Response to Unsolicited Offer by DNO ASA (“DNO”)
26 November 2018
Further to its earlier announcement, the Board of Faroe (the “Board”, “we”) have now met together with its advisers and considered the announcement released earlier today by DNO of an unsolicited offer for the entire issued and to be issued share capital of Faroe not already owned by DNO at 152p per share (the “Offer”).
The Board strongly believes that the Offer is opportunistic and substantially undervalues Faroe and encourages all shareholders to take no action.
DNO’s opportunistic Offer substantially undervalues your Company
The Offer price of 152p per share represents a premium of just 1% to Faroe’s 3-month VWAP and only 21% to Faroe’s closing share price on 23 November 2018. This is:
- substantially below the average premium on all UK takeovers over the last 10 years of 43%¹;
- substantially below the average premium on all UK takeovers in the E&P space over the last 10 years of 40%²; and
- equivalent to US$6.8³ per barrel of 2P reserves and US$3.2³ per barrel of 2P reserves + 2C resources, which is substantially below the average price paid recently for comparable North Sea (in particular, Norwegian Continental Shelf) portfolios of US$12.1⁴ per barrel of 2P reserves and US$9.5⁴ per barrel of Total Resources respectively.
DNO’s Offer does not value Faroe’s exciting prospects as an independent business
The Offer also fails to recognise the exciting prospects that Faroe has as an independent business. Faroe has a proven track record of successful exploration, sustainably delivering reserves and resource growth year-on-year, and effective portfolio management. Since the date of DNO’s first acquisition of the Company’s shares on 4 April 2018, Faroe has made significant progress in its stated exploration and appraisal programme and general corporate development:
14 August 2018
Faroe Petroleum plc
(“Faroe”, “Faroe Petroleum”, the “Company”)
Farm-In to UKCS Agar/Plantain Well
Faroe Petroleum, the independent oil and gas company focusing principally on exploration, appraisal and production opportunities in Norway and the UK, is pleased to announce that it has farmed into the UK Continental Shelf (“UKCS”) Agar Plantain exploration and appraisal well close to the UK/Norwegian median line, operated by Azinor Catalyst Limited (“Catalyst”).
The Plantain exploration prospect will be drilled first followed by a contingent side-track to appraise the Agar oil field, discovered in 2014. Operator volumes in Agar and Plantain have been estimated by Catalyst at a combined mid-case resource of 60 million barrels of oil equivalent, with an upside case of 98 million barrels of oil equivalent. Plantain is an Eocene oil prospect which follows on from the original Agar oil discovery in 2014 (9/14a-15A) and the analogous Frosk oil discovery (24/9-12 S) made in Norway by AkerBP earlier this year.
Drilling on Agar Plantain is currently scheduled to commence later this month using the Transocean Leader at a total estimated gross cost of US$15 million. Faroe joins Catalyst (25.0% and operator) and Cairn Energy plc (50.0%) in this sole-risk well, the results of which will be announced on completion of drilling operations. Faroe’s equity interest in this well is 25.0%, to be funded through existing cash resources, and through the same transaction will also become a 12.5% equity interest holder in the wider P1763 Licence (Apache 50.0% and operator, Cairn 25.0%, Catalyst 12.5%).
This farm-in remains subject to the customary regulatory and third party consents.