NORWEGIAN oil and gas operator DNO has stated it does not intend to make an offer for Faroe Petroleum after acquiring Israeli energy giant Delek Group’s 15.37 per cent share in a £70 million deal,

writes Kevin Scott.

But DNO is aiming to build its stake in Aberdeen-based Faroe and has engaged Pareto Securities to acquire up to 10 per cent of the outstanding shares in the group.

Shareholders in Faroe Petroleum are invited to tender shares through a reverse book building process.

The movement came as Faroe announced significant discoveries in both the Hades and Iris prospects in the Norwegian Sea.

Faroe has a 20% interest in the prospects, which both exceeded pre-drill estimates.

Iris is estimated to contain between 19 and 132 million barrels of oil equivalent, while Hades contains 19 to 113 mmboe.

The decision by Delek to sell its stake in Faroe comes within a year of the group’s takeover of Aberdeen-based Ithica Energy, which saw off a proportion of shareholders who believed the company had been valued too low. Dalek’s 113p per share offer valued Ithica at £1 billion.

DNO re-entered the North Sea upstream sector in 2017 through the acquisition of Origo Exploration Holding after a six-year hiatus during which the company built a successful Middle East presence anchored by the DNO-operated flagship Tawke field in the Kurdistan region of Iraq Iraq.

The company paid Delek 125p per share, a 19% premium on Tuesday’s closing price of 105p, indicating the move is a long-term investment by DNO. Shares yesterday climbed by 12.2% to close at 117.8p.

The group holds interests in 19 exploration licences offshore Norway and the UK. In addition to its direct stake in these licences, DNO said it is pursuing additional partnerships with established North Sea players.

At the end of 2017 Faroe had 2P reserves totalling 97.8 mmboe and 2C reserves of 78.6 MMboe. Its daily production volume last year average 14,300 barrels.

The Hades and Iris prospects, previously known as Aerosmith and Zappa respectively, have been part of Faroe’s portfolio for many years.