Faroe Urges Rejection of DNO Bid

AIM-listed Faroe Petroleum urged its shareholders late November 26 to reject DNO's unsolicited bid for all Faroe shares of £1.52 ($1.95)/each, saying it was "opportunistic and substantially undervalues Faroe" on "every applicable metric."

The price represents a premium of just 1% to Faroe’s 3-month volume-weighted average price and only 21% to Faroe’s closing share price on 23 November 2018, it said, so substantially below the average premium on all UK takeovers over the last 10 years of 43%; substantially below the average premium on all UK takeovers in the E&P space over the last 10 years of 40%; and equivalent to $6.80/barrel of 2P reserves and $3.2/barrel of 2P reserves + 2C resources, which is substantially below the average price paid recently for comparable North Sea of $12.1/barrel of 2P reserves and $9.5/barrel of total resources respectively.

Further, Faroe said, the bid fails to recognise the exciting prospects that Faroe has as an independent business, with the potential to deliver significant resources in the next 12 months. "We continue our transformational production growth programme with a fully-funded near to medium term production growth target of 35,000 barrels of oil equivalent/day, and potential for considerable additional organic production growth thereafter; and our plans are underpinned by our strong balance sheet together with the recent successful increase and extension of our Reserve Based Lending bank credit facility, which remains undrawn," it said. 

Faroe continues to believe that control should not be ceded without an appropriate premium being paid for the high quality, full cycle and diversified North Sea asset base that "stands in stark contrast to DNO’s existing business. As such, Faroe would solve DNO’s strategic challenges and shareholders should receive an appropriate premium which is not currently reflected in DNO’s offer."