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Faroe Petroleum shares soar as DNO makes premium-priced takeover offer

Iraq and Norway focused oiler DNO already owns 28% of Faroe and with a cash offer pitched at 152p, it wants to scoop up the rest of the company’s shares

oil and gas operations
The offer marks a 44% premium since stake building began in April

Faroe Petroleum plc (LON: FPM) shares shot up over 20% in Monday’s early deals as it became the subject of a premium priced takeover approach.

Oslo headquartered DNO has made a 152p per share cash offer to buy the Norway-and-UK-focused offshore oil firm.

DNO already holds some 28.22% of Faroe’s shares and the takeover offer values all of the AIM-quoted firm at £607.9mln.

READ: Faroe Petroleum major shareholder DNO withdraws requisition for board representation

The offer price to shareholders is pitched at a 44% premium to Faroe’s share price prior to DNO’s first share acquisition earlier this year, in April.

In Monday’s early deals, Faroe shares rose 27.8p or 22% to trade at 153p each.

"We are pleased now to engage directly with the Faroe shareholders with a proposed all-cash voluntary offer of 152 pence per share,” said Bijan Mossavar-Rahmani, DNO executive chairman.

He added: “In the period between our first acquisition, triggering significant bid speculation, and this offer, the price of Brent crude has dropped 13 percent and oil and equity markets have entered a period of great uncertainty.

Faroe to consider its position

In a brief statement responding to DNO’s tilt, Faroe noted that DNO had not engaged with its management before announcing the unilateral offer.

“The board of Faroe will meet together with its advisers to consider the offer and a further announcement will be made in due course,” Faroe said.

 “In the meantime, Faroe shareholders are strongly urged to take no action in relation to their Faroe shares.”

DNO boss knocks “stubbornly disappointing” AIM share price performance

“For those shareholders who wish to exit, DNO is, therefore, offering a considerable premium.”

Mossavar-Rahmani, playing his hand as the hostile acquirer, further added: “For those who wish to remain, there is no assurance of Faroe achieving its full value potential in a volatile commodity and financial markets environment as a relatively small scale, financially constrained UK-AIM listed company whose share price performance has remained stubbornly disappointing, with the very notable exception of short-term spikes following the sale of a particular large block of shares by one investor to another (most recently to DNO) and the attendant speculation about an impending takeover premium with each such transaction.”

“We firmly believe that Faroe's assets, the substantial part of which are Norwegian, are better placed in the bosom of DNO, Norway's oldest independent oil and gas company, currently operating gross production of 125,000 barrels per day which compares with the 7,500 barrels of oil equivalent a day of gross production operated by Faroe.

“DNO's proven and probable reserves were nearly four times those of Faroe's as reported at 31 December 2017.”

DNO’s return to Norway as transition from Iraq

DNO’s primary assets are based in Northern Iraq, in Kurdistan, where it generated some US$347mln of revenue in 2017, producing over 73,000 barrels of oil per day.

The company re-entered Norway in mid-2017 when it acquired Origo Exploration by assuming the explorer’s work commitments.

Subsequently, DNO applied for ten exploration licences in Norway’s 2017 licensing round (seven in the Norwegian North Sea, one in the North Sea and two in the Barents Sea), and that adds to nine other licences it holds across Norwegian and UK waters.

In a recent investor presentation, DNO said it was “actively pursuing” additional stakes in the region including exploration, development and production assets.

The Norwegian company has previously talked about a potential listing and as a result of its partnership with Genel Energy, in the Kurdistan region of Northern Iraq, it is not unfamiliar to London’s oil investors.

In April, DNO said it had decided to build a long-term strategic shareholding in the company.

Quick facts: Faroe Petroleum plc

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