Faroe en­ters Nor­we­gian oil deal as it faces down takeover

The Daily Telegraph - Business - - Business - By Jil­lian Am­brose

FAROE Petroleum has clinched a deal to boost its oil pro­duc­tion in the Nor­we­gian North Sea while bat­tling a hos­tile takeover bid from its largest share­holder.

The Aberdeen-based pro­ducer told share­hold­ers that the as­set swap ar­range­ment with Nor­we­gian ma­jor Equinor, for­merly known as Sta­toil, would raise its oil pro­duc­tion by be­tween 7,000-8,000 bar­rels of oil a day from next year.

Faroe said the out­put boost could al­low it to re­turn cash to share­hold­ers and push through a sus­tain­able div­i­dend pol­icy.

Gra­ham Ste­wart, the com­pany’s CEO, told in­vestors that the share­holder sweet­ener was not de­signed to see off the bid by top share­holder DNO to take full con­trol of the com­pany.

He added that the deal had been un­der dis­cus­sion since be­fore the hos­tile takeover bid emerged last week.

DNO raised hack­les on Faroe’s board with a bid to buy it for 152p a share, valu­ing the Aim-listed com­pany at £608m – a move dubbed “op­por­tunis­tic” by Mr Ste­wart. He ad­vised share­hold­ers to take no ac­tion.

DNO al­ready owns 28pc of its smaller ri­val af­ter a steady cam­paign of stake­build­ing this year.

The Oslo-listed oil giant was forced in April to deny it planned a full takeover of­fer, trig­ger­ing City rules that blocked DNO from mak­ing an ap­proach for six months.

Faroe’s shares have traded at around 150p a share since Au­gust, reach­ing highs of 170p a share in early Oc­to­ber, be­fore fall­ing oil prices dragged its share price down to be­low 130p last month.

Un­der the terms of the deal, Faroe will take Equinor’s stakes in the Vilje and Ringhorne East fields, and parts of the state-owned firm’s own­er­ship in the Marulk and Alve fields, in re­turn for its stakes in the Njord field.

Faroe said the deal would help es­tab­lish an oil pro­duc­tion rate of 18,000 to 22,000 bar­rels a day in 2019, which is al­most dou­ble the 12,000 bar­rel daily rate set this year.

“We are now con­fi­dent in our abil­ity to de­liver in ex­cess of 50,000 boepd [bar­rels of oil equiv­a­lent] in the medium term,” Mr Ste­wart said.

“This will en­able us to give care­ful con­sid­er­a­tion to a po­ten­tial re­turn of cap­i­tal to our share­hold­ers, as an ad­di­tional el­e­ment in our cap­i­tal de­ploy­ment mix,” he added.

In a state­ment, DNO said that al­though the “sig­nif­i­cant deal” may not have been de­signed to halt its takeover plans, it would re­quire pause for thought.

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