July 4, 2011 / 3:22 PM / 8 years ago

UPDATE 2-Norway's DNO and RAK to merge oil operations

* DNO shares up 16 pct, deal higher than market value

* Chairman already talking to other companies about more M&A

* RAK to hold 41 pct of DNO versus 30 pct

* UAE firm: new “cultural links” may help DNO in Iraq row

(Recasts with RAK CEO interview, analyst, background, updates share)

By Walter Gibbs and Joachim Dagenborg

OSLO, July 4 (Reuters) - Norway’s DNO and Emirati firm RAK Petroleum may seek additional Middle East partnerships after agreeing to merge their oil operations under the DNO banner in a deal that sent DNO shares up 16 percent on Monday.

Bijan Mossavar-Rahmani, who is both chairman of the DNO board and RAK’s chief executive, said a number of oil companies had called him “to consider combining” as political turmoil sweeps the Middle East and pushes down share prices.

“There may be an opportunity for a company like DNO in its enlarged form to take the lead in aggregating other MENA- (Middle East-North Africa) focused companies whose share prices have been hit by the perception of increased risk,” he told Reuters.

Shares in DNO jumped 15.8 percent to 6.95 crowns against a slightly higher Oslo market , as the deal valued the firm at a higher price than its current market value, a Norwegian analyst said.

“When the stock is trading at 6 crowns, and something comes along that looks like a fair deal that values DNO at just under 10 crowns per share, there are good reasons for boosting the share price,” said the analyst, who declined to be named due to the deal’s “lack of clarity”.

As part of the deal RAK Petroleum would boost its share in DNO from 30 to 41 percent. RAK would move its oil and gas acreage — including two producing fields off Oman — to a new DNO subsidiary to be managed from Oslo.

The transaction would see DNO issue new shares in a price range of 8.25 to 10 crowns ($1.54 to $1.87) against RAK assets valued at $250 million to $300 million, the two companies said, with exact terms to be based on independent valuations.

DNO said it intended to list the merged company on the London Stock Exchange while keeping its Oslo listing.

The major shareholders in unlisted RAK Petroleum include Sheikh Saud bin Saqr Al Qasimi, ruler of the Ras Al Khaimah emirate in the United Arab Emirates.


NO’s biggest physical possession will remain its Tawke field in Iraqi Kurdistan.

Reserves there could exceed 500 million barrels of oil but profitability is in doubt as Iraq’s oil ministry debates whether to honour DNO production contracts authorised by the Kurdish regional government.

Mossavar-Rahmani, who pushed longtime chairman Berge Gerdt Larsen from DNO’s boardroom last month , told Reuters the proposed terms came from DNO’s management and the Norwegian members of its board.

“The proposed minimum price for DNO shares..., which RAK accepted, represented a 35 percent premium over the closing price on Friday,” the Iranian-American executive said.

He said the addition of Middle Eastern oil and gas fields to DNO’s portfolio and of Middle Eastern managers to its staff could only help the company in its Iraqi contract dispute.

“I would hope this move would be viewed positively in Iraq and the region generally,” he said, citing “historical, language and cultural links”. (Editing by Louise Heavens)

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