DNO International, a Norwegian oil and gas producer merged with RAK Petroleum, has continued a share buyback programme launched after an unsuccessful takeover bid for a Canadian competitor.
The company yesterday announced the purchase of 1 million of its shares on Oslo's stock exchange, taking the total amount of DNO shares it owns to 4 million.
DNO started the share buyback programme on July 16, only days after dropping its interest in Calvalley, a Canadian company pumping oil in Yemen. It has since bought its own shares on several occasions. Analysts believe the move is due to a dearth of mergers and acquisitions options.
"They are doing it because they haven't got any good projects in the pipeline," said Marius Foss, who covers DNO at DNB Bank.
Shareholders sanctioned a buyback of up to 100 million shares at the company's annual general meeting earlier in the year.
RAK Petroleum, based in the UAE and which holds 42.8 per cent of DNO, said in May it was reconsidering plans to reduce its stake to 30 per cent, a move that was to pave the way for a DNO listing on the London Stock Exchange.
Bijan Mossavar-Rahmani, DNO's chairman, said last week he was still committed to expanding in the Middle East and North Africa, where all of its current assets lie, with investment into its existing 17 licences and acquisitions both on the table.
The company became the first foreign oil producer in Iraq since the 1970s when it began pumping crude at the Tawke oilfield in Kurdistan.
Like other producers that struck production agreements with the Kurdish Regional Government (KRG), DNO suffered from payments delays as Iraq's central government withheld proceeds from oil sales.
Sporadic payments out of Iraq undermined DNO's financial position and shareholders agreed to a merger with RAK Petroleum last year.
DNO's finances subsequently improved on lower lifting costs and increased oil sales to the Kurdish domestic market and the company posted a net profit rose of 307 million Norwegian kroner (Dh186.7m) in the first quarter .
"We're selling oil into the local market and we're getting paid for that," confirmed Mr Mossavar-Rahmani.
"The Kurdish government has been very supportive."
The company hopes to raise production at the Tawke field to 100,000 barrels per day (bpd) from the current 50,000 bpd by the end of this year and to 200,000 bpd next year.
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