A Norwegian company that pumps oil in Iraqi Kurdistan and RAK Petroleum have agreed to merge, giving the Oslo company a lifeline while it waits for oil payments from Baghdad.
RAK Petroleum-DNO merger wins board approval
A Norwegian company that pumps oil in Iraqi Kurdistan has finalised a merger with the UAE's RAK Petroleum.
The board of DNO International this week approved the deal, which offers the Norwegian producer a cash lifeline while it waits out a dispute between Baghdad and Kurdish authorities over oil payments.
"By combining our two companies' assets and people, the enlarged DNO International will be positioned not only to extract greater value from the existing exploration and production properties but to play an even more active role in the Middle East and North Africa," Helge Eide, the managing director of DNO said yesterday.
RAK Petroleum, which has amassed a 30 per cent stake in DNO since 2009, would increase that to 40 per cent under the deal.
DNO is to exchange shares valued at 9.5 Norwegian krone for RAK Petroleum's operating assets, valued at US$250 million (Dh918.2m). The share price is at the upper end of the 8.25 to 10 krone agreed on in July, when the companies first announced their plan to merge.
Shares of DNO rose 3 per cent to 5.635 kroner yesterday after the news of the board's approval. The deal has yet to be approved by regulators and the shareholders of both companies, which RAK Petroleum expects to be completed by December. The deal offers stability for DNO, with revenue from its two production sites in Yemen and Iraqi Kurdistan coming under risk from political instability or government holdups. DNO was among the first companies to strike oil in Iraqi Kurdistan but has only just begun to receive payments from the government in Baghdad for its crude. While waiting, it has sold some oil at lower prices inside Iraq.
"The issues are political and will have to be resolved at the appropriate political levels in Erbil," Bijan Mossavar-Rahmani, the chairman of RAK Petroleum, said in July. Mr Mossavar-Rahmani has also served as the chairman of DNO since a surprise vote in June. "We want to be a transparent and responsible operator in Kurdistan, and I think with time and with a willingness to be supportive, that we'll resolve the issues," he said.
DNO is targeting a second London listing next year, Mr Mossavar-Rahmani said yesterday.
That would provide the company with more cash to expand into Tunisia and increase production in Kurdistan. In June, DNO increased its estimate of reserves in its Tawke field there from 387 million barrels to more than 500 million.