Extension of Cash Offer for Faroe Petroleum

RNS Number : 0904M

DNO ASA

03 January 2019

 

Not for release, publication or distribution, in whole or in part, in or into any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction

FOR IMMEDIATE RELEASE

3 January 2019

EXTENSION OF CASH OFFER FOR FAROE PETROLEUM PLC

Oslo, 3 January 2019 - DNO ASA ("DNO"), the Norwegian oil and gas operator, announces today that it has decided to extend for a further 14 days its 12 December 2018 cash offer for the entire issued and to be issued share capital of Faroe Petroleum plc ("Faroe") not already owned by DNO at 152 pence per share (the "Offer"), notwithstanding the significant deterioration in oil and equity markets and a steady stream of disappointing exploration news from Faroe.

DNO made its Offer on 26 November 2018 at what it considered to be a full and fair price for Faroe. The Offer price of 152 pence is a 44.8 percent premium to the price of 105 pence on 3 April 2018 (the last business day before DNO announced its first acquisition of shares in Faroe) and a 20.8 percent premium to the Faroe Share price at the close of business on 23 November 2018 (the last business day before the announcement of the Offer).

As at 1.00 p.m. (London time) on 2 January 2019, DNO had received valid acceptances of the Offer in respect of a total of 48,986,566 Faroe Shares representing approximately 13.1 percent of the issued share capital of Faroe which DNO may count towards satisfaction of the Acceptance Condition. DNO already owns 29.9 percent of the issued share capital of Faroe. Taken together, the total number of Faroe Shares which DNO may count towards the satisfaction of the Acceptance Condition is 160,480,584 Faroe Shares, representing approximately 43.0 percent of the issued share capital of Faroe. This is below the Acceptance Condition, being such number of shares as is equal to one share more than 57.5 percent of Faroe's issued share capital.

Faroe Shareholders will appreciate the downturn in markets from the time DNO made its Offer on the morning of 26 November 2018 to the first closing at 1.00 p.m. (London time) on 2 January 2019. Faroe is a UK AIM-listed company and during this period, the UK AIM index has fallen by 9 percent¹, the Brent spot oil price has fallen by 11 percent² and the average Brent futures oil prices for 2019 and 2020 have fallen by 11 percent³ and 9 percent⁴, respectively.

In light of these factors and other concerns referred to in our announcement as of 2 January 2019, following the announcements of Faroe's Competent Persons Report and the dry Brasse East well, DNO has been faced with a difficult decision as to whether to lapse or to extend its Offer. After careful consideration, including factoring in the likely challenge facing some shareholders to act during the Christmas and New Year holiday, DNO has decided to extend the Offer for a further 14 days.

If its Offer lapses, DNO cannot make a new offer for another 12 months (subject to the exceptions in the Code) and there can be no assurances as to DNO's ambitions in these depressed markets. Whether DNO achieves its Acceptance Condition or not, its goal will continue to be to safeguard DNO's significant investment in Faroe. DNO will redouble efforts to replace entrenched directors and achieve appropriate board representation for the owners of Faroe to achieve greater transparency and scrutiny; improvement of corporate governance practices; informed and proactive shareholder "say on pay" and to prevent further dilutive actions, including large, off-market options awards to the executive directors.

DNO's full, fair -- and in retrospect, even generous -- Offer provides Faroe Shareholders with a rare opportunity to exit their relatively illiquid holdings in Faroe at an attractive price in volatile and uncertain oil and equities markets. Faroe Shareholders, including the executive directors who hold significant numbers of shares, options and matching shares awarded or available for award through Faroe's various schemes, should consider where Faroe Shares will trade if DNO's Offer lapses and what prices larger blocks of shares can command given Faroe's relatively illiquid AIM-listed position.

The Offer, which remains subject to the terms and conditions set out in the Offer Document of 12 December 2018, and as further described in the Form of Acceptance for those holding certificated Faroe Shares, is being extended and will remain open for acceptances until 1.00 p.m. London time on 16 January 2019.

DNO ASA Executive Chairman Bijan Mossavar-Rahmani issued the following statement:

"Even if DNO's Offer lapses or is allowed to lapse, DNO is not going away. For too long shareholders have given the Faroe board of directors a free pass. Starting with  our first acquisition of shares, shareholders holding some 43 percent of Faroe's shares have voted with their feet by seeking to exit all or part of their positions either through sales to DNO or by accepting our Offer. Whatever the outcome of this Offer process, we will make every effort, through regular communication and engagement, to encourage our fellow shareholders who remain invested to vote their shares going forward not by proxy but proactively."

Sources

1.   The change in the AIM Index trading price from market open at 8.00 a.m. (London time) on 26 November 2018 until 1.00 p.m. (London time) on 2 January 2019 (from Bloomberg).

2.   The change in the Brent spot price from 8.00 a.m. (London time) on 26 November 2018 until 1.00 p.m. (London time) on 2 January 2019 (from Bloomberg).

3.   The difference between the 2019 forward Brent price based on the average front month mid-point between the bid and the ask prices for January to December 2019 as at 8.00 a.m. (London time) on 26 November 2018 and the average front month mid-point between the bid and the ask prices for March to December 2019 as at 1.00 p.m. (London time) on 2 January 2019 (from Bloomberg).

4.   The difference between the 2020 forward Brent price based on the average front month mid-point between the bid and the ask prices for January to December 2020 as at 8.00 a.m. (London time) on 26 November 2018 and the average front month mid-point between the bid and the ask prices for January to December 2020 as at 1.00 p.m. (London time) on 2 January 2019 (from Bloomberg).

The Offer Document, together with the Form of Acceptance, is available on DNO's website at https://www.dno.no/en/investor-relations/offer_announcement_26November.

All Faroe Shareholders are urged to proceed to accept the Offer in accordance with the instructions set out below.

Actions to be taken:

Faroe Shareholders who have not yet accepted the Offer should act as soon as possible and by the following deadline:

·    If you hold your Faroe Shares, or any of them, in certificated form (that is, not in CREST) you should complete and return the Form of Acceptance accompanying the Offer Document as soon as possible and, in any event, so as to be received by Equiniti Limited by no later than 1.00 p.m. (London time) on 16 January 2019.

·    If you hold your Faroe Shares, or any of them, in uncertificated form (that is, in CREST), you should ensure that an Electronic Acceptance is made by you or on your behalf so that the TTE instruction settles as soon as possible and, in any event, by no later than 1.00 p.m. (London time) on 16 January 2019. You are reminded that, if you are a CREST sponsored member, you should contact your CREST sponsor before taking any action.

The procedure for acceptance is set out in paragraph 14 of Part I of the Offer Document and in Parts D and E of Appendix I of the Offer Document and, in respect of certificated Faroe Shares, as further described in the Form of Acceptance. The Offer Document and the Form of Acceptance will be made available on DNO's website at https://www.dno.no/en/investor-relations/offer_announcement_26November.

Faroe Shareholders with any questions relating to this announcement or the completion and return of the Form of Acceptance or the making of an Electronic Acceptance (as the case may be) or seeking further copies of the Offer Document and the Form of Acceptance should contact Equiniti Limited on 0333 207 6399 or [phone] (if calling from outside the UK). Lines are open from 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (excluding English and Welsh public holidays).

Level of acceptances and interests in relevant securities

As at 1.00 p.m. in London on 2 January 2019, DNO had received valid acceptances of the Offer in respect of a total of 48,986,566  Faroe Shares representing approximately 13.1 percent of the issued share capital of Faroe which DNO may count towards satisfaction of the Acceptance Condition. So far as DNO is aware, no acceptances have been received from persons acting in concert with DNO.

As at the close of business in London on 2 January 2019, DNO held 111,494,018 Faroe Shares, representing 29.9 percent of Faroe's issued share capital.

Save as disclosed above, as at the close of business in London on 2 January 2019 (being the latest practicable time and date prior to the date of this announcement), neither DNO nor, so far as DNO is aware, any person acting in concert with DNO had:

·    any interest in, or right to subscribe in respect of, or any short position in relation to Faroe relevant securities, including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of Faroe relevant securities; or

·    borrowed or lent any Faroe relevant securities (including any financial collateral arrangements), save for any borrowed shares which have been either on-lent or sold.

Furthermore, no dealing arrangement (of the kind referred to in Note 11 of the definition of "acting in concert" in the Code) exists between DNO (or, so far as DNO is aware, any person acting in concert with it) and Faroe in relation to Faroe Shares. For these purposes, a dealing arrangement includes any indemnity or option arrangement, any agreement or understanding, formal or informal, of whatever nature, relating to Faroe Shares which may be an inducement to deal or refrain from dealing in such securities.

Accordingly, the total number of Faroe Shares which DNO may count towards the satisfaction of the Acceptance Condition is 160,480,584 Faroe Shares (representing approximately 43.0 percent of the issued share capital of Faroe).

The references to the issued share capital of Faroe above are based on a figure of 372,889,693 Faroe Shares in issue on 26 November 2018.

Compulsory acquisition, cancellation of trading and listing, re-registration

DNO announced, as set out in the Offer Document, that subject to the Offer becoming or being declared unconditional in all respects and DNO acquiring or agreeing to acquire (taken together with the Faroe Shares already held by it) 75 percent of the voting rights attached to Faroe Shares, it intends to procure the making of an application by Faroe to the London Stock Exchange for the cancellation of the admission to trading of the Faroe Shares on AIM.

It is anticipated that the application for cancellation of admission to trading of the Faroe Shares on AIM will take effect no earlier than the date that is 20 Business Days after DNO has acquired or agreed to acquire 75 percent of the voting rights attaching to the Faroe Shares.

The cancellation of admission to trading of the Faroe Shares on AIM would significantly reduce the liquidity and marketability of any Faroe Shares not assented to the Offer at that time.

If DNO receives acceptances under the Offer in respect of, or otherwise acquires, 90 percent or more of the Faroe Shares to which the Offer relates, DNO will exercise its rights pursuant to the provisions of Chapter 3 of Part 28 of the Companies Act to acquire compulsorily the remaining Faroe Shares in respect of which the Offer has not been accepted.

It is also intended that, following the cancellation of the admission to trading of the Faroe Shares on AIM, Faroe would be re-registered as a private company under the relevant provisions of the Companies Act.

Enquiries:

DNO ASA                             

Media: [e-mail]            

Investors: [e-mail]

Tel: [phone]

Brunswick

Patrick Handley                                               

Charles Pretzlik

William Medvei

Tel: [phone]

Lambert Energy Advisory Limited

Philip Lambert                                    

David Anderson

Tel: [phone]                                   

Pareto Securities AS

Petter Sagfossen

Tel: [phone]

Further information

The terms and conditions of the Offer are set out in the Offer Document and the accompanying Form of Acceptance. Defined terms used but not defined in this announcement have the meanings given in the Offer Document unless the context requires otherwise.

This announcement is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Offer or otherwise, nor shall there be any sale, issuance or transfer of securities of Faroe in any jurisdiction in contravention of applicable law. The Offer will be made solely by means of the Offer Document and (in respect of Faroe Shares held in certificated form) the Form of Acceptance accompanying the Offer Document, which will, together, contain the full terms and conditions of the Offer including details of how it may be accepted.

Please be aware that addresses, electronic addresses and certain other information provided by Faroe Shareholders, persons with information rights and other relevant persons for the receipt of communications from Faroe may be provided to DNO during the Offer Period as required under Section 4 of Appendix 4 of the Code to comply with Rule 2.11 of the Code.

Lambert Energy Advisory Limited, which is authorised and regulated in the UK by the FCA, is acting exclusively for DNO and no-one else in connection with the Offer and will not be responsible to anyone other than DNO for providing the protections afforded to clients of Lambert Energy Advisory Limited nor for providing advice in relation to the Offer or any other matters referred to in the Offer Document, this announcement or otherwise.

Pareto Securities AS is acting exclusively for DNO and no-one else in connection with the Offer and will not be responsible to anyone other than DNO for providing the protections afforded to clients of Pareto Securities AS nor for providing advice in relation to the Offer or any other matters referred to in the Offer Document, this announcement or otherwise.

Overseas jurisdictions

The availability of the Offer to Faroe Shareholders who are not resident in and citizens of the UK or the US may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens. Persons who are not resident in the UK or the US should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions. Further details in relation to Overseas Shareholders are contained in the Offer Document.

The release, publication or distribution of this announcement in or into jurisdictions other than the UK or the US may be restricted by law and therefore any persons who are subject to the law of any jurisdiction other than the UK or the US should inform themselves about, and observe, any applicable requirements. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Offer disclaim any responsibility or liability for the violation of such restrictions by any person. This announcement has been prepared for the purposes of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of England.

The Offer is not being made, directly or indirectly, in, into or from any jurisdiction where to do so would violate the laws in that jurisdiction. Accordingly, copies of this announcement and formal documentation relating to the Offer will not be and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any jurisdiction where to do so would violate the laws of that jurisdiction.

Notice to US Faroe Shareholders

The Offer is being made for the securities of an English company and is subject to UK disclosure requirements, which are different from those of the US. The financial information included in the Offer Document has been prepared in accordance with IFRS and thus may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US.

The Offer will be made in the US pursuant to an exemption from US tender offer rules provided by Rule l4d-1I under the US Exchange Act and otherwise in accordance with the requirements of the Code. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments, that are different from those applicable under US domestic tender offer procedures and law. If the Offer is instead implemented by means of a scheme of arrangement as provided for under English law it will not be subject to the tender offer rules of the US Exchange Act. Accordingly, the Offer would be subject to disclosure requirements and practices applicable in the UK to schemes of arrangement which differ from the disclosure requirements of US tender offer rules.

The receipt of cash pursuant to the Offer by a US Faroe Shareholder will likely be a taxable transaction for US federal income tax purposes and under applicable state and local, as well as foreign and other tax laws. Each holder of Faroe Shares is urged to consult his/her independent professional advisor immediately regarding the tax consequences of acceptance of the Offer.

It may be difficult for US Faroe Shareholders to enforce their rights and any claim arising out of the US federal securities laws, since DNO is located in a country other than the US, and some or all of their officers and directors may be residents of countries other than the US. US Faroe Shareholders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

In accordance with normal UK practice, DNO or its nominees, or its brokers (acting as agents), may from time to time make certain purchases of, or arrangements to purchase, Faroe Shares outside the US, other than pursuant to the Offer, before or during the period in which the Offer remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will be disclosed as required in the UK, will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website, www.londonstockexchange.com.

Forward looking statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Offer and other information published by DNO contain statements which are, or may be deemed to be, "forward-looking statements". Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of DNO about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Offer on DNO and Faroe, the expected timing and scope of the Offer and other statements other than historical facts.

Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although DNO believes that the expectations reflected in such forward-looking statements are reasonable, DNO can give no assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include the satisfaction of the Conditions, as well as additional factors, for example, oil and gas operations, particularly those relating to development stage assets which are subject to varying inputs that may impact timing, including, inter alia, permitting, environmental regulation, changes to regulators and regulation, third party manufacturers and service providers, the weather and asset partner and operator actions. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors. DNO, its associates, directors, officers and advisers provide no representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations DNO is under no obligation, and DNO expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No profit forecasts or quantified benefits statement

No statement in this announcement is intended as a profit forecast, profit estimate or qualified benefits statement and no statement in this announcement should be interpreted to mean that earnings per Faroe Share or DNO share for the current or future financial years would necessarily match or exceed the respective historical published earning per Faroe Share or DNO share or to mean that the enlarged group's earnings in the first 12 months following the Offer, or in any subsequent period, would necessarily match or be greater than those of Faroe or DNO for the relevant preceding financial period or any other period.

Dealing disclosure requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1 percent or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10^th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10^th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 percent or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and hard copies

A copy of this announcement and the documents required to be published by Rule 26 of the Code is and will be available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on DNO's website https://www.dno.no/en/investor-relations/offer_announcement_26November. For the avoidance of doubt, the contents of such website are not incorporated into and do not form part of this announcement.

You may request a hard copy of this announcement by contacting Equiniti Limited on 0333 207 6399 or [phone] (if calling from outside the UK) or by submitting a request in writing to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Lines are open from 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at applicable international rates. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note that Equiniti Limited cannot provide advice on the merits of the Offer nor give financial, tax, investment or legal advice. If you have received this announcement in electronic form, copies of this announcement and any document or information incorporated by reference into this announcement will not be provided unless such a request is made.

About DNO

DNO is a Norwegian oil and gas operator focused on the Middle East and North Sea. Founded in 1971 and listed on the Oslo Stock Exchange, DNO holds stakes in onshore and offshore licences at various stages of exploration, development and production in the Kurdistan region of Iraq, Norway, Oman, the UK and Yemen.

 

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