Bid speculation mounts over North Sea oil and gas firm

BID speculation is mounting over Faroe Petroleum as the City awaits the next move by Norway’s DNO, the biggest shareholder in the Aberdeen-based oil and gas firm.
Oslo-listed DNO declared last month that it had no intention of making a bid for the company after concluding its most recent share purchase. However, takeover speculation has intensified after Faroe chief Graham Stewart confirmed it is continuing to use investment bank Rothschild as a defence adviser.
Mr Stewart highlighted the nature of Faroe’s continuing relationship with the financier in an interview with Reuters. He said Rothschild has been retained in that capacity since it was employed as an adviser when Dana Petroleum acquired a 27.5 per cent stake in Faroe in the early 2000s.
Mr Stewart’s comments came after DNO moved quickly to become the biggest shareholder in the company.
DNO, which resumed its interest in the North Sea last year after previously concentrating its efforts on the Middle East, secured 15.37 per cent of Faroe on April 4 when it acquired the stake held by Israeli-based Delek for £70.5 million. It then acquired a further 10% in Faroe through a reverse book building process, before lifting its stake to 27.68% with a subsequent share purchase.
City rules dictate that a shareholder must make a full takeover bid if their stake exceeds 30%.
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DNO, which is largely focused on Kurdistan, declared that it does not intend to make an offer for Faroe in a statement to the Oslo stock exchange on April 4. As a result, it must wait for six months before it can make a bid for the company under the takeover code.
DNO declined to comment when contacted in Oslo yesterday. A City source observed that Faroe has had an “industrial shareholder” with a stake similar to that now held by DNO since Dana acquired its stake. That 27.5% stake passed to KNOC (Korea National Oil Corporation) when it acquired Dana in a £1.8 billion deal in 2010. Delek then bought its stake from KNOC, by which time it had been diluted to around 15%.
Mike van Dulken, head of research at Accendo Markets, said it is a good time for investors in Faroe, whose share price has recovered from a five-year low of 43.75p in January 2016 – at the depth of the crude price plunge – to around 138p at the close of play last night. However, it is still adrift of the 153p it hit in May 2014.
Mr van Dulken said: “The shares have certainly perked up. Obviously, they were extremely low a couple of years ago, but they are not far off the highs of this time four years ago.”
He added: “The rise in [the] oil price gives a bit more value to what they are doing, but whoever is buying would have to pay for that. Shareholders are going to want a healthy premium for control to be taken.”