Latest: Faroe lambasts DNO for ‘puzzling attacks’ on exploration record

Graham Stewart, former chief executive, Faroe Petroleum

(submitted pic)
Graham Stewart, former chief executive, Faroe Petroleum (submitted pic)

Bosses at Faroe Petroleum have condemned DNO for repeatedly attacking its exploration track record.

Faroe said it boasted one of the best technical teams in the Norwegian Continental Shelf and that it was “puzzled” by the criticism.

The two companies have been embroiled in a bitter war of words following Oslo-based DNO’s “hostile” bid to seize control of Faroe.

This morning, DNO revealed it had failed to get enough investors to part with their holdings to make its offer of £1.52 per share unconditional.

Under that offer, tabled in November, DNO would only pay out if it secured enough acceptances to take its equity in Faroe to 57.5%.

But by yesterday afternoon’s deadline, DNO could only muster a further 13.1%, which would have taken its total to 43%.

DNO subsequently said it had bought more Faroe shares, increasing its equity to 30%, from 29.9% previously, and triggering a “mandatory offer”.

It effectively reduces the acceptance condition to 50% from 57.5% and extends the closing date for the offer to January 18.

Whatever the outcome, DNO said it would not “go away” and vowed to “redouble efforts” to put its own nominees on Faroe’s board to ensure “greater transparency and scrutiny”.

Yesterday, DNO said Faroe had “exhausted” its defence following recent exploration disappointments at Brasse East and Cassidy.

DNO also picked apart a report indicating Faroe’s shares should fetch £1.86-£2.25.

Faroe said the extension showed DNO was bluffing when it threatened to lapse the offer by 12 months, by which time it could have gone could on the deal.

Led by chief executive and founder Graham Stewart, Faroe again urged investors to reject the offer, which it described as too low and an attempt to take advantage of the recent drop in oil prices.

Faroe’s board said: “We are concerned at DNO’s increasing attacks on Faroe’s outstanding exploration track record and its implied criticism of our technical team which boasts one of the best exploration track records on the NCS.

“It is a particularly puzzling criticism given that Faroe would provide DNO with a high quality, full cycle and diversified North Sea asset base that stands in stark contrast to DNO’s existing business.”

The directors added: “DNO’s statement that it is “not going away” demonstrates the attractiveness of Faroe to DNO.

“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.”

Paul Mumford, of Cavendish Asset Management, which held more than 5 million shares in Faroe, said: “It’s unclear what this offer extension will achieve. Shareholder reactions to DNOs initial offer already suggested that it was too low.

“It’s no surprise that DNO chose to disregard yesterday’s independent valuation, as it exposes the offer for what it really is – an opportunistic bid which wildly undervalues Faroe, both in terms of current production and also its valuable exploration assets.”

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