Shares of Aberdeen-based Faroe Petroleum, the independent oil and gas company, rose about 12% on Wednesday after it announced “significant discoveries” in the Hades and Iris prospects in the Norwegian Sea — and Norwegian oil firm DNO built up a big stake in Faroe.
DNO early on Wednesday bought a 15.4% stake in Faroe and then said after the market close that it aims to increase its stake to around 25%.
DNO, which bought the initial stake from Israel’s Delek Group, will offer to buy up to 10% of Faroe’s shares from other shareholders by Thursday morning, although it said it does not plan a full takeover of Faroe.
“DNO now has decided to build a long term strategic shareholding in Faroe Petroleum and to support Faroe Petroleum management’s growth focused North Sea strategy,” said the Norwegian firm.
After the market closed, Faroe said in a stock exchange statement: “Faroe Petroleum notes the purchase of 56,355,825 shares in the company representing 15.37% of the company’s share capital by DNO ASA from Delek Group Ltd at a price of GBP 1.25 per share and DNO’s subsequent statement that it has no intention of making an offer for the company.
“Faroe also notes the announcement by DNO of an intention to acquire up to 10% of the outstanding shares in the company through a reverse book building process.
“The Faroe board has not had any discussions with DNO in relation to its purchase of the shares in the company and its intention to acquire an additional shareholding in the company.
“The Faroe board further notes that it has had no discussions with Delek in relation to the sale of its shares in the company.
“The Faroe board considers that the GBP 1.25 per share price at which DNO purchased the Faroe shares from Delek substantially undervalues the company and its prospects.”
On the discoveries, Faroe Petroleum CEO Graham Stewart said: “We are very pleased to announce significant discoveries in both the Hades and Iris prospects; both are well in excess of pre-drill estimates.
“These discoveries are located in one of our core areas and build on Faroe’s already significant position in the Norwegian Sea.
“The Hades and Iris prospects, previously known as Aerosmith and Zappa respectively, have been part of Faroe’s portfolio for many years, forming the main part of a successful APA licence application made in 2009.
“It is extremely gratifying to see both of these prospects delivering significant discoveries, further confirming Faroe’s consistent and industry-leading exploration track record, which has directly and indirectly generated approximately 75% of our 2P reserves.
“Aside from the ongoing Fogelberg appraisal well, results from which are expected shortly, the Company’s exploration programme continues over the remainder of the year, with three further committed exploration wells in Norway: the Rungne (Faroe-operated), Cassidy and Pabow wells.”
Faroe said of the discoveries: “Preliminary gross volumes of recoverable hydrocarbons for the Hades prospect are estimated to be 19 – 113 mmboe (million barrels of oil equivalents), exceeding pre-drill estimates” and “preliminary gross volumes of recoverable hydrocarbons for the Iris prospect are estimated to be 19 – 132 mmboe, exceeding pre-drill estimates.”
The licences involved are both operated by OMV (Norge) AS (30%), Faroe Petroleum Norge AS (20%), with partners Statoil Petroleum AS (40%) and Spirit Energy Norge AS (10%).