DNO Bid Undervalues Faroe by 48 %

Laxman Pai January 3, 2019

North Sea player Faroe Petroleum published an independent valuation of its assets by Gaffney, Cline & Associates (GCA), which is said to highlight the inadequacy of DNO ASA's GBP608 million at 152p per share takeover offer.

Faroe Petroleum could be worth more than USD1bln (GBP800m) according the review that values the company well above the bid made by Norwegian oil giant DNO. The findings imply a valuation for Faroe itself in the range of 186 pence to 225p per share, representing a 22% to 48% premium to DNO's offer price of 152 pence.

The calculation reflects current market oil pricing and "further reinforces the board's view that DNO's offer is opportunistic and substantially undervalues Faroe", the group added.

John Bentley, Faroe’s chairman, said the independent valuation “clearly supports” the board’s view that the offer “substantially undervalues” the company. In addition, Faroe completed the drilling of the Brasse East well and Brasse Appraisal side-track.

DNO, which has built up a 29.9% stake in Faroe, said last week its cash deal was “full and fair, even generous”. Faroe had until January 20 to weigh in with material new information on the DNO bid.