvegan 
licences. Faroe was also awarded an extension  
of the existing Grouse licence (Faroe 50%)  
allowing for the entire prospect to reside within 
Faroe-held acreage. 
Faroe Petroleum was awarded two new licences  
in the Central North Sea. Fulmar B is a new 
traditional licence operated by Endeavour Energy 
(Faroe 33.3%), located on the southern margin  
of the Central Graben, and contains a number 
of leads both at Palaeocene and Jurassic levels.  
In the Greater Perth Area, Faroe was awarded  
the Birnam traditional licence (Faroe 33.33%)  
with Parkmead as operator. This licence is located  
in the Outer Moray Firth, north east of the Perth  
oil field, in which the partnership already holds  
an interest and contains an attractive Upper  
Jurassic prospect. The Company was also awarded 
the Pinsent licence (Faroe 50%) on the western  
edge of the Northern North Sea Viking Graben,  
to the north of the BP operated Bruce field.  
This traditional licence, operated by RWE Dea,  
is targeting a new Palaeocene play.
Faroe Petroleum plc  Annual Report & Accounts 2012 23
Review of the year  Ex plo r a tion (continued)
Norway
During the seven years since Faroe Petroleum 
established its presence in Norway, the 
Company has consistently been amongst the 
most successful in the various licence rounds. 
Licence rounds
In the 2011 APA round, announced in January  
2012, this was again demonstrated when Faroe won 
seven new licences, including operatorship of three 
licences, and in the 2012 APA round, announced 
in January this year, Faroe won a further eight 
licences, three of which as operator. Out of a total 
of 47 companies which submitted applications in 
the 2012 APA round, only three companies won 
more licences. The current portfolio extends from 
the shallow water region in the south, across the 
Norwegian North Sea, the Norwegian Sea and into 
the arctic region of the Barents Sea, and contains an 
excellent variety of low risk exploration and appraisal 
assets as well as high impact frontier assets. The 
licences are at various stages of maturity, which 
generates an active high quality drilling programme. 
Drilling
There has been a considerable increase in 
exploration activity in Norway in recent years with 
many new players competing for acreage and an 
increasingly high number of exploration wells being 
drilled. 2012 saw the arrival in Norway of Cairn 
Energy and Tullow Oil through the acquisitions  
of Agora Oil & Gas and Spring Energy respectively. 
Exploration activity in Norway has been very 
successful with high discovery rates and some of  
the largest oil discoveries in the world during the  
last few years including the billion barrel Johan 
Sverdrup discovery (formerly known as Aldous and 
Avaldsnes) in the middle of the Norwegian North 
Sea and the Skrugard and Havis oil discoveries  
in the Barents Sea, which represent a breakthrough  
in a new petroleum province. 
The Group has had a good track record of success 
in Norway. Since 2010 the Group has drilled eight 
wells and made four discoveries. Three of these 
discoveries, Fogelberg, Butch and the most recent 
Rodriguez, are being progressed with further 
appraisal planned ahead of development decisions, 
and the Maria discovery was successfully swapped 
with Petoro for producing assets in Norway.
The Butch discovery well (Faroe 15%) drilled in late 
2011/early 2012 found a light oil in an excellent 
quality reservoir on the north-west side of a large 
salt structure. The discovery is located in 66 metres 
of water depth in the Norwegian North Sea 
close to the Ula and Gyda fields. Centrica as the 
operator has started working on a development 
plan for the Butch discovery and, in parallel, is also 
planning two further exploration wells to be drilled 
towards the end of this year and early 2014 on the 
untested south-western and eastern sides of the 
same large salt structure. The well planning work is 
being carried out in parallel with the development 
planning to allow the latter to be fast tracked, 
irrespective of the outcome of the two additional 
exploration wells.
The Kalvklumpen well (Faroe 20%) in the Northern 
North Sea was drilled at the beginning of the 
year and found excellent reservoir at both target 
levels but did not encounter hydrocarbons. After 
incorporating the Kalvklumpen results and new 
information from other wells, the understanding of 
the petroleum system in this area is improving and 
several promising new targets have been identified. 
Review of the year
24 Faroe Petroleum plc Annual Report & Accounts 2012 The results of the T -Rex well (Faroe 30%) were 
announced in March 2012. The well found oil, but 
unfortunately encountered a thinner than expected 
reservoir section. T -Rex was the first well to target 
the high potential Cretaceous play in this area and 
data from the well provided an important calibration 
point for further evaluation and de-risking of other 
prospects on this play type including the Rodriguez 
discovery, the results of which were announced 
in January 2013. Moveable hydrocarbons were 
discovered in the Lower Cretaceous sandstone layers 
in the Lange formation, which contain an estimated 
gas condensate column of over nine metres net pay. 
Wintershall as operator estimates the preliminary 
size of the discovery at between 19 and 126 million 
barrels of recoverable oil equivalent (net to Faroe 
Petroleum approximately 6 to 38 mmboe). This is the 
first exploration well drilled on the Rodriguez licence 
PL475 and further appraisal will be required to 
establish the lateral extent and size of this discovery. 
In addition to the Rodriguez discovery, Faroe 
Petroleum already has the Fogelberg gas discovery 
also in the Norwegian Sea, which is being matured 
towards a development decision to coincide with gas 
export capacity becoming available in the Norwegian 
pipeline system in a few years time. In this context, 
it is noted that the Norwegian Authorities have 
recently proposed a significant reduction in gas 
transportation tariffs for new gas field developments 
in Norwegian waters. This proposal is now in a 
consultation process and, if introduced, this change 
to tariffs would significantly improve project 
economics both of Fogelberg and Rodriguez. 
In June, Faroe announced the result of the 
Norwegian North Sea Clapton exploration well 
which was drilled on the side of the Mode Dome 
salt diapir (Faroe 40% and operator). Whilst the 
well encountered the primary chalk reservoir 
on prognosis, it did not contain hydrocarbons 
of producible quantities. It is worth noting that this 
well, which was Faroe Petroleum’s first operated  
well in Norway, was drilled successfully on budget 
and on schedule. 
The results of the Cooper well (Faroe 30%) were 
announced in August. Oil was encountered in  
a 59 metres gross section within the Garn Formation 
and 10 metres gross section within the Ile Formation.  
A drill stem test to evaluate the potential productivity 
was undertaken although surprisingly, and unlike 
other wells in the area, no hydrocarbons flowed to 
surface. A large amount of data was collected and 
work continues to resolve why the Garn formation  
is tight in the Cooper well and whether this is likely 
to be a local or a field wide reservoir phenomenon. 
Acquisition
Also in August, Faroe acquired a 12.5% share in 
licence PL531 in the Barents Sea, containing the 
Darwin prospect on which drilling commenced  
in March 2013. The prospect consists of a large 
closure at multiple levels located on the Veslemøy 
High in the frontier western part of the Barents  
Sea approximately 60 to 80 kilometres to the south 
west of the recent breakthrough oil discoveries 
on Skrugard and Havis. Faroe also holds two other 
very large exploration licences in the Barents Sea 
located between the Total operated Norvarg gas 
discovery to the East and the large Skrugard and 
Havis oil discoveries to the West. On the Samson 
Dome licence (Faroe 20%), a new 3D seismic  
dataset is being interpreted while in the Kvalross 
licence (Faroe 40%) a large new 3D seismic survey 
was acquired this summer and is currently being 
processed. Both these licences are being matured 
towards drilling decisions.
Faroe Petroleum plc  Annual Report & Accounts 2012 25
Review of the year  Ex plo r a tion (continued)
Iceland
The licence (Faroe 67.5% and operator) is  
extensive, encompassing seven licence blocks 
located to the south of the Jan Mayen Ridge,  
which in turn is located inside the Arctic Circle  
to the north east of Iceland.
The new offshore licence is located to the south 
of the Jan Mayen Island, on a ridge which forms 
part of the Jan Mayen micro continent. This micro 
continent lies between the conjugate margins of 
both East Greenland and the Norwegian Continental 
Shelf, where several giant oil and gas fields have 
been developed. Recent samples taken from the 
seabed within the northern part of the new licence 
area have indicated the presence of both Mesozoic 
sedimentary rocks and a working hydrocarbon 
system. These are key components associated with 
many of the oil accumulations found in offshore 
fields in Norway and the UK. 
The award of the licence was ratified in January 
2013 and Faroe Petroleum has mapped several very 
large structures within the licence area and will now 
set about de-risking these prospects with the agreed 
work programme. 
In December, Faroe Petroleum 
announced a provisional 
exploration licence award in  
the Dreki area on the Icelandic 
Continental Shelf in the  
Icelandic 2
nd
 Licensing Round.
Review of the year
26 Faroe Petroleum plc Annual Report & Accounts 2012 Expected drilling programme
Our ongoing programme will test a variety of exploration 
plays, with a spread of risk and reward. With one of  
the largest portfolios in the UK and Norway, we remain 
confident with an overall discovery rate well ahead 
of the industry average.
2013 2014
Prospect WI Operator Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
N. Uist/Cardhu 6.3% BP
Rodriguez South 30.0% Wintershall
Darwin 12.5% Repsol
Snilehorn 7.5% Statoil
Novus 50.0% Faroe
Butch – East 15.0% Centrica
Solberg 30.0% Wintershall
Perth 34.5% Parkmead
Butch – South West 15.0% Centrica
Brage – Brent deepening 13.4% Statoil/Wintershall
Oksen 20.0% Det Norske
Shango 20.0% Total
Grouse 37.5% Faroe
Brage North Appraisal 13.4% Wintershall
Field WI Operator Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Brage infill 13.4% Statoil/Wintershall
Njord infill 7.5% Statoil
Hyme development 7.5% Statoil
Schooner 6.9% Tullow
Expected Firm
Faroe Petroleum plc  Annual Report & Accounts 2012 27
Review of the year wells per year
Proposed high impact 
exploration programme  
of 5 wells per year.
Operational review
Review of the year
28 Faroe Petroleum plc Annual Report & Accounts 2012 Production 
and development
In 2012, Faroe produced a net 
average 6,900 boepd of oil  
and gas derived principally from  
the Njord, Brage and Ringhorne  
East fields in Norway and the 
Blane field in the UK, excluding 
production from the acquisition 
of East Foinaven which is yet to 
complete. Smaller contributions 
to production came from the 
Glitne and Jotun fields in Norway, 
as well as the Schooner, Topaz 
and Wissey gas fields in the 
Southern Gas basin in the UK.
Faroe Petroleum plc  Annual Report & Accounts 2012 29
Review of the year In addition, fields that are progressing in the 
appraisal phase and towards developments include 
Butch and Fogelberg in Norway, Glenlivet and 
Tornado in the west of Shetland and Perth in the  
UK Central North Sea. 
Production  
During 2012, the Njord field (Faroe 7.5%) underwent 
a significant upgrade and development work 
programme, which included riser replacements,  
a low pressure project, preparations for the North 
West flank development and the tie-in of the Hyme 
satellite development project. The programme 
which involved shutting down production for 
extensive periods was exacerbated by unscheduled 
interruptions in the final quarter of 2012.
In the Brage field (Faroe 14.25%) production was 
interrupted for two weeks in July due to an oil 
workers strike but otherwise continues to produce 
with high uptime. The drilling of new in-fill wells 
continued in the first half of 2012, but as planned, 
drilling was halted temporarily in order to carry out 
maintenance and upgrades to the drilling equipment 
to allow for the drilling of long reach wells in 2013. 
The Ringhorne East field (Faroe 7.8%) has  
produced at stable rates during the first half of  
the year. The first of two long reach in-fill wells 
targeting un-drained oil identified on 4D seismic  
was completed and came on stream at the end 
of July. 
The Glitne field (Faroe 9.3%) is approaching the 
end of field life and, following an unsuccessful in-fill 
well in early 2012 drilled by operator Statoil, work 
has commenced on planning the decommissioning 
of the field. Faroe is capped for a large part of the 
decommissioning cost through an agreement with 
DONG, and the remainder of this cost can be offset 
against income from production on other Norwegian 
fields for tax purposes. 
The Blane oil field (Faroe 18%) located in the  
Central Graben on the border between the UK and 
the Norwegian sector has continued to outperform 
expectations during the year, from a reservoir and 
well performance perspective, despite an extended 
period of downtime in the second half of the year 
resulting from an incident on the third party host 
platform Ula. 
Discoveries   
On the Glenlivet discovery (Faroe 10%) west of 
Shetland, concept selection was carried out on this 
material gas discovery, made in 2009. It is expected 
that activity on the asset will now go on hold  
for a period, pending availability of near term firm 
capacity in the third party export infrastructure, 
ahead of a field investment decision which  
is expected ahead of 2016. 
The Tornado discovery (Faroe 10%) contains 
significant gas resources and an oil rim in a high 
quality reservoir. Work continues with various field 
owners in the area on a joint development and 
export solution for these resources.
Production and development (continued)
Faroe has two fields in development: the Hyme field 
in Norway which came on stream in late February 
2013 and the Orca field in the UK which is due on 
stream late 2013 or early 2014.
Review of the year
30 Faroe Petroleum plc Annual Report & Accounts 2012 On Fogelberg (Faroe 15%) the operator is 
working towards field development to coincide 
with availability of transportation capacity in the 
Åsegard production and transportation system, 
which will allow for the gas to be transported from 
the Norwegian Sea to the European continent. 
As referred to above, if approved, the proposed 
significant reduction in gas transportation tariffs 
for new Norwegian gas field developments would 
significantly improve project economics. 
 
In the UK Central North Sea the Perth oil field (Faroe 
34%) is being matured towards field development 
by the operator, Parkmead. The Group has decided 
that further appraisal of the asset is required prior 
to a field investment decision, and an appraisal 
well is scheduled to be drilled late in 2013. In 
February 2013 Faroe announced the acquisition 
of a 50% interest in the Lowlander field which is 
fully appraised and located 16km from the Perth 
field (Faroe 34.62%). The acquisition creates the 
potential for an attractive joint Perth/Lowlander 
development as the collective volumes in these fields 
are significant, considering their central location in 
the UK North Sea.
Reserves 
As production and reserves are an increasing area  
of focus, during 2012 the Company took the 
decision to report internal reserves estimates for the 
first time. From now on, the Company will report 
its estimates of Proven plus Probable (2P) reserves 
as part of this Review of Activities. These estimates 
are made according to the Petroleum Resource 
Management System guidelines endorsed by the 
Society of Petroleum Engineers and are typically  
in line with or slightly below those estimates 
performed by a Competent Person whose results 
have historically been reported by the Company.
Reserves 
31.12.12
Liquids 
(mmbbls)
Gas 
(bcf)
Total
(mmboe)
Norway 10.7 28.6 15.5
UK 2.4 6.0 3.4
Group 13.1 34.6 18.9
All reserves, apart from the volumes associated with 
the Orca gas field in the UK, are from fields currently 
in production. The UK reserves do not include 
volumes associated with the East Foinaven field  
(the transaction is expected to complete H1 2013) 
which is estimated to contain 1.2 million barrels  
of oil equivalent net to Faroe which when added  
to the existing reserves total 20.1 million barrels  
of oil equivalent. 
Above: Illustration of the 
Hyme subsea tie-back 
to the Njord platform. 
Hyme came onstream 
in March 2013.
Faroe Petroleum plc  Annual Report & Accounts 2012 31
Review of the year Finance review
Overview
2012 was a period of considerable activity for the 
Group, with an extensive investment in production 
and development, the exploration programme and  
the winning of a significant number of new licences.  
The Group generated cash flow from operations 
during the year of £77.2 million, which, together 
with the Norway exploration facility, funded  
all exploration expenditure and most development 
capital expenditure, ending the year in a strong  
cash position with £72.9 million of unrestricted  
cash (31 December 2011: £111.6 million).
Income statement
Revenue was £158.8 million (2011: £80.2 million). 
This is a significant increase on last year, reflecting  
in particular the full year effect of acquisitions 
made in 2011 of the Brage, Njord, Ringhorne East 
and Jotun fields in Norway, and benefiting from 
continuing high oil prices. Cost of sales, including 
depreciation of producing assets, was £97.0 million 
(2011: £52.2 million), giving a gross profit for  
the year of £61.8 million (2011: £28.0 million) –  
a significant increase from previous years. EBITDAX 
for the year more than doubled to £96.0 million 
(2011: £40.9 million).
Exploration expenditure for the year was £79.7 
million (2011: £42.3 million). This expenditure 
includes pre-award exploration expenditure  
(£8.6 million) and write-offs of licence specific 
exploration and evaluation expenditure on previously 
capitalised licences where active exploration  
has now ceased (£71.1 million). The pre-award 
exploration expenditure included costs incurred in 
licence rounds. The licences which were relinquished 
and written off during the year included T -Rex, 
Clapton and Fulla/Freya together with other smaller 
write-offs over several exploration assets.
The Group’s reported loss before tax was £29.0 
million (2011: £14.3 million profit). Loss after tax 
was £5.2 million (2011 Profit: £47.4 million due 
principally to the exceptional gain of £40.0 million  
on the disposal of Maria).
Hedging
In line with Group business policy approximately 
43% of UK oil and gas sales in 2012 were  
hedged, with hedging losses of £0.6 million  
(2011: £0.3 million).
Review of the year
32 Faroe Petroleum plc Annual Report & Accounts 2012 See p51 for  
our accounts.
The Group has entered into hedging arrangements 
covering approximately 52% of 2013 and 39%  
of Q1 2014 (post tax) total expected oil production, 
predominantly in the UK, but has also commenced 
hedging of Norwegian production. These are a 
combination of zero cost collars and put options  
with floors predominantly at US$90 per barrel.
Norwegian tax rebates for exploration
In Norway, the Company benefits from a 78% 
exploration and appraisal cost rebate, meaning  
that for every £1 spent the Norwegian Government 
will return 78p of net exploration and appraisal 
expenditure in the form of a rebate the following 
year. The Company can also borrow under its 
Norway exploration facility a significant portion 
of the 78 pence per £ rebate, thereby maximising 
equity leverage in Norwegian exploration wells and 
minimising the need to farm down to third parties. 
From an exploration and appraisal perspective,  
the Norwegian tax system therefore ensures a very 
cost effective fiscal environment in which to explore 
for hydrocarbons.
Taxation
The amount of tax receivable at 31 December  
2012 was £48.5 million (2011: £53.7 million payable 
less £40.4 million overseas tax credit resulting in 
£13.3 million payable). The prior year was unusual  
in that Norwegian tax was payable, reflecting greater 
taxable profits on the assets obtained from Petoro 
compared to the exploration costs in Norway.
The tax credit in the Income Statement was £23.8 
million (2011: £33.2 million). The 2012 tax credit 
mainly consists of an overseas tax credit of £48.5 
million, with an increase in deferred tax liabilities  
of £24.0 million.
The overseas tax credit of £48.5 million consists of 
the tax refund on exploration expenditure in Norway 
net of taxable profits generated by producing assets. 
The refund will be received in December 2013.
“ 2012 was a period of considerable activity for the Group, 
with an extensive investment in production and development, 
the exploration programme and the winning of a significant 
number of new licences. The Group generated cash flow from 
operations during the year of £77.2 million, which, together 
with the Norway exploration facility, funded all exploration 
expenditure and most development capital expenditure,  
ending the year in a strong cash position with £72.9 million  
of unrestricted cash. ”
2012
2011
2010
96,278
40,882
5,995
EBITDAX (in £’000)
2009 5,211
Turnover (in £’000)
2012
2011
2010
158,792
80,233
15,087
2009 7,005
2012
2011
2010
2009
Profit/(loss) after tax (in £’000)
–5,178
47,407
–20,350
–6,912
Faroe Petroleum plc  Annual Report & Accounts 2012 33
Review of the year At December 2012, the Group had unrelieved  
tax losses in the UK of £75.4 million (2011: £70.3 
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.
The 2012 and 2013 UK Budget announcements 
boosted a number of areas in which the Company 
is active. For the Company’ s west of Shetland 
exploration programme there is the potential to 
benefit from a new £3 billion field allowance for 
deep water field developments (those located in 
more than 1,000 metres water depth and with 
reserves in excess of 180 mmboe) and for smaller 
fields there is expected to be an increase both to the 
threshold, to 45 mmboe (from 20 mmboe), and to 
the amount of the allowance, to £150 million (from 
£75 million). The Government also announced in 
the 2013 Budget that it will sign Decommissioning 
Relief Deeds with all companies which might 
potentially have to incur decommissioning liabilities, 
thus providing greater certainty over the level of 
tax relief that will be available for decommissioning 
expenditure. These measures will allow companies 
to move to post tax decommissioning guarantees, 
removing a major fiscal risk for operators in the  
UK North Sea which, in turn, could release assets  
for sale and funds for investment.
Balance sheet
Production and development investments of £49.3 
million excluding decommissioning asset additions 
(2011: £36.9 million) were made in the year. These 
mainly relate to investment in the Hyme development 
in Norway, and the drilling of in-fill wells at Njord, 
Brage, and Ringhorne East.
Exploration and evaluation investments of  
£111.8 million (2011: £59.2 million) were made in 
the year. These mainly related to drilling the T -Rex, 
Kalvklumpen, Cooper, Clapton, and Rodriguez  
wells in Norway (reflecting costs before the  
78% Norwegian tax rebates), and North Uist in 
the UK. After exploration write-offs in the year of 
£71.1 million (2011: £39.0 million), the intangible 
exploration and evaluation assets increased by  
£45.5 million to £145.1 million (31 December  
2011: £99.6 million). Net assets increased during  
the period to £231.7 million (31 December 2011:  
£230.8 million). 
Cash flow
Closing cash was £72.9 million (2011: £111.6 
million). The reduction is largely due to funding 
of the exploration programme, investment in 
production and development assets, and payment  
of 2011 Norwegian tax, offset by production cash 
flows and cash flows received from new borrowings.
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 1,000 million 
for provision of 75% of its eligible net exploration 
costs on a cash flow basis, such that only 25%  
of eligible exploration expenditure in Norway  
is funded from Company equity going forward. 
During the year the Group doubled the size of the 
committed facility, extended the facility by one 
year to 2015, and enlarged the bank group. This 
arrangement makes it possible to make greater 
investments in Norway exploration than would be 
possible elsewhere. In December 2012, a tax rebate 
of £48.5 million (December 2011: £13.3 million 
payable) was receivable in Norway, and £43.8 million 
(31 December 2011: £nil) was payable under the 
Norwegian exploration financing facility.
The Group also has a secured, substantially available 
but largely undrawn US$250 million (approximately 
£155.0 million) reserve based debt facility. During  
the year the Company doubled the size of the 
committed facility, extended it by one year to 2017, 
and increased the number of banks in the bank 
group. At the year end £7.4 million was payable 
under this facility (2011: £nil).
With a combination of the current cash in the 
business, cash flow from producing assets and 
available headroom in the Group’ s bank facilities, 
the Group will be able to fund all the planned 
capital expenditure (exploration and development/
production) for a number of years. The capital 
expenditure for 2013 is forecast to be up to  
£170 million.
Iain Lanaghan
Group Finance Director
Review of the year
34 Faroe Petroleum plc Annual Report & Accounts 2012 Board of Directors 36
Directors’ report 38
Statement of Directors responsibilities 45
Report on Directors’ remuneration 46
Governance
Accounts
Independent auditors’ report 51
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
Condensed Group cash flow statement 56
Condensed 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 92
Glossary
Faroe Petroleum plc Annual Report & Accounts 2012 35 John Bentley  
Non-Executive 
Chairman
Graham Stewart  
Chief Executive
Helge Hammer  
Chief Operating Officer
Iain Lanaghan  
Group Finance Director
Tim Read  
Senior Independent 
Non-Executive Director
Roger Witts 
Independent  
Non-Executive Director
Hanne Harlem 
Independent  
Non-Executive Director
Biography John is British and has 40 years 
experience in the natural resources 
sector. He holds a degree in 
Metallurgy from Brunel University, 
was appointed to the Board in 
September 2007 .
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 honors degree in Offshore 
Engineering from Heriot-Watt 
University and an MBA from 
Edinburgh University.
Helge is Norwegian and holds a 
degree in Petroleum Engineering 
from NTH University of Trondheim 
and in Economics from Institut 
Francais du Petrol in Paris. He 
joined Faroe Petroleum in 2006.
Iain is British and joined the Board 
as Group Finance Director in 2009. 
He is also founder and non 
executive chairman of Marwyn 
European Transport plc. 
Tim was appointed to the Board 
as Non-Executive Director 
in March 2009. He is currently 
a director of Metminco Limited 
and Capital Drilling Limited, 
has a BA (Economics) from the 
University of Strathclyde in 
Glasgow and is a Fellow of the 
Chartered Institute for Securities 
and Investment.
Roger is British and is a qualified 
accountant with over 30 years 
experience in the oil and gas 
industry. He was appointed to the 
Board in May 2007 as part-time 
finance director, became 
a Non-Executive Director in 
May 2009 and was deemed 
independent in December 201 1. 
Hanne is a qualified lawyer 
with over 25 years of experience  
in the business, financial and 
political arenas in Norway.  
She was appointed to the Board  
as an Independent Non-Executive 
Director in July 201 1.
Year appointed 2007 1998 2006 2009 2009 2007 2011
Board meetings attended 8/9 7/9 8/9 9/9 6/9 8/9 7/9
Experience John served in a number of senior 
management positions in the 
Gencor Group in South Africa, 
the USA, UK and Brazil. In 1996 
he was instrumental in floating 
Energy Africa Ltd on the 
Johannesburg stock exchange and 
became Chief Executive for the 
following five years. More recently 
he was Executive Chairman of 
FirstAfrica Oil plc and served on 
the Boards of Rift Oil plc and 
Adastra Minerals Ltd. He currently 
serves on the Board of a number 
of resource companies including as 
Deputy Chairman of Wentworth 
Resources Ltd, Non-Executive 
Director of Griffiths Energy 
International Inc and Chairman 
of Scotgold Resources Ltd.
Graham 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.
Previously Helge worked for 
Paladin Resources, where he was 
Asset Manager and deputy 
Managing Director, prior to that he 
worked at Shell for 13 years as a 
Reservoir Engineer, Team Leader 
and Business Manager in Norway, 
Oman, Australia and Holland.
Iain’s positions have included 
founder and CFO of the German 
transport group, Abellio, 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. 
He is a Chartered Accountant, 
having qualified with KPMG in 
London and Frankfurt.
Tim has over 40 years experience 
in the natural resource sector as 
an investment analyst, investment 
banker and corporate executive 
and director. 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). 
Roger 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.
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, 
Aker ASA and Hafslund ASA. In 
addition she has acted as Minister 
of Justice for the Norwegian 
Government and Managing 
Director of the University of Oslo. 
Hanne is currently head of the City 
of Oslo Legal Department.
Committee membership Audit Committee
Nominations Committee
Remuneration Committee
Nominations Committee – – Audit Committee
Nominations Committee
Remuneration Committee
Audit Committee
Nominations Committee
Remuneration Committee
Audit Committee
Nominations Committee
Remuneration Committee
Independent – – – – Yes Yes Yes
Board of Directors
36 Faroe Petroleum plc Annual Report & Accounts 2012
Governance Governance
John Bentley  
Non-Executive 
Chairman
Graham Stewart  
Chief Executive
Helge Hammer  
Chief Operating Officer
Iain Lanaghan  
Group Finance Director
Tim Read  
Senior Independent 
Non-Executive Director
Roger Witts 
Independent  
Non-Executive Director
Hanne Harlem 
Independent  
Non-Executive Director
Biography John is British and has 40 years 
experience in the natural resources 
sector. He holds a degree in 
Metallurgy from Brunel University, 
was appointed to the Board in 
September 2007 .
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 honors degree in Offshore 
Engineering from Heriot-Watt 
University and an MBA from 
Edinburgh University.
Helge is Norwegian and holds a 
degree in Petroleum Engineering 
from NTH University of Trondheim 
and in Economics from Institut 
Francais du Petrol in Paris. He 
joined Faroe Petroleum in 2006.
Iain is British and joined the Board 
as Group Finance Director in 2009. 
He is also founder and non 
executive chairman of Marwyn 
European Transport plc. 
Tim was appointed to the Board 
as Non-Executive Director 
in March 2009. He is currently 
a director of Metminco Limited 
and Capital Drilling Limited, 
has a BA (Economics) from the 
University of Strathclyde in 
Glasgow and is a Fellow of the 
Chartered Institute for Securities 
and Investment.
Roger is British and is a qualified 
accountant with over 30 years 
experience in the oil and gas 
industry. He was appointed to the 
Board in May 2007 as part-time 
finance director, became 
a Non-Executive Director in 
May 2009 and was deemed 
independent in December 201 1. 
Hanne is a qualified lawyer 
with over 25 years of experience  
in the business, financial and 
political arenas in Norway.  
She was appointed to the Board  
as an Independent Non-Executive 
Director in July 201 1.
Year appointed 2007 1998 2006 2009 2009 2007 2011
Board meetings attended 8/9 7/9 8/9 9/9 6/9 8/9 7/9
Experience John served in a number of senior 
management positions in the 
Gencor Group in South Africa, 
the USA, UK and Brazil. In 1996 
he was instrumental in floating 
Energy Africa Ltd on the 
Johannesburg stock exchange and 
became Chief Executive for the 
following five years. More recently 
he was Executive Chairman of 
FirstAfrica Oil plc and served on 
the Boards of Rift Oil plc and 
Adastra Minerals Ltd. He currently 
serves on the Board of a number 
of resource companies including as 
Deputy Chairman of Wentworth 
Resources Ltd, Non-Executive 
Director of Griffiths Energy 
International Inc and Chairman 
of Scotgold Resources Ltd.
Graham 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.
Previously Helge worked for 
Paladin Resources, where he was 
Asset Manager and deputy 
Managing Director, prior to that he 
worked at Shell for 13 years as a 
Reservoir Engineer, Team Leader 
and Business Manager in Norway, 
Oman, Australia and Holland.
Iain’s positions have included 
founder and CFO of the German 
transport group, Abellio, 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. 
He is a Chartered Accountant, 
having qualified with KPMG in 
London and Frankfurt.
Tim has over 40 years experience 
in the natural resource sector as 
an investment analyst, investment 
banker and corporate executive 
and director. 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). 
Roger 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.
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, 
Aker ASA and Hafslund ASA. In 
addition she has acted as Minister 
of Justice for the Norwegian 
Government and Managing 
Director of the University of Oslo. 
Hanne is currently head of the City 
of Oslo Legal Department.
Committee membership Audit Committee
Nominations Committee
Remuneration Committee
Nominations Committee – – Audit Committee
Nominations Committee
Remuneration Committee
Audit Committee
Nominations Committee
Remuneration Committee
Audit Committee
Nominations Committee
Remuneration Committee
Independent – – – – Yes Yes Yes
Faroe Petroleum plc Annual Report & Accounts 2012 37 The Directors present their Annual Report and the audited 
financial statements for the year ended 31 December 2012.
Principal activities
The principal activities of the Group are the exploration, 
appraisal, production and development of oil and gas reserves. 
The principal geographic areas of activity during 2012 were the 
North Atlantic margin, the North Sea, the Norwegian Sea and 
Barents 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
Aside from the generic risks that face all businesses the 
following are some of the key risks the Group faces:
Exploration, development & production risk
The Group operates in a harsh environment that may result 
in increased risk, greater costs 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 and arctic region. In addition 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 these risks 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 a shortage or delays in the delivery of drilling rigs 
and other equipment which are in short supply. 
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, licences and other interests as well as for the 
recruitment and retention of skilled personnel. The challenge 
to management is to secure assets and recruit and retain staff 
without having to pay excessive premiums.
Competition for drilling rigs, support vessels and services has 
led to a sharp increase in all operating costs from site surveys 
through to decommissioning which can have a major impact 
on both the cash outlay and economic viability of a project. 
There is also competition for access to pipelines and other 
infrastructure which may delay the development of a field 
and thereby its economic value.
In formulating bids to acquire assets, the Company utilises 
experienced senior professionals within the Group to ensure 
that any bids are submitted at a competitive price that reflects 
the potential risked asset value. Prior to any asset being 
evaluated, senior management review the target to ensure 
it fits within the parameters set at the commencement 
of each year.
Commodity prices and fiscal regimes
The market price of hydrocarbon products is volatile and when 
the price of hydrocarbon products drops significantly, or the 
fiscal regime changes materially for the worse, the economic 
prospects of the projects in which the Group has an interest 
can be significantly reduced or rendered uneconomic. There  
is a particular risk when committing to long term development 
contracts based on assumed future hydrocarbon prices. 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 but 
such arrangements will only cover the relatively short term 
and the Group is exposed to any longer term decline in 
commodity prices. 
38 Faroe Petroleum plc Annual Report & Accounts 2012
Directors’ report
Governance Governance
Area KPI Comments
Health, Safety and Environment Lost Time Injury Frequency Rate (LTI) No time was lost on operations during the period.
Serious Incident Rate (SI) None
Operational The number of exploration licences Enough licences to generate 3–5 wells per annum.
The number of wells drilled Target 3–5 per annum. 6 actual for 2012.
Exploration success rate To be better than the industry average. 3 out of 7 wells were technical discoveries.
Reserves/resources added by drilling Reserves growth achieved through a combination of drilling and acquisition; 
resources added through drilling did not exceed those written off.
Production Production increased from 2,500 in 2011 to 6,900 boepd in 2012.
Finance and Market Share price performance Relative share price performance is disclosed on page 48.
Net cash position Adequate cash at all times. Year end balance of £72.9 million.
Exploration funding All firm wells are fully funded.
Human Resources Senior employee retention rate One senior employee left the Company during 2012.
Cash flow and Financing
The ability to finance firm commitments and develop the 
Group’s business depends upon:
(i)  cash flow from the Group’s producing assets: as a non-
operator, cash flow from the Group’s producing assets is 
dependent upon a combination of factors including field 
performance, commodity prices, fiscal regime and operating 
costs all of which are substantially out of the control of the 
Group. The Group seeks to mitigate this risk by maintaining 
a portfolio of oil and gas producing interests in both the UK 
and Norway.
(ii)  finance from the capital markets, debt finance, tax rebates 
(in Norway), farm downs and 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, some interests may be relinquished and/or the 
scope of operations reduced.
Physical catastrophe
As a participant in offshore exploration, production and 
development the Group is exposed to material risk in the event 
of there being a major physical catastrophe. The Group 
maintains a programme of insurance to cover such exposure 
up to recognised industry limits but should an incident occur of 
a magnitude in excess of such limits, the Group would be fully 
exposed to the financial consequences.
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 Review.
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, appraisal 
and production operations:
Faroe Petroleum plc Annual Report & Accounts 2012 39 40 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
Directors’ report 
(continued)
Results and dividends 
The Group financial statements are set out in pages 52 to 59 
and are presented in Pounds Sterling. The Group’s net loss 
for the year was £5,178,000 (2011: profit £47,407,000). 
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 27 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 19 to the Group 
financial statements. Over the period the Company had three 
share incentive schemes by which directors and employees 
may; (i) be granted options under a share option scheme, at 
prevailing market prices, to subscribe for shares in the Company; 
(ii) be issued shares under a co-investment plan, and (iii) be 
issued shares under a share incentive plan. The maximum 
aggregate number of shares which may be issued in respect 
of these schemes is 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
Timothy P Read
Roger C Witts
Hanne Harlem 
The names of the Directors and secretary of the Company 
during and after the financial year are set down on page 92 
and included in the Directors’ biographies.
Corporate Governance and the UK Corporate 
Governance Code
The Directors support high standards of corporate governance 
and comply with the main principles of the UK Corporate 
Governance Code 2010 (the “Code”). The Board considers 
that the Company has been in compliance with the main 
principles of the Code throughout the period.
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 2012.
The following describes the principal elements of the Group’s 
internal control system and processes employed to review the 
effectiveness of such system:
Strategic 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.
Management structure
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.
Risk management
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.  Governance
Faroe Petroleum plc Annual Report & Accounts 2012 41
Budgetary 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 also amends  
and updates the rolling five year plan each year which is also 
approved by the Board.
Annual review
The effectiveness of the Group’s system of internal control 
is reviewed on an annual basis. The Audit Committee 
undertook a review in December 2012 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 the key risks that face the Group to be appropriate.
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 committees
The Board
At 31 December 2012 the Board was comprised of 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 42, to 
review trading performance, set and monitor strategy, examine 
acquisition and divestment possibilities, approve major capital 
expenditure projects, and other significant financing matters 
and report to shareholders. The Board delegates authority to 
the management for 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, 
as required under the Code, 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; Tim Read (senior independent 
director), Hanne Harlem and Roger Witts. Mr Witts was an 
Executive Director of the Company until May 2009 which is 
within the five year period set down by the Code as a measure 
of independence. The Board has, however, evaluated Mr Witts’ 
judgement, character and performance since that date, and 
continues to be satisfied that he acts as an independent 
director and in the best interests of the Company and its 
shareholders and so continue to deem him to be independent.
The Chairman, Executive Directors and Non-Executive Directors 
have other third party commitments including directorships 
of other companies as disclosed in the Directors’ biographies. 
The Company is satisfied that these associated commitments 
have no measurable impact on their ability to discharge their 
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 provisions, 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. 42 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
Directors’ report 
(continued)
The Executive Directors have their performance individually 
reviewed by the Remuneration Committee and 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.
The following is a table of Board and Committee meetings 
during the year:
Board
Audit 
Committee
Nomination 
Committee
Remuneration 
Committee
Meetings held during 2012 9 3 1 3
Number of meetings attended
Executive Directors
Graham D Stewart 7 n/a 1 n/a
Iain M Lanaghan 9 n/a n/a n/a
Helge A Hammer 8 n/a n/a n/a
Non-executive Directors
John W S Bentley 8 3 1 3
Timothy P Read 6 3 1 3
Roger C Witts 8 3 1 3
Hanne Harlem 7 3 1 3
During 2012, certain directors who were not committee 
members attended meetings of the Audit Committee and 
Remuneration Committee by invitation. These details have not 
been included in the table. Where a director is unable to attend 
meetings of the Board or of Board committees, such director 
is invited to review the relevant papers for the meetings and 
provide his or her 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 Roger Witts (committee 
chairman), Tim Read, 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 and the Finance Director 
by invitation. 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 
2012 is given in the preceding table.
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; 
•  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. Governance
Faroe Petroleum plc Annual Report & Accounts 2012 43
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, are 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 Nomination 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. No 
changes to the Board composition were made during 2012 
although as announced on 4 December 2012 Iain Lanaghan 
will be stepping down from the Board in 2013.
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.
Composition of group
Details concerning the subsidiary undertakings are given 
in note 13 to the Group financial statements.
Substantial shareholdings
The Company has analysed its share register at 17 March 2013; 
the results of which indicate the following shareholders held 
3% or more in the issued share capital of the Company:
Shareholder Ordinary Shares %
Dana Petroleum plc
*
48,055,825 22.63
Black Rock Investment Management 28,651,684 13.49
Scottish & Southern Energy plc 10,909,091 5.14
Aviva Investors 10,692,699 5.03
Artemis Investment Management 8,128,422 3.83
AXA Framlington Investment Managers 6,530,819 3.07
*Wholly owned subsidiary of The Korean National Oil Corporation
Directors’ interests in share capital
The Directors’ interests in the share capital of the Company at 
20 March 2013 was as follows:
Ordinary 
Shares 
Options and 
Matching 
Shares
Ordinary 
Shares
Options and 
Matching 
Shares 
20 March 2013 31 December 2012
John W S Bentley 61,675 – 61,675 –
Graham D Stewart* 303,038 6,679,197 279,040 6,531,938
Helge A Hammer 204,307 3,534,474 185,243 3,415,315
Iain M Lanaghan 115,316 2,501,730 115,044 2,501,186
Timothy P Read 60,000 – 60,000 –
Roger C Witts 58,331 147,982 58,331  
Hanne Harlem – – –
* Does not include LTIP
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 2012 were 
equivalent to 30 days (2011: 30 days) purchases based on the 
average daily amount invoiced by suppliers during the year. 44 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
Directors’ report 
(continued)
Health, safety, the environment 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.
Auditors and their independence
A resolution to appoint auditors for the year to 31 December 
2013 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 17. 
Further information on the Group’s exposure to financial risks 
and the management thereof is provided in note 20.
Taking into consideration the Group’s current cash position 
of £72.9 million, future revenue from existing oil and gas fields, 
and the Group’s substantially available 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 financial 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 20 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 
(2011: nil). No political contributions were made during 
the year (2011: £nil).
  Governance
Faroe Petroleum plc Annual Report & Accounts 2012 45
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 these 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 judgments and estimates that are reasonable.
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:
Iain M Lanaghan
Group Finance Director
25 March 2013 46 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
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 are reviewed and approved by the Board each 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 what 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 2013.
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.
Executive remuneration package
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 these schemes are directly linked to improvements 
in the Company’s share price over a fixed vesting period, 
thereby ensuring alignment with shareholders’ objectives.
Details of individual components of the remuneration package 
and service and employment contracts are discussed below.
 
Basic salary and benefits
The policy is to review salary and benefits annually against 
competitive market data and analysis, provided by independent 
consultants, and adjust accordingly.
Bonus scheme
The incentive bonus scheme for the Executive Directors in 2012 
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. The amount of any bonus payments under the scheme 
will not exceed 100% of annual salary. A bonus payment 
of 30% of basic salary was made to the Executive Directors 
in 2012. There is no contractual obligation to pay bonuses.
Share 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. In 2012 no options were granted 
to the Executive Directors under the Faroe Petroleum 2003 
Unapproved Share Option Scheme and following the 
withdrawal of the shareholder resolution to approve the 
proposed 2012 Exceptional Performance Incentive Plan 
(“EPIP”), the provisional awards have since lapsed and there 
has been no charge to the Group’s Income Statement in the 
year. To compensate for the absence of any awards under 
either scheme, a cash bonus of 20% of annual salary was paid  Governance
Faroe Petroleum plc Annual Report & Accounts 2012 47
to the Executive Directors conditional upon the continuing 
directors re-investing such monies (net of payroll taxes) in the 
Company’s shares. 
Details of awards made under the various option Schemes are 
detailed in note 22.
Share Option Scheme
Under this scheme employees are awarded options to acquire 
Company shares at a price no lower than that the day before 
the date of grant with a maximum value of three times annual 
remuneration. In normal circumstances the options will vest 
after three years subject to the performance of the Company’s 
share price over the period.
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.
SIP
Under this scheme employees commit to invest up to an 
annual maximum of £1,500 through market purchases of the 
Company’s shares and for every share purchased the Company 
will match it with two matching shares. The matching shares 
are released at the end of a three year holding period.
Pensions
The Company did not operate a pension scheme for the UK 
based Executive Directors for the period to 31 December 2012 
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. In the UK where such contributions reach the maximum 
Annual Allowance or a Director has accumulated an amount 
equivalent to the Lifetime Allowance, such excess contributions 
are paid as salary. The Company operates 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, and the Chairman, 
are determined by the Board having taken independent expert 
advice on appropriate levels and are reviewed on an annual basis. 
Service Contracts
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 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:
Executive Director Employer
Date of service 
agreement or 
employment contract
Graham D Stewart Faroe Petroleum plc 15 July 2008
Helge A Hammer 
Faroe Petroleum 
Norge AS 15 July 2008
Iain M Lanaghan Faroe Petroleum plc 20 April 2009
Non-Executive Director Employer
Date of last renewal of 
letter of appointment
John W S Bentley Faroe Petroleum plc 24 March 2011
Timothy P Read Faroe Petroleum plc 01 March 2012
Roger C Witts Faroe Petroleum plc 01 May 2012
Hanne Harlem Faroe Petroleum plc 12 July 2011
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. 48 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
Report on Directors’ remuneration
(continued)
Directors’ remuneration
The remuneration of the Directors is as follows:
Fees/basic
salary
£’000
Annual
bonus
£’000
Payment in 
Option
In lieu
(4)
£’000
Benefits
in kind
(1)
£’000
2012
Total
£’000
2011
Total
£’000
2012
Pension
(5)
£’000
2011
Pension
£’000
Executive
GD Stewart 335 101 67 2 505 628 62 49
HA Hammer
(2)
265 80 53 15 413 497 77 71
IM Lanaghan
(3)
233 70 47 2 352 440 38 34
Non-executive
JWS Bentley 88 – – – 88 80 – –
TP Read 84 – – – 84 60 – –
RC Witts 59 – – – 59 55 – –
H Harlem 50 – – – 50 44 – –
Aggregate 1,114 251 167 19 1,551 1,804 177 154
(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 salary and bonus figures are converted to Sterling at the prevailing exchange rates for illustrative purposes only noting that Mr Hammer was paid a salary of NOK 2,432,000 over  
the year, a bonus of NOK 730,000 being 30% of salary and a cash amount of NOK 486,000 being 20% of salary in lieu of any option award in December 2012. The pension contributions 
to Mr Hammer are paid into a defined benefits scheme and in part by way of defined contributions.
(3)  Mr Lanaghan is director and Non-Executive Chairman of Marwyn European Transport plc and received fees totalling £53,000 during the period. He is also a director of Transport Investment 
Limited which is a dormant company and accordingly received no fees during the period.
(4)  To compensate for the absence of any awards made under the Option Scheme, a cash bonus of 20% of annual salary was paid to the Directors conditional upon the continuing directors 
re-investing such monies (net of payroll taxes) in the Company’s shares. 
(5)  Pension contributions to UK directors in excess of the Annual Allowance or Lifetime Allowance are paid as salary (but such sums are not taken into account when calculating bonus 
or option award).
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 2008 to December 2012:
01/01/13 01/01/12 01/01/11 01/01/10 01/01/09 01/01/08
0
30
60
90
120
150
FTSE All Share Oil & Gas FTSE AIM SS Oil & Gas FTSE AIM All-Share Faroe Petroleum Governance
Faroe Petroleum plc Annual Report & Accounts 2012 49
The Company’s share price was 137.50 pence on 31 December 
2012. The highest share price during 2012 was 178.25p and 
the lowest share price was 126.00p.
Directors’ Option Scheme 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) are shown below.
Options 
held at 
01.01.12
Options 
granted 
in the 
year
Options 
held at 
31.12.12
Exercise 
price (p)
Exercisable 
from
Expiry 
date
GD Stewart 328,250
(1)
– 328,250 15.36 23.06.04 17.06.13
492,376
(1)
– 492,376 90.85 23.06.04 17.06.13
569,600 – 569,600 52.67 07.05.07 06.05.14
627,016 – 627,016 124.00 29.03.08 28.03.15
425,263 – 425,263 98.75 14.03.10 13.03.17
536,449 – 536,449 139.79 23.04.11 22.04.18
650,028 – 650,028 60.57 23.07.12 22.07.19
718,900 – 718,900 116.00 06.05.13 05.05.20
511,600 – 511,600 181.75 13.04.14 12.04.21
HA Hammer 105,034 – 105,034 97.88 20.10.09 19.10.16
180,563 – 180,563 98.75 14.03.10 13.03.17
390,746 – 390,746 139.79 23.04.11 22.04.18
456,250 – 456,250 60.57 23.07.12 22.07.19
577,300 – 577,300 116.00 06.05.13 05.05.20
437,300 – 437,300 181.75 13.04.14 12.04.21
IM Lanaghan 609,586 – 609,586 65.62 18.05.12 17.05.19
548,200 – 548,200 116.00 06.05.13 05.05.20
371,000 – 371,000 181.75 13.04.14 12.04.21
RC Witts
(2)
147,982 – 147,982 139.79 23.04.11 22.04.18
JWS Bentley – – – – – –
TP Read – – – – – –
H Harlem – – – – – –
Aggregate 8,683,443 – 8,683,443
(1)  these options were awarded under the Rules of the earlier Faroe Petroleum Unapproved 
Share Option Plan dated 18 June 2003 
(2)  these options were awarded to Mr Witts when he was an Executive Director
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.
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 
During 2012 there were nil awards made to the Directors 
under the CIP .
Matching 
shares held at 
and 31.12.11
Lapsed 
in the year
Matching 
shares granted 
during the 
year
Matching 
shares held at 
31.12.12
GD Stewart 960,025 – – 960,025
IM Lanaghan 684,740 – – 684,740
HA Hammer 838,729 – – 838,729
Aggregate 2,483,494 – – 2,483,494
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. 50 Faroe Petroleum plc Annual Report & Accounts 2012
Governance
Report on Directors’ remuneration
(continued)
Directors SIP Awards 
During 2012 the following awards of Matching Shares were 
made to the Directors under the SIP:
Matching 
shares held at 
31.12.11
Matching 
shares granted 
during the 
year
Matching 
shares held at 
31.12.12
GD Stewart 3,084 1,940 5,024
IM Lanaghan 3,084 1,940 5,024
HA Hammer 3,238 1,936 5,174
Aggregate 9,406 5,816 15,222
Under the SIP , two matching shares are awarded for each 
investment share purchased. Each of the Directors committed 
to invest the maximum of £1.500 per annum, to be spread 
over monthly or quarterly investments. Matching Shares are 
awarded each month to coincide with the purchase of 
Investment Shares which have been purchased in the market 
at prices ranging from a low of £1.365 to £1.863
Signed of behalf of the Board by:
John Bentley 
Non-Executive Chairman
25 March 2012  Accounts
Accounts
Faroe Petroleum plc Annual Report & Accounts 2012 51
We have audited the financial statements of Faroe Petroleum 
plc for the year ended 31 December 2012 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 28. 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 auditor’s 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 45, 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 Groups 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. In addition, we read 
all the financial and non-financial information in the Directors’ 
Report and Group Financial Statements to identify material 
inconsistencies with the audited financial statements. If we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.
Independent auditors’ report 
to the members of Faroe Petroleum plc
Accounts
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 2012 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 
prepared in accordance with IFRSs as adopted by the 
European Union and/or 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.
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 
Group and parent company, or returns adequate for our 
audit have not been received from branches not visited by 
us; or
•  the Group and 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.
Kevin Weston (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP , Statutory Auditor
Aberdeen
25 March 2013 Accounts
Group income statement
for the year ended 31 December 2012
52 Faroe Petroleum plc Annual Report & Accounts 2012
Note
2012
£’000
2011
£’000
Revenue 3 158,792 80,233
Cost of sales (97,008) (52,238)
Gross profit 61,784 27,995
Net gain on disposal of exploration and evaluation assets 11 1,657 39,956
Exploration and evaluation expenses (79,742) (42,337)
Administrative expenses (9,282) (9,853)
Operating (loss)/profit 5 (25,583) 15,761
Finance revenue 7 2,672 2,323
Finance costs 7 (6,080) (3,834)
(Loss)/profit on ordinary activities before tax (28,991) 14,250
T ax credit 9 23,813 33,157
(Loss)/profit for the year attributable to equity holders of the parent (5,178) 47,407
(Loss)/earnings per share – basic (pence) 10 (2.4) 22.3
(Loss)/earnings per share – diluted (pence) 10 (2.4) 20.1 Accounts
Group statement of other comprehensive income
for the year ended 31 December 2012
Faroe Petroleum plc Annual Report & Accounts 2012 53
Note
2012
£’000
2011
£’000
(Loss)/profit for the year (5,178) 47,407
Exchange differences on retranslation on foreign operations net of tax 2,758 (1,102)
Actuarial (losses)/gains on defined benefit pension plans net of tax 21 (84) 423
T ax on items relating to components of other comprehensive income – –
Total comprehensive (loss)/gain for the year (2,504) 46,728
Company statement of other comprehensive income
for the year ended 31 December 2012
2012
£’000
2011
£’000
Profit/(loss) for the year 3,040 (7,091)
T otal comprehensive income/(loss) for the year 3,040 (7,091) Accounts
Group balance sheet
at 31 December 2012
54 Faroe Petroleum plc Annual Report & Accounts 2012
Note
2012
£’000
2011
£’000
Non-current assets
Intangible assets 11 145,104 99,579
Property, plant and equipment: development & production 11 133,359 104,705
Property, plant and equipment: other 11 768 406
Financial assets 12 13 13
279,244 204,703
Current assets
Inventories 14 4,887 4,369
Trade and other receivables 15 55,392 59,852
Current tax receivable 15 48,473 –
Cash and cash equivalents 16 72,891 111,589
181,643 175,810
Total assets 460,887 380,513
Current liabilities
Trade and other payables 17 (41,944) (36,772)
Financial liabilities 17 (51,249) –
Current tax payable 17 – (13,325)
(93,193) (50,097)
Non-current liabilities
Deferred tax liabilities 9 (87,021) (64,256)
Provisions 18 (48,586) (35,038)
Defined benefit pension plan deficit 21 (391) (308)
(135,998) (99,602)
Total liabilities (229,191) (149,699)
Net assets 231,696 230,814
Equity attributable to equity holders
Equity share capital 19 21,239 21,239
Share premium account 205,971 205,971
Cumulative translation reserve 8,069 5,311
Retained earnings (3,583) (1,707)
Total equity 231,696 230,814
These financial statements were approved by the Board of directors on 25 March 2013 and were signed on its behalf by:
Iain M Lanaghan
Group Finance Director Accounts
Company balance sheet
at 31 December 2012
Faroe Petroleum plc Annual Report & Accounts 2012 55
Note
2012
£’000
2011
£’000
Non-current assets
Property, plant and equipment 11 161 92
Financial assets 12 168,711 127,830
Investments in subsidiary undertakings 13 37,549 35,089
206,421 163,011
Current assets
Trade and other receivables 15 170 145
Cash and cash equivalents 16 31,059 68,124
31,229 68,269
Total assets 237,650 231,280
Current liabilities
Trade and other payables 17 (1,021) (1,077)
Total liabilities (1,021) (1,077)
Net assets 236,629 230,203
Equity attributable to equity holders
Equity share capital 19 21,239 21,239
Share premium account 205,971 205,971
Retained earnings 9,419 2,993
Total equity 236,629 230,203
 
These financial statements were approved by the Board of directors on 25 March 2012 and were signed on its behalf by:
Iain M Lanaghan
Group Finance Director Accounts
Condensed Group cash flow statement
for the year ended 31 December 2012
56 Faroe Petroleum plc Annual Report & Accounts 2012
Note
2012
£’000
2011
£’000
(Loss)/profit before tax (28,991) 14,250
Depreciation, depletion and amortisation 11 34,494 12,887
Exploration asset write off 5 71,081 38,993
Gain on disposal of asset (1,657) (39,956)
Fair value of share based payment 3,386 2,909
Decrease/(increase) in trade and other receivables 4,460 (27,464)
Increase in inventories (518) (3,724)
Increase in trade and other payables 5,172 14,277
Currency translation adjustments (1,977) (977)
Interest received (695) (1,324)
Interest and financing fees 6,080 3,834
T ax (payment)/rebate (13,671) 28,070
Net cash generated in operating activities 77,164 41,775
Investing activities
Purchases of intangible and tangible assets (162,052) (96,217)
Proceeds from sale of intangible assets 1,657 53,103
Interest received 7 695 1,324
Net cash used in investing activities (159,700) (41,790)
Financing activities
Net proceeds/(repayments) from borrowings 50,607 (17,575)
Issue of ordinary share capital – 40
Interest and financing fees paid (3,742) (4,393)
Net cash inflow/(outflow) from financing activities 46,865 (21,928)
Net decrease in cash and cash equivalents (35,671) (21,943)
Cash and cash equivalents at the beginning of the year 111,589 132,150
Effect of foreign exchange rate differences (3,027) 1,382
Cash and cash equivalents at the end of the year
16
72,891 111,589 Accounts
Condensed Company cash flow statement
for the year ended 31 December 2012
Faroe Petroleum plc Annual Report & Accounts 2012 57
Note
2012
£’000
2011
£’000
Profit/(loss) before tax 3,040 (7,091)
Depreciation charges 11 42 23
Fair value of share based payment 926 1,514
(Increase)/decrease in trade and other receivables (24) 175
Decrease in trade and other payables (57) (579)
Currency translation adjustments (2,929) 1,109
Inter-Company Service Charge Uplift (120) (195)
Interest received (3,145) (641)
Interest and financing fees 3 –
Investment write down – 2,355
Net cash used in operating activities (2,264) (3,330)
Investing activities
Purchases of property, plant and equipment 11 (111) (44)
Loans to subsidiary undertakings (38,276) (52,185)
Interest received 542 641
Net cash used in investing activities (37,845) (51,588)
Financing activities
Interest paid (3) –
Issue of ordinary share capital – 40
Net cash (outflow)/inflow from financing activities (3) 40
Net decrease in cash and cash equivalents (40,112) (54,878)
Cash and cash equivalents at the beginning of the year 68,124 124,524
Effect of foreign exchange rate differences 3,047 (1,522)
Cash and cash equivalents at the end of the year
16
31,059 68,124 Accounts
Group statement of changes in equity
for the year ended 31 December 2012
Share capital 
£’000
Share  
premium 
account 
£’000
Cumulative 
translation 
reserve 
£’000
Retained 
earnings 
£’000
Total 
£’000
As at 1 January 2011 21,235 205,935 6,413 (52,446) 181,137
Profit for the period – – – 47,407 47,407
Other comprehensive income:
Loss on retranslation of foreign subsidiaries – – (1,102) – (1,102)
T otal actuarial gains – – – 423 423
T otal comprehensive income – – (1,102) 47,830 46,728
New share issue 4 36 – – 40
Share based payments – – – 2,909 2,909
As at 31 December 2011 21,239 205,971 5,311 (1,707) 230,814
Loss for the period – – – (5,178) (5,178)
Other comprehensive income:
Gain on retranslation of foreign subsidiaries – – 2,758 – 2,758
T otal actuarial losses – – – (84) (84)
T otal comprehensive loss – – 2,758 (5,262) (2,504)
New share issue – – – – –
Share based payments – – – 3,386 3,386
As at 31 December 2012 21,239 205,971 8,069 (3,583) 231,696
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.
Cumulative translation reserve
The cumulative translation reserve is used to record exchange differences arising from the translation of the financial statements 
of foreign subsidiaries. 
58 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Company statement of changes in equity
for the year ended 31 December 2012
Share capital 
£’000
Share 
premium 
account 
 £’000
Retained  
earnings  
£’000
Total  
£’000
As at 1 January 2011 21,235 205,935 7,175 234,345
Loss for the period – – (7,091) (7,091)
T otal comprehensive loss – – (7,091) (7,091)
Share issue 4 36 – 40
Share based payments – – 2,909 2,909
As at 31 December 2011 21,239 205,971 2,993 230,203
Profit for the period – – 3,040 3,040
T otal comprehensive income – – 3,040 3,040
Share based payments – – 3,386 3,386
As at 31 December 2012 21,239 205,971 9,419 236,629
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. 
Faroe Petroleum plc Annual Report & Accounts 2012 59 Accounts
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 2012 were 
authorised for issue by the Board of directors on 25 March 2013 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 2012. 
Faroe Petroleum plc is listed on the Alternative Investment Market (AIM).
2 Accounting policies
Basis of preparation
The Group’s financial statements, for the year ended 31 December 2012, 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 2012. 
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 where otherwise indicated.
The Directors believe that the Company has adequate resources to continue its operations for the foreseeable future. The bases 
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.
Accounting estimates
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 consolidation
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 intra-group balances and transactions, including unrealised 
profits arising from them, are eliminated in full.
Foreign currencies
The functional currency for the UK entities is 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.
 
60 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
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 on assets 
and liabilities of such foreign operations 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.
Joint ventures
The Group is engaged in oil and gas exploration, production and development 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 28.
Revenue
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 has passed, or has deemed to have passed to the customer, 
in accordance with the commercial terms of each contract.
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. 
Finance costs and debt
Finance costs of debt instruments are allocated to periods over the term of the related instrument at a constant rate on the 
carrying amount. Arrangement fees and issue costs are deducted from the proceeds on initial recognition of the liability and 
are amortised and charged to the Income Statement as finance costs over the term of the instrument.
Oil and gas expenditure – exploration and evaluation 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 production and development (“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.
Faroe Petroleum plc Annual Report & Accounts 2012 61 Accounts
Notes to the accounts
(continued)
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 expenditure – production and development 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.
The key areas of estimation regarding depreciation and the associated unit of production calculation for oil and gas assets are:
• recoverable reserves; and
• future capital expenditure
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.
The future cash flows are adjusted for risks specific to the cash-generating unit and are discounted using a pre-tax discount rate. 
The discount rate is derived from the Group’s post-tax weighted average cost of capital and is adjusted where applicable to take 
into account any specific risks relating to the country where the cash-generating unit is located, although other rates may be used 
if appropriate to the specific circumstances. In 2012 the rate used was 10% nominal (2011: 10% nominal). The discount rates 
applied in assessments of impairment are reassessed each year.
See Note 11 for the carrying value of oil and gas assets. Reserves and production volumes are also stated in the Review 
of Activities, primarily in the Producing Assets section.
62 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Key assumptions used in the value-in-use calculations
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
An average of published forward prices and the long term assumption for natural gas and Brent oil are used for the first three 
years of future cash flow and an inflated 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 are 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.
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 Group has applied a discount rate of  
10% for the current year (2011: 10%).
Sensitivity to 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.
Having reviewed these assumptions, there is no significant impairment exposure. 
Oil & gas expenditure – acquisitions 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.
Faroe Petroleum plc Annual Report & Accounts 2012 63 Accounts
Notes to the accounts
(continued)
2 Accounting policies (continued)
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.
Decommissioning
The Group recognises the 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.
Where the Group has an asset with nil carrying value, and subsequently on the basis of new information makes an increase 
to the discounted cost of decommissioning, then such increase is taken to the Income Statement.
The key areas of estimation regarding decommissioning are:
• expected economic life of field, determined by factors such as 
 o field reserves and future production profiles – see Review of Activities section
 o commodity prices
• inflation rate 2.5%;
• discount rate 7%; and
• decommissioning cost estimates (and the basis for these estimates)
See Note 18 Provisions in respect of decommissioning obligations and explanation of discount rates.
Underlift/Overlift
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 cost and net realisable value.
Other property, plant & equipment
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
64 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Financial assets
Financial assets which are trade investments of the Group and Company are accounted for at fair value unless this cannot 
be reliably re-assessed.
In the Group accounts, financial assets which are loans provided by the parent company to subsidiary undertakings are carried 
at cost and treated as net investments in the subsidiaries and, as such, both foreign currency and impairment gains and losses 
on such loans are recognised in the income statement, to the extent that any individual subsidiary would be to borrow in its own 
capacity as a single entity. In the Company accounts, foreign currency gains and losses on such loans to subsidiary undertakings 
are recognised in the Income Statement.
Investments
Investments in subsidiaries are included in the financial statements at cost less provisions for impairment. 
Taxation
The Income Statement tax charge/(credit) 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
•  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.
Pensions
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 in the statement of other 
comprehensive income.
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.
Trade and other receivables
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.
Faroe Petroleum plc Annual Report & Accounts 2012 65 Accounts
Notes to the accounts
(continued)
2 Accounting policies (continued)
Operating leases
Rentals under operating leases are charged to the Income Statement on a straight line basis over the period of the lease.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.
Share based payments
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.
The key areas of estimation regarding share based payments are:
•  share price volatility; and
•  estimated lapse rates
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.
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.
Employee Benefit Trust
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.
Interest bearing loans and borrowings
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.
66 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
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.
 
Derivative financial instruments and hedging
The Group uses derivative financial instruments to manage certain exposures to fluctuations in foreign currency exchange rates, 
interest rates and commodity prices in addition to trading purposes. Such derivative financial instruments are initially recognised 
at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives 
relating to unquoted equity instruments are carried at cost where it is not possible to reliably measure their fair value subsequent 
to initial recognition. Derivatives are carried as assets when the fair value is positive and liabilities when the fair value is negative.
Financial liabilities at fair value through profit or loss are carried on the Balance Sheet at fair value, with gains or losses arising 
from changes in fair value recognised in the Income Statement. Derivatives are classified as held for trading and are included 
in this category.
Impact of new standards and interpretations
The following standards and interpretations are new and effective in 2012 and have been adopted:
International Financial Reporting Standards (IFRS/IASs) Effective date
• IAS 12 (amendment) Income T axes 1 January 2012
Improvements to International Financial Reporting Standards (issued 2011)
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 1 (amendment) Presentation of Financial Statements 1 July 2012
• IAS 27 (revised) Separate Financial Statements 1 January 2013 
• IAS 28 (revised) Investments in Associates and Joint Ventures 1 January 2013
• IFRS 7 (amendment) Financial Instruments: Disclosures 1 January 2013
• IFRS 10 Consolidated Financial Statements 1 January 2014
• IFRS 11 Joint Arrangements 1 January 2014
• IFRS 12 Disclosures of Interests in Other Entities 1 January 2014
• IFRS 13 Fair Value Measurement 1 January 2013
• IAS 19 (amendment) Employee Benefits 1 January 2013
• IFRS 9 Financial Instruments: Presentation – Classification and Measurement* 1 January 2015
Improvements to International Financial Reporting Standards (May 2012)*
The amendments as noted above are not believed to have a material impact on the financial statements of the Group. The Group 
will adopt these standards on the date at which they become effective.
* These have not yet been endorsed by the EU.
Faroe Petroleum plc Annual Report & Accounts 2012 67 Accounts
Notes to the accounts
(continued)
3 Revenue
Revenue recognised in the Income Statement is analysed as follows:
2012
£’000
2011 
£’000
Oil sales 123,870 70,642
Gas sales 18,238 4,423
Condensate sales 16,108 5,306
T ariff income 1,140 130
Hedging loss (564) (268)
Total revenue 158,792 80,233
The Group hedges a proportion of the forecast oil and natural gas production using a variety of hedging instruments and incurred 
hedging losses, net of costs, of £564,000 (2011: £268,000) in the year.
4 Segmental reporting 
The Group operates a single class of business being oil and gas exploration, appraisal, production and development and related 
activities in a single geographical area presently being Northwest Europe. Revenue from two key customers which individually 
represent more than 10% of total sales were as follows: £115,838,000 arising from sales of oil (2011: £63,643,000),  
£378,000 arising from sales of natural gas (2011: £nil) and £15,859,000 arising from sales of condensate (2011: £2,217,000). 
The Company has no revenue.
5 Group operating profit/ (loss)
2012
£’000
2011
£’000
Group operating profit/(loss) is stated after charging
Exploration asset write off 71,081 38,993
Pre-award exploration expenditure 8,661 3,344
Depreciation of property, plant & equipment 34,494 12,887
Operating lease payments 527 360
6 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:
2012
£’000
2011
£’000
Audit of Group financial statements 73 70
Audit of subsidiaries pursuant to legislation 30 21
Other services relating to taxation 31 24
Other services 20 57
154 172
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 2012 were £12,000 (2011: £11,000).
 
68 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
7 Finance revenue and cost
2012
£’000
2011
£’000
Bank and other interest receivable 695 1,324
T otal interest income for financial assets not at fair value through profit or loss 695 1,324
Realised exchange gain 1,977 999
Total finance revenue 2,672 2,323
Bank interest payable and other loans (3,742) (3,049)
T otal interest expense for financial assets not at fair value through profit or loss (3,742) (3,049)
Unwinding of discount on decommissioning provision (2,338) (785)
Total finance cost (6,080) (3,834)
8 Employment costs
The aggregate payroll costs of staff and directors were as follows:
2012
£’000
2011
£’000
Wages and salaries 6,773 6,231
Social security costs 869 806
Pension costs 871 606
Share based payments charge (equity settled) 3,386 2,909
11,899 10,552
Included in pension costs are £352,000 (2011: £212,000) in respect of defined benefit schemes and £519,000 (2011: £394,000) 
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:
2012
£’000
2011
£’000
Technical 20 18
Finance & Commercial 15 13
Administration 5 4
(b) Directors emoluments:
2012
£’000
2011
£’000
Directors emoluments 1,551 1,804
Aggregate contributions to pension schemes
1
: 
Defined benefit 23 71
Defined contribution 154 83
Number of directors accruing benefits under: 
Defined benefit schemes 1 1
Defined contribution schemes 3 2
Faroe Petroleum plc Annual Report & Accounts 2012 69 Accounts
8 Employment costs (continued)
The emoluments of the Directors: 
Fees/basic
salary
£’000
Annual
bonus 
£’000
Payment
In lieu
2
£’000
Benefits
in kind
£’000
2012
Total
£’000
2011
Total
£’000
2012
Pension
1
£’000
2011
Pension
£’000
Aggregate remuneration 1,114 251 167 19 1,551 1,804 177 154
During the year no options were exercised by directors (2011: nil)
1
  Pension contributions made to UK Executive Directors in excess of the Annual Allowance or Lifetime Allowance are paid as salary 
(but such sums are not taken into account when calculating any bonus or option award).
2
  To compensate for the absence of any awards made under the Option Scheme, a cash bonus of 20% of annual salary was  
paid to the Executive Directors, conditional upon the continuing directors re-investing such monies (net of payroll taxes) in the 
Company’s shares.
Full details of amounts paid to Directors can be found in the Report on Directors’ Remuneration. 
9  T axation
(a) Tax on loss on ordinary activities
2012
£’000
2011
£’000
Current taxation
Overseas tax credit 48,473 40,421
UK tax – 4,531
Current tax credit 48,473 44,952
Amounts underprovided in previous year (165) (698)
Total current tax credit 48,308 44,254
Deferred taxation
Origination of temporary differences (23,986) (12,088)
Total deferred tax charge (23,986) (12,088)
Foreign exchange differences
Differences arising from the use of year end and average exchange rates (509) 991
T otal foreign exchange differences (509) 991
Total tax credit in the Income Statement 23,813 33,157
There are no items charged to equity with any current or deferred tax effect.
Notes to the accounts
(continued)
70 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
(b) Reconciliation of the total tax credit
The tax credit in the Income Statement for the year is higher than the inside ring fence rate of corporation tax in the UK of 62% 
(2011: 59.30%). The differences are reconciled below:
2012
£’000
restated
2011
£’000
Tax reconciliation 
(Loss)/profit on ordinary activities before tax (28,991) 14,250
T ax at 62% (2011: 59.30%) (17,974) 8,451
Expenses not deductible for tax purposes 891
*
 3,431
Income not taxable for tax purposes (1,502) 6
Ring fence expenditure supplement (4,251) (2,358)
Unrecognised deferred tax (2,192) 1,679
Non-taxable gain on disposal of Maria E&E asset
1
–
*
 (31,166)
Release of deferred tax provided on Maria E&E asset
2
–
*
 (18,991)
Utilisation of losses (1,094) (576)
Unrelieved tax losses and other deductions arising in the period 5,566 2,557
Effect of foreign profits/losses charged at different rate of tax (1,467) 8,786
Effect of profits/losses taxed at 24.5% (2011: 26.5%) (809) 1,262
Foreign exchange differences (1,146) (2,405)
Underprovided in previous year in foreign subsidiary 165 698
Reversal of prior year UK current tax provision – (4,531)
Total tax credit (23,813) (33,157)
1
  Non-taxable gain of disposal of E&E assets in 2011 refers to the 78% of £39,956,000 (gain on disposal of E&E assets per Income 
Statement) in respect of the prior year Petoro swap transaction.
2
  Release of deferred tax provided on Maria E&E asset in 2011 refers to the 78% of £24,348,000 (see Note 11) being the reversal 
of timing differences related to the Maria E&E disposal.
The 2012 overseas tax credit of £48,473,000 represents a tax refund on net exploration expenditure and is due for repayment 
in December 2013. The 2011 overseas tax credit of £40,421,000 represents a notional tax refund on net exploration expenditure 
in Norway calculated by only including taxable profits generated by assets acquired from Petoro in Norway from completion date 
(1 December 2011) of that transaction.
The reconciliation of the total tax credit has been based upon the UK ring fence corporation tax rate of 30% (2011: 30%) and 
the UK supplementary charge which was 32% (2011: 29.3% effective average) giving a combined rate of 62% (2011: 59.3% 
effective average). The UK oil and gas activities of the Group were subject to this rate during 2012.
*
 These prior year figures have been restated to give greater clarity to the Petoro swap transaction but in aggregate remain the 
same as previously presented. 
Faroe Petroleum plc Annual Report & Accounts 2012 71 Accounts
Notes to the accounts
(continued)
9  T axation (continued)
(c) Unrecognised tax losses
Group
The Group has tax losses which arose in the UK of £75,429,000 (2011: £70,253,000) and in the Faroe Islands of £3,195,000 
(2011: £3,069,000) 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 excess management expenses of £367,000 (2011: £1,416,000). A deferred tax asset has not been recognised 
in respect of losses as there is uncertainty whether the losses may be used to offset future taxable profits.
(d) Deferred tax
The deferred tax included in the Balance Sheet is as follows:
Group
2012
£’000
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
Deferred tax liability
Difference between accumulated depreciation and capital allowances (87,021) (64,256) – –
Recognised deferred tax liability 
1
(87,021) (64,256) – –
Deferred tax assets
Difference between accumulated depreciation and capital allowances (19,966) (19,803) 31 24
T ax losses 46,351 43,223 – –
Other temporary differences 4,661 4,683 1,617 1,371
Excess management expenses 367 1,416 366 1,416
Unrecognised deferred tax asset 31,413 29,519 2,014 2,811
1
 The year on year change in the deferred tax liability is not equal to the origination of temporary difference as in note 9 (a) due to 
the foreign exchange differences. 
 
72 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
10  Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent 
by the weighted average number of Ordinary Shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the profit 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.
The following reflects the loss and share data used in the basic and diluted loss per share computations:
2012 
£’000
2011 
£’000
Basic and diluted profit/(loss) attributable to equity holders of the parent (5,178) 47,407
2012
Thousands
2011
Thousands
Basic weighted average number of shares 212,385 212,383
Dilutive potential of Ordinary Shares granted into share based incentive schemes – 22,950
Diluted weighted average number of shares 212,385 235,333
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.
2012
Pence
2011
Pence
(Loss)/earnings per share (basic) (2.4) 22.3
(Loss)/earnings per share (diluted) (2.4) 20.1
Faroe Petroleum plc Annual Report & Accounts 2012 73 Accounts
Notes to the accounts
(continued)
11 Intangible assets and property, plant & equipment
Property, plant and equipment
Intangible
exploration 
and evaluation
costs
£’000
Development
and
production 
costs
£’000
Other
£’000
Total
£’000
Group
Cost
At 1 January 2011 102,688 40,182 1,393 144,263
Additions 59,199 107,218 252 166,669
Reclassification (413) 413 – –
Write-offs (38,993) – – (38,993)
Exchange Adjustments 1,446 288 23 1,757
Disposals/swaps (24,348) – – (24,348)
At 31 December 2011 and 1 January 2012 99,579 148,101 1,668 249,348
Additions 111,787 58,203 661 170,651
Reclassification 290 (290) – –
Write-offs (71,081) – – (71,081)
Exchange Adjustments 4,529 4,969 (33) 9,465
Disposals/swaps – – – –
As at 31 December 2012 145,104 210,983 2,296 358,383
Depreciation and impairment 
At 1 January 2011 – 30,690 1,081 31,771
Depreciation charge for year – 12,706 181 12,887
At 31 December 2011 and 1 January 2012 – 43,396 1,262 44,658
Depreciation charge for year – 34,228 266 34,494
At 31 December 2012 – 77,624 1,528 79,152
Net book value
At 31 December 2012 145,104 133,359 768 279,231
At 31 December 2011 99,579 104,705 406 204,690
In 2009, Faroe Petroleum Norge AS (‘FPN’) entered into a transaction whereby it swapped an E&A asset (Trym) for two D&P assets 
(Enoch and Glitne). As part of the SPA, depending on the revenues generated by Trym over the first 12 month period of stable 
production, FPN would be entitled to a potential deferred consideration. At the time of the transaction this contingent event was 
deemed to be too uncertain to have a reliable fair value assigned. Trym commenced production in February 2011 and the revenue 
for the first 12 months of stable production triggered a proportion of the deferred consideration to be paid under the terms 
of the swap. This resulted in the gain of £1,657,000 recognised in the Income Statement.
74 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
The E&E write-offs in 2012 of £71,081,000 (2011: £38,993,000) relate to licences where active exploration has been completed 
and commercial reserves have not been discovered. In 2011 the Maria licence in Norway was swapped for a portfolio of 
production and development assets, resulting in a £24,348,000 disposal of E&E assets, and a resulting gain on disposal of  
E&E assets of £39,956,000 as recognised in the Income Statement.
Production and development cost additions in 2012 of £58,203,000 (2011: £107,218,000) mainly relate to capital expenditure 
and the recognition of additional decommissioning asset costs during the year.
The aforementioned 2011 Maria swap transaction resulted in a fair value of acquired assets of £64,304,000 which constituted 
fixed asset cost additions of £44,293,000 and an underlift balance of £25,211,000 less further items valued at £5,200,000. 
When deducting the net book value of the Maria licence, £24,348,000, from the fair value of assets acquired, this provides the 
£39,956,000 gain on sale as presented on the Income Statement.
Further production and development cost additions were incurred in 2011 as a result of the Blane acquisition of £33,255,000.
Both of these acquisition costs are included in the 2011 additions figure of £107,218,000.
Property, plant 
and equipment
Other 
£’000
Company
Cost
At 1 January 2011 312
Additions 44
At 31 December 2011 and 1 January 2012 356
Additions 111
At 31 December 2012 467
Depreciation
At 1 January 2011 241
Charge for year 23
At 31 December 2011 and 1 January 2012 264
Charge for year 42
At 31 December 2012 306
Net book value
At 31 December 2012 161
At 31 December 2011 92
Faroe Petroleum plc Annual Report & Accounts 2012 75 Accounts
Notes to the accounts
(continued)
12 Financial assets
Cost and net
book value
2012
£’000
Cost and net
book value
2011
£’000
Group
Financial assets – non current
Trade investments 13 13
Company
Financial assets – non current
Loans to subsidiaries 168,711 127,830
The Group’s trade investment consists of a 14% 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.
13 Investments in subsidiary undertakings
Company Investments in 
subsidiary undertakings 
£’000
Cost and net book value
At 1 January 2011 25,750
Conversion of intercompany loan to share capital 10,000
Additions 1,401
Investment write down (2,062)
At 31 December 2011 35,089
Additions 2,460
At 31 December 2012 37,549
In 2011 there was investment write down in respect of Føroya Kolvetni P/F .
76 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
At 31 December 2012, the subsidiary undertakings of the Company and Group were:
Company
Country of 
Incorporation Nature of Business
Proportion of 
shares and voting 
rights held
Føroya Kolvetni P/F Faroe Islands Oil and gas exploration 100% ordinary 
Faroe Petroleum (UK) Limited England Oil and gas exploration 100% ordinary
Faroe Petroleum Norge AS Norway Oil and gas exploration 100% ordinary
Faroe Petroleum Norge AS (Iceland Branch)
1
Norway Oil and gas exploration 100% ordinary
Faroe Petroleum (Energy) Limited England Investment activities 100% ordinary
Greenland Oil Company AS
2
Greenland Oil and gas exploration 100% ordinary
Faroe Petroleum SIP Employment Benefit Trust Limited England Employee Benefit Trust Company 100% ordinary
Faroe Petroleum Employment Benefit Trust Limited England Employee Benefit Trust Company 100% ordinary
1
 In conjunction with the award of our operated licence in Iceland, a new branch was opened in Iceland, within the Faroe Petroleum Norge AS entity 
2
 Greenland Oil Company is held by subsidiary undertaking Faroe Petroleum (Energy) Ltd. The Company was established in 2009.
14 Inventories
2012
£’000
2011
£’000
Materials and equipment 4,887 4,369
15 Trade and other receivables
Group
2012
£’000
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
Amounts falling due within one year:
Trade receivables 8,425 3,721 – –
Other receivables 39,215 51,376 107 121
Restricted cash deposits 2,666 689 – –
Prepayments and accrued income 5,086 4,066 63 24
55,392 59,852 170 145
Current tax receivable 48,473 – – –
Total receivables 103,865 59,852 170 145
The 2012 restricted cash balance includes £644,000 (2011: £644,000) held on deposit with Barclays which relates to a Letter of 
Credit for Schooner decommissioning. A further amount of £2,022,000 (2011: £45,000) is being held in Escrow which, in 2012, 
includes a security deposit in respect of the East Foinaven asset purchase.
The current tax receivable in 2012 relates to a tax rebate in Norway of 78% of Norwegian net exploration expenditure. The Group 
had a tax liability at the end of 2011.
The credit quality of trade and other receivables that are neither past due or impaired is assessed by reference to external credit 
ratings where available, otherwise historical information relating to counterparty default rates is used.
 
Faroe Petroleum plc Annual Report & Accounts 2012 77 Accounts
Notes to the accounts
(continued)
15 Trade and other receivables (continued)
Group
2012
£’000
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
Counterparties with internal credit rating 47,640 55,097 107 121
47,640 55,097 107 121
16 Cash and cash equivalents
Group 
2012
£’000
Group 
2011
£’000
Company
2012
£’000
Company
2011
£’000
Cash at bank and in hand 20,514 44,780 967 1,314
Short-term deposits 52,377 66,809 30,092 66,810
72,891 111,589 31,059 68,124
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying  
periods depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit  
rates. If the Group is required to utilise a deposit, there is access to a deposit at any point in the term. The fair value of cash  
and cash equivalents is £72,891,000 (2011: £111,589,000). At 31 December 2012, the Group had available £110,591,000 
(2011: £65,537,000) 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 £31,059,000 (2011: £68,124,000).
17 Trade and other payables and current financial liabilties
Group
2012
£’000
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
Amounts falling due within one year:
Trade payables 3,223 10,158 222 262
Other payables 12,619 8,514 401 704
Accruals and deferred income 26,102 18,100 398 111
Trade and other payables 41,944 36,772 1,021 1,077
Current tax payable – 13,325 – –
Short-term bank borrowing 51,249 – – –
Current financial liabilities 51,249 – – –
Exploration Financing Facility (EFF)
This facility is under Faroe Petroleum Norge AS and has an aggregate commitment of NOK 1 billion (approx £110 million). 
Utilisations can be made under the facility up until 31 December 2014. At 31 December 2012 there was NOK 396 million  
(£43.8 million) drawn under the facility (2011: nil). The facility is secured against the annual Norwegian tax rebate under which 
78% of all allowable expenditure is repaid to the claimant (together with interest thereon) twelve months after the end of the  
tax year.
78 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Reserve Based Lending Facility (RBL)
This Revolving Borrowing Base facility is under both Faroe Petroleum (UK) Limited and Faroe Petroleum Norge AS. The facility 
has an aggregate amount of US$ 250 million and will amortise over the life of the borrowing base assets. At 31 December  
2012, Faroe Petroleum Norge AS has drawn NOK 67 million (£7.4 million) under the facility in addition to the utilisation of  
US$ 24.2 million (£15.0 million) as cover for a Letter of Credit. 
18 Provisions 
Decommissioning
provision
£’000
Other provision
£’000
Total
£’000
Group
At 1 January 2011 8,334 – 8,334
New provisions and changes in estimates 25,353 566 25,919
Unwinding of discount (note 7) 785 – 785
At 31 December 2011 and 1 January 2012 34,472 566 35,038
New provisions and changes in estimates 11,235 (25) 11,210
Unwinding of discount (note 7) 2,338 – 2,338
At 31 December 2012 48,045 541 48,586
The decommissioning provision of £48,045,000 (2011: £34,472,000) relates primarily to the Group’s production and development 
facilities. The decommissioning provision is recorded at Faroe’s share of the decommissioning cost expected to be incurred.
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%. This lower discount rate (compared to project evaluation 
at 10% and asset impairment testing) reflects the greater uncertainty inherent in the decommissioning liability. 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.
The other provision of £541,000 (2011: £566,000) relates to $875,000 and which is liable to be paid upon first gas sales from the 
Orca field under the terms of a sale and purchase agreement between Faroe Petroleum (UK) Limited and ConocoPhillips (UK) Alpha 
Limited and ConocoPhillips (UK) Theta Limited. The movement in the period (£25,000) reflects foreign exchange translation only.
19 Called up share capital
Group and
Company
2012
£’000
Group and
Company
2011
£’000
Authorised
212,385,353 (2011: 212,385,353) Ordinary Shares of £0.10 21,239 21,239
Allotted, called up and fully paid
212,385,353 (2011: 212,385,353) Ordinary Shares of £0.10 21,239 21,239
Faroe Petroleum plc Annual Report & Accounts 2012 79 Accounts
Notes to the accounts
(continued)
19 Called up share capital (continued)
2012
Thousands
2011
Thousands
2012
£’000
2011
£’000
Ordinary shares of £0.10 each 
At 1 January 212,385 212,350 21,239 21,235
Issued on exercise of share options – 35 – 4
212,385 212,385 21,239 21,239
At 31 December 2012 the issued share capital of the Company was represented by 212,385,353 Ordinary Shares of £0.10 each 
(2011: 212,385,353). At 31 December 2012, there were 27,786,142 (2011: 27,909,450) 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 £1.8175 (2011: £0.1536 to £1.8175). Further details are contained in note 22.
20 Financial instruments, financial risk factors and capital management
Fair value of financial assets and liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments, 
including those classified under discontinued operations that are carried in the financial statements.
Group
2012
£’000
Group
2011 
£’000
Company
2012 
£’000
Company
2011
£’000
Financial assets
Loans and receivables
Available-for-sale investments 13 13 – –
Cash 72,891 111,589 31,059 68,124
Trade and other receivables 47,640 55,097 107 121
Restricted cash 2,666 689 – –
Commodity pricing derivative contracts – 188
Loans to subsidiaries – – 168,711 127,830
Financial liabilities
Amortised Cost
Trade and other payables (15,842) (18,672) (623) (966)
Short-term bank borrowing (51,249) – – –
56,119 148,904 199,254 195,109
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 it is not possible to determine a reliable value.
Within the above analysis, only the commodity pricing derivative contracts are deemed to be a Level 2 financial instrument within 
a fair value hierarchy.
The Group and Company is exposed to financial risks arising out of market risks (e.g. commodity prices, foreign currency 
exchange rates and interest rates), credit risks and liquidity risks. Details of these areas of risk are described below. 
80 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
(a) Market 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. The Company is exposed to movement in foreign currency exchange rates and interest rates.
 (i) Commodity price risk
  The Group is exposed to commodity price risk. Where and when appropriate the Company will put in place suitable hedging 
arrangements to mitigate the risk of a fall in commodity prices. At 31 December 2012, the Group had in place an oil zero-cost-
collar ($US 90/bbl – $US 112/bbl) and a gas zero-cost collar (55p/th – 66p/th). The Group also had several put options at both 
$US 80/bbl and $US 90/bbl. The aggregate fair value of these instruments was nil. During January 2013 both a further zero 
cost collar ($US 90/bbl – $US 118/bbl) and a further $US 90/bbl put option was entered into in order to hedge a further 
proportion of production expected in Q3 2013 – Q1 2014 and Q1 2014 – Q1 2014 respectively. The Company is not subject 
to commodity price risk.
 (ii) 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 is no 
currency hedging arrangement in place. Loans to subsidiaries with a functional currency other than British Pounds 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.
Increase/
decrease in
US Dollar rate
Effect on 
(loss)/profit
pre tax
£’000
Effect on
Equity
£’000
2012 +/-10% 4,384/(4,384) –
2011 +/-10% 1,817/(1,817) –
 (iii) Interest rate risk
  The Group is exposed to interest rate risks through the Group’s bank loan in Norway and the UK (see note 17 for terms). 
The possible effect of changes in interest rates is shown in the table below:
Increase/
decrease in
basis points
Effect on
(loss)/profit
 pre tax
£’000
2012
Norwegian kroner +/-100 270/(270)
British pounds +/-100 -/-
2011
Norwegian kroner +/-100 277/(277)
British pounds +/-100 -/-
   
Faroe Petroleum plc Annual Report & Accounts 2012 81 Accounts
Notes to the accounts
(continued)
20 Financial instruments, financial risk factors and capital management (continued)
(b) Credit 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 limited exposure to such credit risk and has put procedures in place to mitigate such risks. The maximum individual 
exposure for the Group at 31 December 2012 was £6,724,000 (2011: £6,755,000). The Company had no exposure to credit risk 
at 31 December 2012 (2011: £nil) from customers or partners. The exposure to subsidiaries failing to repay loans to the Company 
at 31 December 2012 was £168,711,000 (2011: £127,830,000).
(c) Liquidity 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 2011, when £62.2 million (before issue costs) was raised via a share placing and May 2011, when £69.8 million 
(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.
The table below shows the maturity analysis of the Group’s financial liabilities.
31 December 2012
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 – 15,842 – – – 15,842
Short-term bank borrowing* – – – 51,388 – 51,388
31 December 2011
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 – 18,672 – – – 18,672
Short-term bank borrowing* – – – – – –
*Includes the interest borne on these short-term bank borrowings. 
The Company’s financial liabilities consist of trade and other payables of £623,000 (2011: £966,000) which are due within  
three months.
Capital management
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. The EFF banking facility has been arranged in Norway to bridge the tax rebate receivable and the RBL banking facility 
is in place to finance operations and further growth in the business. 
At 31 December 2012 the net debt ratio was 22.0% (2011: nil)
2012 
£’000
2011 
£’000
Borrowing 51,249 –
Equity 231,696 230,814
Debt ratio 22.0% –
82 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
21 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 £519,000 (2011: £394,000). 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 2012 by a qualified independent actuary. The Group’s 
contributions for 2013 are expected to be £277,000 (2012: £258,000).
The table below is a summary of the net liabilities position of the pension scheme: 
2012
£’000
2011
£’000
Present value of scheme liabilities (1,186) (1,344)
T otal market value of assets 879 613
Actuarial (losses)/gains (84) 423
Net pension liability (391) (308)
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. 
22 Share based payments 
During the year, the Company operated three share schemes to incentivise employees, the Faroe Petroleum Unapproved Share 
Option Scheme (“Option Scheme”), the Faroe Petroleum Co-Investment Plan (“CIP”) and the Share Incentive Plan (SIP); details 
of which are summarised below: 
Share 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 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.
SIP:
Under this scheme employees commit to invest a monthly amount of up to an annual maximum of £1,500 through market 
purchases of the Company’s shares and for every share purchased the Company will match it with two matching shares. 
The matching shares are released at the end of a three year holding period.
 
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 £3,386,000 (2011: £2,909,000), all of which related to equity settled share-based 
payment transactions under the Current Schemes.
Faroe Petroleum plc Annual Report & Accounts 2012 83 Accounts
Notes to the accounts
(continued)
22 Share based payments (continued)
Share options
The following table sets out details of all outstanding options under the option scheme:
2012 2011
Options 
No
Weighted 
average 
exercise price 
£
Options 
No
Weighted 
average 
exercise price 
£
Outstanding at beginning of period 21,911,754 1.14 17,499,748 0.97
Granted during the period 301,900 1.58 4,480,700 1.79
Lapsed during the period (433,887) 1.40 – –
Forfeited during the period (138,200) 1.82 – –
Exercised during the year
(2)
– – (68,694) 0.98
Outstanding at the end of the period
(1)
21,641,567 1.13 21,911,754 1.14
Exercisable at the end of the period 11,868,287 0.86 2,845,921 1.39
(1)
 The options outstanding at 31 December 2012 had a weighted average remaining contractual life of 6.11 years (2011: 6.89 years).
(2)
 No options were exercised in 2012. The weighted average exercise price at the date of exercise for such options in 2011 was £0.98. The share price at the date of exercise was £1.97. 
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 £1.23 £1.19 40.21% 5.0 5.00% 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%
13 April 2011 £0.91 £1.78 £1.82 63.11% 5.0 2.65% 0.00%
18 May 2011 £0.73 £1.45 £1.40 62.81% 5.0 2.32% 0.00%
21 September 2011 £0.77 £1.51 £1.53 63.57% 5.0 0.79% 0.00%
12 December 2011 £0.63 £1.50 £1.55 53.17% 5.0 0.50% 0.00%
11 January 2012 £0.63 £1.62 £1.60 49.12% 5.0 1.01% 0.00%
1 February 2012 £0.62 £1.70 £1.67 48.61% 5.0 1.01% 0.00%
24 September 2012 £0.51 £1.50 £1.51 44.65% 5.0 0.36% 0.00%
Details of all options outstanding as at 31 December 2012 are included in Note 19.
84 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
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.
Co-investment 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.
2012
CIP Share
Awards No
2011 
CIP Share
Awards No
Outstanding at the beginning and end of the period 3,392,843 2,033,995
Granted during the period 167,497 1,460,443
Lapsed during the period – (101,595)
Forfeited during the period (20,503) –
Outstanding at the end of the period 3,539,837 3,392,843
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
12 September 2008 £0.63 £1.37 £0.00 41.53% 3.0 4.50% 0.00%
23 September 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 November 2010 £0.94 £1.74 £0.00 64.02% 3.0 1.41% 0.00%
12 April 2011 £0.95 £1.82 £0.00 63.13% 3.0 1.80% 0.00%
22 December 2011 £0.73 £1.53 £0.00 53.09% 3.0 0.51% 0.00%
28 May 2012 £0.64 £1.56 £0.00 45.97% 3.0 0.34% 0.00%
All vested Co-Investment Plan shares have lapsed as performance conditions were not met.
Share Incentive Plan 
During 2012 the Group introduced a Share Incentive Plan.
2012
SIP Share
Awards No
2011
SIP Share
Awards No
Matching shares outstanding at the beginning of the period 71,164 –
Matching shares purchased during the period 54,072 71,164
Matching shares forfeited during the period (9,510) –
Outstanding at the end of the period 115,726 71,164
The share awards under the SIP are booked through the Employment Benefit Trust at actual cost. 
Faroe Petroleum plc Annual Report & Accounts 2012 85 Accounts
Notes to the accounts
(continued)
23 Contingent liabilities
Under the terms of a sale and purchase agreement between Faroe Petroleum (UK) Limited (“FPUK”) and Nexen Petroleum 
UK Limited, FPUK are liable to pay a deferred consideration of £2,994,000 upon approval of a Field Development Plan (“FDP”) 
by Department of Energy and Climate Change (“DECC”) for the Perth licence. The joint venture has submitted a draft FDP subject 
to both DECC approval and final approval by the joint venture participants including FPUK, and so it is uncertain whether the 
deferred consideration will be paid.
Under the terms of a sale and purchase agreement between FPUK and ConocoPhillips (UK) Alpha Limited and ConocoPhillips (UK) 
Theta Limited, FPUK are liable to pay deferred consideration of $875,000 upon first gas sales from the Minke Graben field. As the 
decision to develop this field is yet to be taken by the joint venture partners, it is very uncertain whether the deferred 
consideration will be paid. 
A similar deferred consideration ($875,000) relating to the Orca field has been included in provisions in 2012 as disclosed  
in note 18.
24 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 
licences, amount to £149,086,000 (2011: £198,833,000) as follows: 
2012 
£’000
2011 
£’000
Group
UKCS Contracted 10,370 3,388
Norway Contracted 138,716 195,445
Company
As at 31 December 2012, the Company has no future capital commitments (2011: £nil). The Company has provided a guarantee 
for all the licence costs of its subsidiaries.
25 Obligations under operating leases
Obligations under non-cancellable operating leases for land and buildings are as follows:
Group
2012
£’000
Group
2011
£’000
Company
2012
£’000
Company
2011
£’000
Future minimum lease payments under non-cancellable leases:
Within one year 562 216 118 72
Two to five years 1,699 169 80 169
After five years – – – –
2,261 385 198 241
Rentals due under operating leases are charged against income on a straight line basis over the term of the lease. In 2012 lease 
payments (net) of £527,000 (2011: £360,000) were charged against income (see note 5). The operating leases relate 
predominantly to office leases with rent payable on a monthly basis. 
86 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
26 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:
2012
£’000
2011
£’000
Short-term employee benefits 1,683 1,976
Post-employment benefits 177 154
Share-based payment 1,389 1,254
3,249 3,384
There are no other related party transactions requiring disclosure for the Group. The Directors’ Remuneration report, together 
with Note 8 contains additional information in respect of directors’ emoluments.
During the year the Company entered into transactions, in the ordinary course of business, with other related parties, all within 
the Faroe Petroleum plc Group. Trading balances outstanding at 31 December 2012 with other related parties, are as follows:
2012
£’000
2011
£’000
Loans to subsidiaries 168,711 127,830
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. 
27 Subsequent events
Hyme development onstream 
On 26 February 2013, the Company announced that production commenced on the Statoil operated Hyme oil field in the 
southern part of the Norwegian Sea. This field ties back to the Njord A platform, which is located 19 kilometres away, in which 
Faroe also holds a 7.5% interest. The operator estimates that the Hyme field contains approximately 30 million barrels of oil 
equivalent (mmboe) (net to Faroe 2.25 mmboe), predominantly oil, and expects the field to extend the production life of the 
Njord field to beyond 2020. The development has been delivered on schedule and on budget of approximately NOK 4.5 billion 
(Faroe net share approximately £37.5 million). Faroe has funded its share of the development costs from cash flow generated  
from its producing interests. It is expected that the field will generate between 10-15% of the Company’s estimated 2013  
daily production. 
Rodriguez discovery 
On 31 January 2013, the Company announced that further results from the Rodriguez exploration well in PL475 (6407/1-6S) 
(Faroe 30%) confirmed a significant gas condensate discovery in the Lower Cretaceous interval. The Operator’s preliminary 
volumetric estimates of the size of the discovery are between 19 and 126 million barrels of recoverable oil equivalent (net to 
Faroe c.6 – 38mmboe). This is the first exploration well drilled on the Rodriguez license PL475 and further appraisal will be 
required to establish the lateral extent and size of this discovery.
Norwegian exploration licence awards
On 16 January 2013, the Company announced that it has been awarded eight new prospective exploration licences, including 
three operatorships, under the 2012 Norwegian APA Licence Round on the Norwegian Continental Shelf. These included  
two licences in the Northern North Sea, five licences in the North Sea and one licence in the Halten Terrace Area of the  
Norwegian Sea.
Faroe Petroleum plc Annual Report & Accounts 2012 87 Accounts
Notes to the accounts
(continued)
27 Subsequent events (continued)
Commencement of drilling on Darwin
On 4 March 2013 the Company announced that the Repsol operated high impact wildcat Darwin exploration well (7218/11-1) 
(Faroe 12.5%), acquired from Talisman Energy Norge AS in August 2012, had spudded. The Darwin prospect is located on the 
Veslemøy High in the frontier western part of the Barents Sea. Multiple targets have been identified on 3D seismic and this well 
will test the main Darwin prospect and contribute towards further de-risking of the large upside potential in the remainder of the 
licence area.
Lowlander acquisition
On 27 February 2013 the Company announced that it has entered into an agreement with Talisman Sinopec to acquire a 50% 
interest in UK Licence P .324, block 14/20c containing the Lowlander oil discovery. Lowlander is fully appraised and the field has 
sour characteristics, similar to those of the Perth Field (Faroe 34.62%), which is located 16 kilometres from Lowlander. The work 
programme will include a joint Perth/Lowlander development study.
Pil acquisition
On 27 February 2013 the Company announced that it has acquired a 25% interest in Norwegian Licence PL586 containing the 
Pil prospect which is located within tie-back distance (33 kilometres) to the producing Njord field (Faroe 7.5%). An exploration 
well is scheduled to be drilled on this prospect in the first half of 2014.
28 Jointly controlled assets 
Fields in production or under development as at 31 December 2012:
Country Licence Block Field Name Field Operator
Licence % 
Interest
Field % 
Interest
UK P454, P611 44/24a Minke GDF SUEZ E&P UK Ltd 5.89 5.89
UK P454, P611 44/24a, 29b, 30a Orca GDF SUEZ E&P UK Ltd 5.89 3.24
UK P039 53/4d Wissey Tullow Oil UK Ltd 18.75 18.75
UK P520 49/1a, 2a, 2b Topaz RWE DEA UK Ltd 25.00 7.50
UK P689 43/30a, 44/26a Schooner Tullow Oil SK Ltd 100.00 6.90
UK P111 30/3a Upper Blane T alisman Energy Norge AS 18.00
Netherlands D15B D15b Orca Minke GDF Production Nederland BV 5.00
Netherlands D18A D18a Orca Minke GDF Production Nederland BV 2.50
Norway PL048B 15/5 Glitne Statoil Petroleum AS 9.30 9.30
Norway PL048D 15/5 Enoch T alisman Sinopec North Sea Ltd 9.30 1.86
Norway PL055, PL053B, PL185 30/6, 31/4, 31/7 Brage Statoil Petroleum AS 14.25
Norway PL055, PL055B,
 PL055D
31/4 Brage
 Sognefjord
Statoil Petroleum AS 13.40 13.40
Norway PL103B 25/7 Jotun Exxon Exploration & 
Production Norway AS
30.00 3.00
Norway PL107, PL107C, PL132 6407/ 7 , 10 Njord Statoil Petroleum AS 7.50 7.50
Norway PL348 6407/8, 9 Hyme Statoil Petroleum AS 7.50 7.50
Norway PL169E 25/8 Ringhorne East Exxon Exploration & 
Production Norway AS
30.00 7.80
88 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Exploration acreage and discoveries as at 31 December 2012:
Country Licence Block Licence Name Operator
Licence % 
Interest
UK P218, P588 15/21a rest, 21f rest, 21b rest, 21c all Perth DEO Petroleum UK Ltd 34.62
UK P1787 21/14b Temple Faroe Petroleum (UK) Ltd *100.00
UK P1190 204/13a Tornado OMV (UK) Limited 10.00
UK P1192 213/20b, 25c , 214/16b N. Uist BP Exploration Operating 
Company Limited
6.25
UK P1195 214/30a Glenlivet DONG E&P (UK) Limited 10.00
UK P1839 205/13b, 14, 18, 19 Aileen Faroe Petroleum (UK) Ltd 50.00
UK P1851 219/2, 3, 223/26, 27 Balblair Faroe Petroleum (UK) Ltd 50.00
UK P1852 222/28, 29 Ardbeg Faroe Petroleum (UK) Ltd 50.00
UK P1853 217/11a, 12, 13a, 14, 15, 16a, 17a, 18a,
 19a, 20, 218/11a, 12a, 16, 17, 22a,
Grouse Faroe Petroleum (UK) Ltd 37.50
UK P2045 208/21a, 26, 214/30d Glenfarclas Faroe Petroleum (UK) Ltd 33.34
UK P2011 205/16d, 17b, 21c, 22b Dunvegan Faroe Petroleum (UK) Ltd 50.00
UK P2010 206/7b Ribbon E.ON E&P UK Limited 50.00
UK PL1655 15/21a Spaniards Premier Oil UK Ltd 8.40
UK P2076 29/12 part, 13 part, 14 Fulmar B Endeavour Energy (UK) Ltd 33.33
UK P1993 15/16e Perth
Exploration
DEO Petroleum Exploration Ltd 33.00
UK P1975 3/28c, 9/3e Pinsent RWE Dea UK SNS Ltd 50.00
Norway PL006C 2/5 part SE T or Lundin Norway AS 10.00
Norway PL405/
PL405B
7/9, 12, 8/7, 8, 10, 11 Butch Centrica Resources (Norge) AS 15.00 
Norway PL414/
PL414B
25/2, 3, 5, 6 Kalvklumpen/
Oksen
Det Norske Oljeselskap ASA 20.00
Norway PL433 6506/9 part, 12 part Fogelberg Centrica Resources (Norge) AS 15.00
Norway PL440S 2/8 part Clapton Faroe Petroleum Norge AS 40.00
Norway PL475 6407/1 part, 6406/3 Rodriguez Wintershall Norge AS 30.00
Norway PL477/
PL477B
6506/11 part Cooper/
Zappa
Centrica Resources (Norge) AS 30.00
Norway PL507 25/2, 3, 30/11, 12, 31/10 parts Tetrao Wintershall Norge AS 30.00
Norway PL590 6507/10 Milagro North Energy ASA 30.00
Norway PL592 6506/9 part Grayling Centrica Resources (Norge) AS 50.00
Norway PL534 7224/7, 8, 11 Samson Dome/
Hegg
BG Norge AS 20.00
Norway PL611 7223/3,6, 7224/1, 2, 3, 4, 5 Kvalross Wintershall Norge AS 40.00
* Not jointly controlled – belongs 100% to the Group
Faroe Petroleum plc Annual Report & Accounts 2012 89 Accounts
Notes to the accounts
(continued)
28 Jointly controlled assets (continued)
Exploration acreage and discoveries as at 31 December 2012 (continued):
Country Licence Block Licence Name Operator
Licence % 
Interest
Norway PL644 6506/8, 10, 11 Aerosmith OMV (Norge) AS 20.00
Norway PL645 6506/7, 10 Novus Faroe Petroleum Norge AS 50.00
Norway PL620 9/6 Lola Faroe Petroleum Norge AS 50.00
Norway PL621 9/2 Epsilon Faroe Petroleum Norge AS 75.00
Norway PL627 25/5, 6, 8, 9 Shango T otal E&P Norge AS 20.00
Norway PL629 25/1, 2, 4, 5 Darling Bridge Energy Norge AS 20.00
Norway PL531 7217/12, 7218/10, 11 Darwin Repsol Exploration Norge AS 12.50
Iceland 2013/01 IS6808/8, 9, 10, 11, 12 IS6708/1, 2 Iceland 01 Faroe Petroleum Norge AS 67.50
 
Fields in production or under development as at 31 December 2011:
Country Licence Block Field Name Field Operator
Licence % 
Interest
Field % 
Interest
UK P454, P611 44/24a Minke GDF SUEZ E&P UK Ltd 5.89 5.89
UK P454, P611 44/24a, 29b, 30a Orca GDF SUEZ E&P UK Ltd 5.89 3.24
UK P039 53/4d Wissey Tullow Oil UK Ltd 18.75 18.75
UK P520 49/1a, 2a, 2b Topaz RWE DEA UK Ltd 25.00 7.50
UK P689 43/30a, 44/26a Schooner Tullow Oil SK Ltd 100.00 6.90
UK P111 30/3a Upper Blane T alisman Energy Norge AS 18.00
Netherlands D15B D15b Orca Minke GDF Production Nederland BV 5.00
Netherlands D18A D18a Orca Minke GDF Production Nederland BV 2.50
Norway PL048B 15/5 Glitne Statoil Petroleum AS 9.30 9.30
Norway PL048D 15/5 Enoch T alisman Sinopec North Sea Ltd 9.30 1.86
Norway PL055, PL053B, PL185 30/6, 31/4, 31/7 Brage Statoil Petroleum AS 14.25
Norway PL055, PL055B,
 PL055D
31/4 Brage
 Sognefjord
Statoil Petroleum AS 13.40 13.40
Norway PL103B 25/7 Jotun Exxon Exploration & 
Production Norway AS
30.00 3.00
Norway PL107, PL107C, PL132 6407/7, 10 Njord Statoil Petroleum AS 7.50 7.50
Norway PL348 6407/8, 9 Hyme Statoil Petroleum AS 7.50 7.50
Norway PL169E 25/8 Ringhorne East Exxon Exploration & 
Production Norway AS
30.00 7.80
90 Faroe Petroleum plc Annual Report & Accounts 2012 Accounts
Exploration acreage and discoveries as at 31 December 2011:
Country Licence Block Licence Name Operator
Net % 
Interest
UK P218,P588 15/21a rest, 21f rest, 21b rest, 21c all Perth DEO Petroleum UK Ltd 34.62
UK P1787 21/14b Temple Faroe Petroleum (UK) Ltd *100.00
UK P1161 206/5a, 206/10a Freya/Fulla Faroe Petroleum (UK) Ltd 50.00
UK P1190 204/13 Tornado OMV (UK) Limited 10.00
UK P1192 213/20b, 25c, 214/16b N. Uist/Cardhu BP Exploration Operating 
Company Limited
6.25
UK P1195 214/30 Glenlivet DONG E&P (UK) Limited 10.00
UK P1593 44/29c Narwhal GDF Suez E&P UK Ltd 20.00
UK P1839 205/13b, 14, 18, 19 Aileen Faroe Petroleum (UK) Ltd 50.00
UK P1851 219/2, 219/3, 223/26, 223/27 Balblair Faroe Petroleum (UK) Ltd 50.00
UK P1852 222/28, 222/29 Ardbeg Faroe Petroleum (UK) Ltd 50.00
UK P1853 217/11a, 12, 13a, 16a, 17a, 18a, 19a,
 20, 218/11a, 218/12a, 16, 17, 22a
Grouse Faroe Petroleum (UK) Ltd 37.50
Norway PL006C 2/5 part SE T or Lundin Norway AS 10.00
Norway PL289 3/7 part Musling Dong E&P Norge AS 14.00
Norway PL405/PL405B 7/9, 12, 8/7, 8, 10, 11 Butch 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 Norge AS 40.00
Norway PL475 6407/1 part, 6406/3 Rodriguez Wintershall Norge AS 30.00
Norway PL477/PL477B 6506/11 part Cooper/Zappa Centrica Resources (Norge) AS 30.00
Norway PL507 25/2, 3, 30/11, 12, 31/10 parts Tetrao Wintershall Norge AS 30.00
Norway PL590 6507/10 Milagro North Energy ASA 30.00
Norway PL592 6506/9 part Grayling Centrica Resources (Norge) AS 50.00
Norway PL534 7224/7, 8, 11 Samson Dome/Hegg BG Norge 20.00
Norway PL611 7223/3,6, 7224/1, 2, 3, 4, 5 Kvalross Wintershall Norge AS 40.00
* Not jointly controlled as these licences belong 100% to the Group
 
Faroe Petroleum plc Annual Report & Accounts 2012 91 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
5 Old Bailey
London 
EC4H 7BA
Principal bankers
Lloyds Bank 
2nd Floor,
1 Lochrin Square
92 Fountainbridge
Edinburgh
EH3 9QA
BNP Paribas
16, rue du Hanovre
75002 Paris
Auditors
Ernst & Young LLP
Blenheim House
Fountainhall Road
Aberdeen
AB15 4DT
Joint solicitors
K&L Gates LLP
One New Change
London
EC4M 9AF
Pinsent Masons LLP
13 Queen’s Road
Aberdeen
AB15 4YL
Joint stockbroker and Nomad
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Joint stockbroker 
Oriel Securities Limited
150 Cheapside
London
EC2V 6ET
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
Officers and professional advisers 
92 Faroe Petroleum plc Annual Report & Accounts 2012 bcf billion cubic feet
boe barrels of oil equivalent
boepd barrels of oil equivalent per day
EBITDAX  Earnings before interest, taxation, depreciation, amortisation and exploration  
expenditure (gross profit plus depreciation on producing assets)
mmbbls million barrels
mmboe million barrels of oil equivalent
Glossary 
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Telephone: 0207 7403 4099 www.sampsonmay.com  Faroe Petroleum plc Annual Report & Accounts 2012
Faroe Petroleum
24 Carden Place
Aberdeen
AB10 1UQ
www.faroe-petroleum.com