Graham Stewart, Chief Executive of Faroe Petroleum, commented, 'This is a further important step in Faroe Petroleum's Atlantic Margin strategy of farming out high cost exploration wells to secure a significant free cost carry, from an initially high licence equity position. CIECO has recognised the potential of our strategic Atlantic Margin portfolio position, and we are delighted to have reached agreement with them and we look forward to a very successful relationship together.'

Faroe Petroleum has entered into a farm-out agreement with CIECO Exploration and Production Limited ('CIECO') involving two high impact exploration wells in the Atlantic Margin. CIECO is a subsidiary of the Japanese trading conglomerate ITOCHU Corporation. This follows the previous Atlantic Margin farm out to Idemitsu E&P UK Ltd earlier this year and is in line with Faroe Petroleum's strategy of farming-out the majority of drilling costs to reduce its cost exposure whilst retaining material remaining interests.

In the Faroes, CIECO is farming into 12.5% of the Eni operated Anne Marie 005 licence, where an exploration well will target one of several structural prospects. The licence is operated by Eni and, in May 2006, the joint venture committed to drill a well on the licence, which is to be drilled before July 2009. The agreement with CIECO provides for a significant cost carry for Faroe Petroleum, leaving the Company with 12.5% of the licence equity.

In the UK, Faroe Petroleum has granted CIECO an option on terms which are very attractive to the Company, to farm into 2.5% of the Shell operated P.1192 licence located on the Corona Ridge, close to Chevron's successful Rosebank/ Lochnagar discovery. A decision is expected to be taken by the joint venture in the near future with regard to drilling the Cardhu prospect.

These transactions are contingent upon joint venture partner consents being granted and the respective approval from the Faroese Ministry of Trade and Industry and the UK Department of Business, Enterprise and Regulatory Reform.

Tags: CIECO Exploration and Production Limited, Faroe Petroleum