Faroe has offered circular rejecting DNO’s offer

ABERDEEN -- The board of Faroe has announced that it has published its response circular in relation to the unsolicited offer for the entire issued and to be issued share capital of Faroe not already owned by DNO ASA at 152p per share in cash.

The board reaffirms its previous statements that the offer is opportunistic and substantially undervalues Faroe, and encourages all shareholders to take no action.

DNO’s opportunistic Offer of 152p per share substantially undervalues Faroe’s high quality, full cycle and diversified North Sea business

• Premium of only 1% to the undisturbed three month volume weighted average share price (VWAP)
• Premium of only 21% to the closing share price prior to the Offer announcement – about half the average premium paid on all UK takeovers over the last 10 years
• Discount of c.45% to the average price paid recently for comparable North Sea (in particular, Norwegian Continental Shelf (“NCS”)) portfolios measured on a per barrel of 2P reserves basis
• DNO’s opportunistic Offer seeks to exploit the recent oil price fall – timing its Offer announcement after the oil price fell to a 12 month low – to acquire Faroe on the cheap

DNO’s unsolicited offer ignores Faroe management’s proven track record and its exciting independent future

• One of the best exploration track records on the NCS – as validated by the Wittemann E&P Consulting report⁵ published today; our Iris/Hades discovery was one of the largest globally in 2018 YTD
• Consistently drilled 4-5 exploration wells each year delivering regular, high impact news flow and currently in the midst of our largest ever drilling campaign
• Fully funded to triple production in the near-to-medium term
• Excellent track record of value creation through active portfolio management and M&A – as exemplified by the recent Equinor asset swap

DNO’s inadequate Offer ignores the significant benefits created by the Equinor asset swap

• Accelerates the delivery of our production target by increasing production by c.60% in 2019
• Provides better portfolio balance between production and development with no material impact on reserves or growth prospects
• Adds £96 million incremental cash flow in the next two years further strengthening our already robust balance sheet. This financial flexibility enables us to give careful consideration to the optimal mix of reinvestment in the existing portfolio, potential M&A opportunities and capital return to shareholders

DNO were not aware of this transaction when they announced their Offer and have since then failed to revise their Offer to reflect the significant benefits created by it