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RNS Number : 0165M
DNO ASA
02 January 2019
Not for release, publication or distribution, in whole or in
part, in or into any jurisdiction where to do so would constitute a
violation of the relevant laws of such jurisdiction
FOR IMMEDIATE RELEASE
2 January 2019
DNO ASA RESPONSE TO ANNOUNCEMENTS BY FAROE PETROLEUM PLC
Oslo, 2 January 2019 - DNO ASA ("DNO"), the Norwegian oil and
gas operator, notes that Faroe Petroleum plc ("Faroe") has
announced today that another of its important exploration wells,
Brasse East, has been completed as a dry hole. This follows the
recent disappointing announcements by Faroe on two other important
exploration wells, the Rungne well in the Brasse region, and the
"step-change" Cassidy well. The Brasse East dry well is indeed
troubling, as DNO had already noted that Faroe's ability to deliver
its longed for "transformational growth" heavily depends on the
Brasse development, which according to Faroe's own Competent
Persons Report ("CPR") today represents 35 percent of group
reserves[1]. Brasse's development has already been delayed by two
to three years and now awaits agreements, not yet finalised, with
third party host platform operators and a cross license utilisation
agreement.
Moreover, DNO had already expressed concern about Faroe's value
creation strategy and its overall attractiveness as a result of the
Equinor swap, in which Faroe jettisoned a crown jewel growth asset,
Njord, for mature, near term production which also left Faroe more
exposed, for its future growth, on the Brasse development. DNO
notes that the independent expert's asset valuation released this
morning by Faroe ignored this effect by presenting the valuation on
a pre-swap basis.
DNO notes that Faroe have included in today's hastily prepared
and released CPR a downgraded oil price sensitivity value based on
Brent prices of $53.89 per barrel in 2019 and $62.50 per barrel in
2020, the two years critical for the production contribution from
the Equinor swap. This again raises questions as to the wisdom of
swapping out of quality growth for near term mature production in
the Equinor swap.
The stock market has already given its verdict on the Brasse
East well and the publication of a CPR which raised more questions
than answers, with Faroe's Shares today falling in the aftermath of
the publication of the Faroe releases. But DNO is especially
concerned, and unconvinced, by four aspects of the CPR.
I. The report is still based on an oil price assumption of $70
per barrel from 2021, materially above the forward price of $57 per
barrel Brent price for 2021[2], notwithstanding that Faroe now
includes lower oil price sensitivities for 2019 and 2020.
II. By not including any value for the effect of the much
heralded Equinor swap, the report gives shareholders no accurate
picture of Faroe's future value or the actual cash flow
contribution from the Equinor swap's mature production at the lower
oil prices cited in the CPR. It should be noted that today's CPR
includes oil price sensitivities which are considerably lower than
the oil prices used as recently as 20 December 2018 in Faroe's
response circular to DNO's Offer to justify its claims of the
benefits of the Equinor swap.
III. The report contains no account of corporate costs, general
and administrative costs, working capital changes and finance
costs. It is also unclear whether the CPR has taken into account
the full decommissioning costs related to the Schooner and Ketch
following recent cessation of production at these fields.
IV. DNO notes that approximately 24 percent[3] of the value
assigned to Faroe's assets under the base case in the CPR lies in
contingent resources and "near term prospects". Moreover, of the
base case value assigned to Faroe's assets in the CPR only 68
percent[4] was underpinned by Faroe's oil and gas reserves.
DNO ASA Executive Chairman Bijan Mossavar-Rahmani issued the
following statement:
"From today's announcement it is plain that Faroes's defence is
exhausted. Their valuation report assesses an historic view of the
company using an inflated commodity price. The Equinor swap,
wrought on the company without consulting shareholders, is not
reflected, nor has consideration been given to a range of capital
and operating costs. The CPR accompanies the third exploration
failure in recent weeks from a company whose chairman vaunted its
exploration success in Faroe's defence document. The market's
verdict is evident today in the share price. With public companies,
it is the shareholders who ultimately decide."
Enquiries:
DNO ASA
Media: media@dno.no
Investors: ir@dno.no
Tel: +47 911 57 197
Brunswick
Patrick Handley
Charles Pretzlik
William Medvei
Tel: +44 20 7404 5959
Lambert Energy Advisory Limited
Philip Lambert
David Anderson
Tel: +44 20 7491 4473
Pareto Securities AS
Petter Sagfossen
Tel: +47 22 87 87 48
Further information
The terms and conditions of the Offer are set out in the Offer
Document and the accompanying Form of Acceptance. Defined terms
used but not defined in this announcement have the meanings given
in the Offer Document unless the context requires otherwise.
This announcement is not intended to and does not constitute, or
form part of, an offer, invitation or the solicitation of an offer
to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities, or the solicitation of any vote or
approval in any jurisdiction, pursuant to the Offer or otherwise,
nor shall there be any sale, issuance or transfer of securities of
Faroe in any jurisdiction in contravention of applicable law. The
Offer will be made solely by means of the Offer Document and (in
respect of Faroe Shares held in certificated form) the Form of
Acceptance accompanying the Offer Document, which will, together,
contain the full terms and conditions of the Offer including
details of how it may be accepted.
Please be aware that addresses, electronic addresses and certain
other information provided by Faroe Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from Faroe may be provided to DNO during the Offer
Period as required under Section 4 of Appendix 4 of the Code to
comply with Rule 2.11 of the Code.
Lambert Energy Advisory Limited, which is authorised and
regulated in the UK by the FCA, is acting exclusively for DNO and
no-one else in connection with the Offer and will not be
responsible to anyone other than DNO for providing the protections
afforded to clients of Lambert Energy Advisory Limited nor for
providing advice in relation to the Offer or any other matters
referred to in the Offer Document, this announcement or
otherwise.
Pareto Securities AS is acting exclusively for DNO and no-one
else in connection with the Offer and will not be responsible to
anyone other than DNO for providing the protections afforded to
clients of Pareto Securities AS nor for providing advice in
relation to the Offer or any other matters referred to in the Offer
Document, this announcement or otherwise.
Overseas jurisdictions
The availability of the Offer to Faroe Shareholders who are not
resident in and citizens of the UK or the US may be affected by the
laws of the relevant jurisdictions in which they are located or of
which they are citizens. Persons who are not resident in the UK or
the US should inform themselves of, and observe, any applicable
legal or regulatory requirements of their jurisdictions. Further
details in relation to Overseas Shareholders are contained in the
Offer Document.
The release, publication or distribution of this announcement in
or into jurisdictions other than the UK or the US may be restricted
by law and therefore any persons who are subject to the law of any
jurisdiction other than the UK or the US should inform themselves
about, and observe, any applicable requirements. Any failure to
comply with the applicable restrictions may constitute a violation
of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons
involved in the Offer disclaim any responsibility or liability for
the violation of such restrictions by any person. This announcement
has been prepared for the purposes of complying with English law
and the Code and the information disclosed may not be the same as
that which would have been disclosed if this announcement had been
prepared in accordance with the laws of jurisdictions outside of
England.
The Offer is not being made, directly or indirectly, in, into or
from any jurisdiction where to do so would violate the laws in that
jurisdiction. Accordingly, copies of this announcement and formal
documentation relating to the Offer will not be and must not be,
mailed or otherwise forwarded, distributed or sent in, into or from
any jurisdiction where to do so would violate the laws of that
jurisdiction.
Notice to US Faroe Shareholders
The Offer is being made for the securities of an English company
and is subject to UK disclosure requirements, which are different
from those of the US. The financial information included in the
Offer Document has been prepared in accordance with IFRS and thus
may not be comparable to financial information of US companies or
companies whose financial statements are prepared in accordance
with generally accepted accounting principles in the US.
The Offer will be made in the US pursuant to an exemption from
US tender offer rules provided by Rule l4d-1I under the US Exchange
Act and otherwise in accordance with the requirements of the Code.
Accordingly, the Offer will be subject to disclosure and other
procedural requirements, including with respect to withdrawal
rights, offer timetable, settlement procedures and timing of
payments, that are different from those applicable under US
domestic tender offer procedures and law. If the Offer is instead
implemented by means of a scheme of arrangement as provided for
under English law it will not be subject to the tender offer rules
of the US Exchange Act. Accordingly, the Offer would be subject to
disclosure requirements and practices applicable in the UK to
schemes of arrangement which differ from the disclosure
requirements of US tender offer rules.
The receipt of cash pursuant to the Offer by a US Faroe
Shareholder will likely be a taxable transaction for US federal
income tax purposes and under applicable state and local, as well
as foreign and other tax laws. Each holder of Faroe Shares is urged
to consult his/her independent professional advisor immediately
regarding the tax consequences of acceptance of the Offer.
It may be difficult for US Faroe Shareholders to enforce their
rights and any claim arising out of the US federal securities laws,
since DNO is located in a country other than the US, and some or
all of their officers and directors may be residents of countries
other than the US. US Faroe Shareholders may not be able to sue a
non-US company or its officers or directors in a non-US court for
violations of the US securities laws. Further, it may be difficult
to compel a non-US company and its affiliates to subject themselves
to a US court's judgement.
In accordance with normal UK practice, DNO or its nominees, or
its brokers (acting as agents), may from time to time make certain
purchases of, or arrangements to purchase, Faroe Shares outside the
US, other than pursuant to the Offer, before or during the period
in which the Offer remains open for acceptance. These purchases may
occur either in the open market at prevailing prices or in private
transactions at negotiated prices. Any information about such
purchases will be disclosed as required in the UK, will be reported
to a Regulatory Information Service and will be available on the
London Stock Exchange website, www.londonstockexchange.com.
Forward looking statements
This announcement (including information incorporated by
reference in this announcement), oral statements made regarding the
Offer and other information published by DNO contain statements
which are, or may be deemed to be, "forward-looking statements".
Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and
projections of the management of DNO about future events and are
therefore subject to risks and uncertainties which could cause
actual results to differ materially from the future results
expressed or implied by the forward-looking statements. The
forward-looking statements contained in this announcement include
statements relating to the expected effects of the Offer on DNO and
Faroe, the expected timing and scope of the Offer and other
statements other than historical facts.
Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "plans",
"expects" or "does not expect", "is expected", "is subject to",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", "believes" or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. Although DNO believes that the
expectations reflected in such forward-looking statements are
reasonable, DNO can give no assurance that such expectations will
prove to be correct. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments
to differ materially from those expressed or implied by such
forward-looking statements. These factors include the satisfaction
of the Conditions, as well as additional factors, for example, oil
and gas operations, particularly those relating to development
stage assets which are subject to varying inputs that may impact
timing, including, inter alia, permitting, environmental
regulation, changes to regulators and regulation, third party
manufacturers and service providers, the weather and asset partner
and operator actions. Other unknown or unpredictable factors could
cause actual results to differ materially from those in the
forward-looking statements. Such forward-looking statements should
therefore be construed in the light of such factors. DNO, its
associates, directors, officers and advisers provide no
representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward-looking statements in
this announcement will actually occur. You are cautioned not to
place undue reliance on these forward-looking statements. Other
than in accordance with its legal or regulatory obligations DNO is
under no obligation, and DNO expressly disclaims any intention or
obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
No profit forecasts or quantified benefits statement
No statement in this announcement is intended as a profit
forecast, profit estimate or qualified benefits statement and no
statement in this announcement should be interpreted to mean that
earnings per Faroe Share or DNO share for the current or future
financial years would necessarily match or exceed the respective
historical published earning per Faroe Share or DNO share or to
mean that the enlarged group's earnings in the first 12 months
following the Offer, or in any subsequent period, would necessarily
match or be greater than those of Faroe or DNO for the relevant
preceding financial period or any other period.
Dealing disclosure requirements
Under Rule 8.3(a) of the Code, any person who is interested in 1
percent or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 p.m. (London time) on the 10(th) business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 p.m. (London time) on the 10(th) business day following
the announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1 percent or more of any class of relevant securities
of the offeree company or of any securities exchange offeror must
make a Dealing Disclosure if the person deals in any relevant
securities of the offeree company or of any securities exchange
offeror. A Dealing Disclosure must contain details of the dealing
concerned and of the person's interests and short positions in, and
rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save
to the extent that these details have previously been disclosed
under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b)
applies must be made by no later than 3.30 p.m. (London time) on
the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on website and hard copies
A copy of this announcement and the documents required to be
published by Rule 26 of the Code is and will be available, subject
to certain restrictions relating to persons resident in Restricted
Jurisdictions, on DNO's website
https://www.dno.no/en/investor-relations/offer_announcement_26November.
For the avoidance of doubt, the contents of such website are not
incorporated into and do not form part of this announcement.
You may request a hard copy of this announcement by contacting
Equiniti Limited on 0333 207 6399 or +44 121 415 0973 (if calling
from outside the UK) or by submitting a request in writing to
Equiniti Limited, Corporate Actions, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA. Lines are open from 8.30 a.m. to
5.30 p.m. (London time) Monday to Friday (excluding English and
Welsh public holidays). Calls to the helpline from outside the UK
will be charged at applicable international rates. Different
charges may apply to calls from mobile telephones and calls may be
recorded and randomly monitored for security and training purposes.
Please note that Equiniti Limited cannot provide advice on the
merits of the Offer nor give financial, tax, investment or legal
advice. If you have received this announcement in electronic form,
copies of this announcement and any document or information
incorporated by reference into this announcement will not be
provided unless such a request is made.
About DNO
DNO is a Norwegian oil and gas operator focused on the Middle
East and North Sea. Founded in 1971 and listed on the Oslo Stock
Exchange, DNO holds stakes in onshore and offshore licences at
various stages of exploration, development and production in the
Kurdistan region of Iraq, Norway, Oman, the UK and Yemen.
[1] Based on proved and probable reserves to Faroe as per the
CPR (Appendix IV: Summary of Reserves). Taking the total Brasse
reserves of 35.78 MMboe (Oil: 24.18 MMBbl, NGL: 4.38 MMBbl, Gas:
43.3 Bscf divided by 6 to give 7.22 MMboe) divided by the total
reserves of 101.59 MMboe (Oil: 71.40 MMBbl; NGL: 10.44 MMBbl; Gas:
118.5 Bscf divided by 6 to give 19.75 MMboe) giving 35 percent.
[2] Forward market price of $57 per barrel Brent price for 2021,
as of 15:10 p.m. (London time) on 2 January 2019 as quoted on
Bloomberg.
[3] Based on base case contingent resources value of $165
million and near term prospects value of $79 million divided by the
total value of $1,007 million (from page 14 of the CPR) giving 24
percent.
[4] Based on base case reserves (by field) value of $681 million
divided by the total value of $1,007 million (from page 14 of the
CPR) giving 68 percent.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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