Faroe Petroleum PLC (LON:FPM) Response to Unsolicited Offer by DNO ASA

Further to its earlier announcement, the Board of Faroe (the “Board”, “we”) have now met together with its advisers and considered the announcement released earlier today by DNO of an unsolicited offer for the entire issued and to be issued share capital of Faroe not already owned by DNO at 152p per share (the “Offer”).

The Board strongly believes that the Offer is opportunistic and substantially undervalues Faroe and encourages all shareholders to take no action.

DNO’s opportunistic Offer substantially undervalues your Company

The Offer price of 152p per share represents a premium of just 1% to Faroe’s 3-month VWAP and only 21% to Faroe’s closing share price on 23 November 2018. This is:

substantially below the average premium on all UK takeovers over the last 10 years of 43%¹;

substantially below the average premium on all UK takeovers in the E&P space over the last 10 years of 40%²; and

equivalent to US$6.8³ per barrel of 2P reserves and US$3.2³ per barrel of 2P reserves + 2C resources, which is substantially below the average price paid recently for comparable North Sea (in particular, Norwegian Continental Shelf) portfolios of US$12.1⁴ per barrel of 2P reserves and US$9.5⁴ per barrel of Total Resources respectively.

DNO’s Offer does not value Faroe’s exciting prospects as an independent business

The Offer also fails to recognise the exciting prospects that Faroe has as an independent business. Faroe has a proven track record of successful exploration, sustainably delivering reserves and resource growth year-on-year, and effective portfolio management. Since the date of DNO’s first acquisition of the Company’s shares on 4 April 2018, Faroe has made significant progress in its stated exploration and appraisal programme and general corporate development:

following significant exploration successes at Iris/Hades and Agar this year, our exploration programme continues with a near term five-well exploration and appraisal campaign already underway with the potential to deliver significant resources in the next 12 months, and many more wells expected thereafter;

we continue our transformational production growth programme with a fully-funded near to medium term production growth target of 35,000boepd, and potential for considerable additional organic production growth thereafter; and

our plans are underpinned by our strong balance sheet together with the recent successful increase and extension of our Reserve Based Lending bank credit facility, which remains undrawn.

We strongly believe that DNO’s Offer fails to reflect these attributes and hence the fair value that you deserve for your investment in Faroe.

Our growth plans are aimed at serving the interests of Faroe’s shareholders as a whole, in keeping with our strong corporate governance culture which also, as expressed in our announcement dated 16 August 2018, led us to conclude that Board representation by DNO would not serve the interests of Faroe’s shareholders. The Board believed then, and continues to believe, that control of the Company should not be ceded without an appropriate premium being paid.

DNO’s Offer does not provide you with an appropriate premium for solving DNO’s strategic challenges

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. 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.

John Bentley, Non-Executive Chairman of Faroe, commented:

“DNO’s offer substantially undervalues Faroe on every applicable metric.

The Board is determined to defend our shareholders’ rights to receive an appropriate premium for a fully funded business which is actively progressing the delivery of its highly attractive growth prospects and is the only platform available which solves DNO’s strategic challenges.

We believe that Faroe is worth substantially more than 152p per share and we urge shareholders to reject DNO’s opportunistic, unsolicited and inadequate offer.”

The Board of Faroe will write to shareholders with its detailed views on the offer in due course. In the meantime, Faroe shareholders are strongly urged to take no action in relation to their Faroe shares.

Rule 2.9 information

In accordance with Rule 2.9 of the City Code on Takeovers and Mergers, the Company confirms that, as at the date of this announcement, it has 372,889,693 ordinary shares of 10 pence each in issue and admitted to trading on the AIM market of the London Stock Exchange.

The International Securities Identification Number for Faroe’s ordinary shares is GB0033032904.

– Ends –


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