dno seeks partners to offset cashflow woes
Last Updated : GMT 15:54:38
Arab Today, arab today
Arab Today, arab today

DNO seeks partners to offset cashflow woes

Arab Today, arab today

Arab Today, arab today DNO seeks partners to offset cashflow woes

Oslo - Arabstoday

DNO International will seek to combine with a competitor in the Middle East and North Africa to gain steadier revenue as it struggles to get full payment from its production in Iraq\'s northern Kurdish region. DNO, the first foreign company to pump oil in Iraq since the 1970s, returned to profit last quarter as sales rose more than three-fold to 730 million crowns (Dh78.6 million), boosted by the start of Iraq payments. A dispute since 2009 over revenue sharing between the semi-autonomous Kurdistan government and Baghdad authorities delayed payments and forced Oslo-based DNO to sell its oil locally at a lower price. DNO has a \"large, long-term potential, but not a lot of current cash generation because of the payment issues,\" Bijan Mossavar-Rahmani, who became DNO chairman in June, said in a phone interview on August 11. Article continues below \"So other Middle East and North Africa companies that have smaller reserves and smaller reserve life, but are able to sell their production at current prices and are able to generate a lot of short-term cash\" would be a good fit, he said. First payment DNO said last week that a first payment of $103.7 million (Dh380 million) for February and March oil exports has been confirmed, as part of an interim system in place until an oil law is passed in Iraq. While the company has struggled with payments and exports from Iraq since production started in 2007, it last month reported a doubling in the recoverable reserves in its Tawke field in the country\'s north, to as much as 636 million barrels from an earlier assessment of 306 million barrels. \"We hope and expect that over time the payment situation will be normalised,\" said Mossavar-Rahmani, who\'s also chief executive officer at RAK Petroleum, which owns about 30 per cent of DNO. DNO in July announced it will combine its Middle East and North African assets with RAK, in a transaction that will raise RAK\'s stake to about 40 per cent. The deal is scheduled to be completed in the fourth quarter pending shareholder approval. The UAE-based company also has concessions in Oman and Tunisia, according to its website. Mossavar-Rahmani ousted former Chairman Berge Gerdt Larsen at a shareholder meeting in June. The Iranian-born executive in June said his focus for DNO would be to strengthen the company\'s finances. While the company\'s weakened valuation will be a challenge in any potential merger or acquisition, now may also be a good time to look at potential combinations, he said. The valuations of Middle East and North Africa oil and gas companies \"are well below the value of the underlying assets,\" Mossavar-Rahmani said. \"Part of it is the Arab spring — the political context — part of it\'s the overall weakness in the securities markets, part of it\'s because oil and gas prices are weak and there\'s a general flight to safety away from higher risk, higher reward assets,\" he added. Global stock markets have plunged this month, sending prices to the lowest levels in more than two years amid a deepening European debt crisis and concern over US growth after Standard & Poor\'s downgraded the world\'s largest economy. Crude prices in New York have fallen 15 per cent in the past three weeks and 7 per cent this year. Share buyback DNO last week announced a share buyback plan to boost the value of its stock, down 43 per cent this year. The chairman declined to comment on the timing of buybacks, saying expectations were for \"continuing turbulence and continuing weakness\" in the market. DNO reported provisional net income of 215 million crowns for the second quarter, compared with a net loss of 121 million crowns a year earlier. It will report final results tomorrow. \"While other assets are cheaper today, with the drop in DNO\'s share price we also have a weaker currency,\" Mossavar-Rahmani said. \"If we were sitting on a lot of cash of course that would be different, but anyone who\'s sitting on cash today has a lot of opportunities. The challenge is to do a transaction with one\'s own paper in a weak market.\"  

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