The board of bid target Faroe Petroleum today published a report placing a higher valuation on the business than the takeover offer from Norwegian suitor DNO.
Faroe hired industry experts at Gaffney, Cline & Associates (GCA) to come up with their own valuation of the company, after DNO offered £608 million at 152p per share to take the business over.
The report concludes that Faroe’s assets are valued in the range of 186p to 225p per share, or between $879 million (£688m) and just below $1.1 billion.
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.
Today marks the closing date for the DNO offer after which, if the Norwegian firm does not receive sufficient acceptances for it to be unconditional, the offer will either lapse or can be extended.
GCA’s valuation does not account for an asset swap with Equinor, Faroe’s “scarcity value” in a tight upstream M&A (mergers and acquisitions) market and the value of its management’s “proven track record”.
John Bentley, non-executive chairman of Faroe, said: “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 per cent to 48 per cent premium respectively to DNO’s offer price.”
Last week, DNO again urged Faroe investors to accept its takeover bid for the company. In calling on Faroe shareholders to back the deal, DNO said its offer was “full and fair, even generous”.
DNO currently holds just under 30 per cent of the company.
Meanwhile, Faroe announced the results of the drilling of the Brasse East well and Brasse Appraisal side-track in the northern area of the North Sea. The Scots firm has a 50 per cent working interest and is also the operator.
Both the reservoir depths and the hydrocarbon contact are similar to the pre-drill expectations, the firm noted.
Chief executive Graham Stewart said: “Although no hydrocarbons were present in the Brasse East prospect we are pleased with the results of the appraisal sidetrack which confirms hydrocarbons within the northern part of the Brasse field, as expected.
“In addition, the excellent sand quality in the Brasse East exploration well has reduced the reservoir risk of the Brasse Extension exploration prospect located to the north east of the Brasse field.”