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In other words mind the gap
im expecting a bid of 1.85 or around that number now that an agreement has been reached with OPEC.If the bid fails imo the sp will drop to around 1.20p gla
Of course Faroe is $US-based. But if there's a very sharp and sudden selloff in the Pound - as would happen in the no-deal Brexit scenario - it would take quite a few months for adjustments to be made. At least that would be my supposition.
Of course, if there's another vote and Brexit gets clobbered (both of which I think are the most likely outcomes), then prices may go in the other direction. I suggest this be called the Prodigal Son scenario.
Sorry to be pedantic but surely Faroe is a US dollar business? I doubt they spend or earn very much in pounds sterling. So if the pound collapses any further against the $ then Faroe is worth more in £ terms.
I agree DNO will wait they’d look silly doing anything else tbh. After their recent comments about the Faroe asset swap deal I’d be surprised if they increased their offer by very much or at all. Faroe also have several exploration wells currently drilling and if they prove to be “successful” how do DNO provide value for those assets? Tricky.
DNO will wait. Right now, the Pound/Krone ratio is 10.84. They will wait until it comes down to about 8, then make a "generous" offer of about 170.
I imagine they would arrange for a sale of their holding to other institutions to avoid a disorderly market.. if they decide to disengage.
Absolutely agree with you Jake ! That’s my take also... if they decide to come back in June I expect the market share price will be closer to 250 rather than 150! Is that a risk they are willing to take ? Are they then willing to pay a 50-60% premium on top of that? Ruhani or Rubini or whatever his name is needs to think very carefully!!
My reading of the DNO statement is that they are taken aback by this change tb the asset mix. They may well walk away as they have no wish to pay a decent premium. That's fine by me. Our Board have had plenty of time to prepare their strategic moves aka defence and this is a good one. There may be more. Only my opinion, of course.
If they decide that FPM isn’t for them, I doubt that will have a negative impact on a 20,000 BOPD cash rich producer paying a dividend! One thing they can’t do is “drip feed”! They’ll have to sell like how Dalek sold and find a buyer for the entire holding! It’s physically impossible to “drip feed” 28% of the company! It’ll take them years to get out! Either way time is running out for them!
it's an interesting one ...
DNO buys at 125pps ... with the sole aim of buying FPM at a low price - be it 152, 175 or 200 pps.
If it decides to leave the table, will it sells its shares (or some of them) at a modest 20% profit ... and the SP will inevitably drop for us PIs. Or will DNO hang on to the shares in the hope the SP will rise to 200...250 pps and then sell in a drip-feed fashion ...
When it gets too high then DNO will not be able to increase the offer as it will be too expensive ...?
SO - maybe a new offer 175/200 pps in the current market is its best/only plan ... a full & final ...
-- BB --
Yup that’s the one. Agreed, thinking about it DNO could hardly say “well done lads”!
Undoubtedly a good deal for Faroe as it massively improves their balance sheet and reduces their short term development capex requirements. Faroe have several other existing discoveries and hopefully future discoveries to be financed through development. I know not everybody agrees with me but I think this is a really excellent management team and it would be a shame to see them subsumed into a foreign company.
Analysister I don’t think it’s putting the bid in doubt. It’s another blatant negotiation tactic! I do hope you’re right and I do hope DNO decide to Foxtrot Oscar!!!
High yield You are correct ! There have been a high volume of shares traded! These were NOT bought by DNO or a connected party because that would have to be declared or it would be illegal! This is people buying in the hope of an increased bid above £2! I don’t know how many takeover situations you’ve been a part of but the share price usually trades at 2-3 % below the takeover price if it is likely to get accepted! The fact that we have been trading at 160 tells you that a higher offer is coming! 152 was simply a starting point for negotiations not a final offer! All should be clearer next week!
Anaysister
I assume this is the statement that you have in mind. No it is not clear, and I think that is part of the game plan, to put some doubt if the bid stands or not.
"This is a significant deal for Faroe, and we need to understand it before making a judgement. While Faroe has asserted this is not designed to stop the DNO offer, we need to ask if this is good value for a company seeking growth: to swap out of its high quality, large scale, core growth hub, Njord, operated by the national oil company of Norway, Equinor, and to take on instead mature and declining production assets - in a deal with Equinor itself. That is the test this deal needs to satisfy."
I’ve read it a few times and I don’t really understand what they are implying or indeed saying. Has anyone else figured it out?
I wonder if it has been translated directly from Norwegian to English? Either way I’m not surprised the Faroe share price has fallen back today as this must put the current bid in some doubt.
workover
Thanks for your reply. I would not worry too much about their future reputation, if they were to succeed in getting 50% from a relatively low bid. It is up to the shareholders to accept their bid or not. As of now, it looks as though some shareholders have sold out already. Traded volume since the bid was lauched is more than 40 million shares in the range 1.55-1.60. My guess is that DNO may reach 50% control, if they raise their bid to 1.70-1.80 level. It will be interesting to follow the development.
Regarding valuation multiples like EBITDA, one have to have in mind that the tax level in the Nowegian sector is 78%.
High yield I appreciate DNO aiming to get the company as cheap as possible! But they are actually doing themselves more harm than good! Their reputation is in tatters! They come across as devious, sneaky weasels ! Which self respecting organisation will want to do business with them in future? They try and sneak into the FPM board and say it is all due to corporate governance concerns then less than 60 days later make a bid that would value the company at less than 2 x 2019 EBITDA! Blind Freddy saw them coming ! As for what price might do it ? I think they might get some holders accepting £2 but that is very short sighted because we can reach £2 based on the current 2 explo wells we are drilling! DNO will miss the opportunity to acquire Faroe due to their stubbornness! They come across as penny wise and pound foolish!
Being a DNO shareholder, I would like DNO being able to acquire Faroe as cheap as possiible. However, I do realize that their offer is too low to get accepted. I think DNO's aim is to get at least 50% of the company, and make some substantial changes of the BOD and at a later stage possibly make a new bid for the remaining shares outstanding.
How high do you all think DNO nees to go in order to get at least 50% of the votes in Faroe?
If someone else comes out the woodwork with a better offer ! I would love for FPM to be sold to anyone other than DNO !
Fully agree with you Cebo! You posted your post while I was typing mines! I believe DNO will be back next week with another offer but I just can’t see them getting a deal done judging by their RNS. The risk they have is that by June 2019 when their PUSU restrictions expire we would have drilled another 5 exploration wells, multiple development wells & workoves, we would also be producing 20,000 BOPD and generating profits of £10 million per month!!!! Share price will be above £2 and their premium will have to take us to £3+ .... that’s too risky for them to walk away now !
No I believe they are making excuses for a marginally increased offer that doesn’t reflect fair value! I think they’ll come back with may be 20-25% higher which I don’t think will be anywhere near enough to get a deal over the line!
Looks like DNO just trying to put the boot in by suggesting that the fields are "maturing and declining" - I think that minday we shall see a second offer, which is unlikely to be enough.
Workover, I think you are spot on with the post. I wrote on here a while back that I thought around £1.90 would be sufficient to gain control. I think after the 2 RNS's, that we are now looking North of £2.00 and then some, particularly if OPEC+ olay their part and agree cuts this week.
DNO would also surely have been aware that talks were ongoing with Statoil when they put in the low-ball offer, maybe not.
I think that DNO will come back early next week with an increased offer, they have 2 weeks now or face a 6 month standstill under the Put up or Shut up and P-off rule. Hopefully they do the later.
Are they making excuses for a strategic withdrawal?
If the takeover price wasn’t set at 152p today’s news would have taken us to 180p-200p based on increasing 2019 production and EBITDA by more than 50%! The shares are now fixed at 150-160 p until DNO make their next move!