Faroe Petroleum's Asset Valuation At Premium To DNO's Takeover Offer

LONDON - UK and Norway-focused oil and gas company Faroe Petroleum PLC on Wednesday published an independent valuation of its assets, which is said to highlight the inadequacy of DNO ASA's GBP608 million takeover offer.

Oil and gas consultant Gaffney, Cline & Associates valued Faroe's oil and gas assets in the range of USD879 million to USD1.08 billion.

The valuation reflected current market oil pricing and recent drilling results from the Brasse East well and Brasse appraisal sidetrack in the North Sea.

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.

Norway-focused oil and gas company DNO currently owns around a 30% stake in Faroe, and in late November made an offer to acquire the remaining shares it does not own.

Faroe has repeatedly rejected the offer, saying that it is "opportunistic and substantially undervalues" the company.

GCA estimated Faroe's proved and probable reserves at 102 million barrels of oil equivalent.

"GCA's independent valuation clearly supports our view that DNO's offer substantially undervalues Faroe. Its valuation of Faroe's oil and gas assets implies a value per share for Faroe in the range of 186p to 225p per share representing a 22% to 48% premium respectively to DNO's offer price," said Chairman John Bentley.

In addition, Faroe completed the drilling of the Brasse East well and Brasse Appraisal side-track.

The Brasse East well 31/7-3 S was drilled to a total depth of 2,247 metres and encountered 48 metres of gross Jurassic reservoir but was found to be water wet.

The appraisal side-track was drilled to a total depth of 2,254 metres and saw better results, encountering 40 metres of hydrocarbon bearing Jurassic reservoir.

Shares in Faroe Petroleum were down 0.7% at 146.05 pence on Wednesday.

Source: LSE