LONDON (Alliance News) - Faroe Petroleum PLC, which is fending off a hostile takeover offer from Norway's DNO ASA, on Wednesday agreed an asset swap with another Norwegian company.
Faroe said it signed a binding agreement with Equinor Energy AS to swap interests in several Norwegian assets on a cashless basis.
With effect from January and subject to regulatory approval, Faroe will swap its interests in the Njord, Hyme and Bauge development assets in return for interests in four production assets on the Norwegian continental shelf, Alve, Marulk, Ringhorne East and Vilje.
Faroe said that the swap will add 7,000 to 8,000 barrels of oil equivalent per day in production in 2019, bringing the company closer to achieving its 50,000 boepd target. The increase in production is due to the assets acquired being producing assets, while the divested one are currently in development.
Faroe Chief Executive Officer Graham Stewart said: "I am pleased to announce this significant swap transaction which is in line with our stated strategy of delivering shareholder value through active portfolio management. It immediately rebalances our asset mix towards production after a series of exploration successes and resultant development projects."
"The transaction will accelerate delivery of our fully-funded production target, while strengthening further our financial position in advance of reaching investment decisions on our new Iris Hades, in Norway, and Agar, in the UK, discoveries. We are now confident in our ability to deliver in excess of 50,000 boepd in the medium term."
Meanwhile, Faroe said it spud the Cassidy exploration well in the Norwegian North sea, of which it owns a 15% working interest in a joint venture with Spirit Energy Norge AS, Suncor Energy Norge AS and Aker BP ASA.
The oil & gas company is targeting first oil at Cassidy in the first half of 2019.
Faroe is currently facing a hostile takeover bid from major shareholder DNO, with the Norwegian firm having made a GBP608 million offer directly to fellow investors.
At the end of November, Faroe said it believed the offer to be "opportunistic" and to "substantially undervalue" the company. The firm encouraged shareholders to take no action. It made no mention of the DNO approach in Wednesday's announcement.
In response to the asset swap deal, DNO said Wednesday that it needs to understand the Equinor agreement 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," DNO said in a short statement.
Faroe shares were down 1.2% at 155.20 pence each on Wednesday afternoon.
