Investors from Dubai to London bought into oil and gas companies with exposure to Iraqi Kurdistan yesterday, sending share prices soaring on hopes of lucrative drilling contracts.
UAE oil and gas companies with stakes in Kurdistan were given a further boost by financial results that revealed strong profit growth on the back of increased production in northern Iraq.
The surge followed ExxonMobil's move into the Kurdish hydrocarbon sector, which lifted the share prices of London-listed companies with exposure to the region. Gulf Keystone Petroleum climbed as much as 14 per cent, while Petroceltic rose as much as 13 per cent.
RAK Petroleum, a company that holds a 30 per cent stake in Norway's DNO International ó with production in Kurdistan ó yesterday reported a record third-quarter profit. Dana Gas, which is also active in the region, yesterday posted a fourfold increase in profit.
RAK Petroleum announced a profit of US$25 million (Dh91.8m).
Without the revenue flowing from the Norwegian operator, the Ras Al Khaimah-based company would have earned only $9m.
RAK Petroleum reiterated yesterday it would complete a full merger with DNO early next year. The combined entity will be listed both on the London Stock Exchange's Alternative Investment Market (AIM) and the Danish bourse.
The third-quarter windfall vindicates the decision to merge, said Bijan Mossavar-Rahmani, the chief executive of RAK Petroleum.
"RAK Petroleum shareholders can be pleased that DNO International is contributing its second profitable quarter to our results and that its more positive share price reflects, in part, the market's favourable outlook for the merger," he said.
DNO's share price climbed as much as 6.75 per cent yesterday, as it emerged that ExxonMobil had struck an agreement with the Kurdish Regional Government (KRG) to rights over six exploration blocks in the semi-autonomous region.
The news is a strong indication that Baghdad's stance on oil contracts signed by the KRG is softening, and that companies operating in Kurdistan will start receiving regular payments for their exports. Iraq's central government resumed exports from the semi-autonomous region in February and agreed to pay foreigners while it sought to resolve the dispute over oil contracts with the regional government.
But DNO is still waiting on outstanding payments for its exports from the Kurdish region after receiving two payments this year. The company produced 36,773 barrels per day (bpd) in the third quarter, 88 per cent of which come from its Kurdish operations, up from 24,956 bpd a year earlier.
Dana Gas's income surged to $39m on the back of increased production in Kurdistan and rising oil prices, causing its share price to jump to a two-month high on the Abu Dhabi Securities Exchange yesterday.
Third-quarter output in the KRG almost doubled to 2.42 million barrels of oil, while production in Egypt fell by almost 5 per cent, the company said in a statement.