DNO Trawling for North Sea Assets

February 7, 2019

© Shaun Wilkinson / Adobe Stock
© Shaun Wilkinson / Adobe Stock

Oil firm DNO is looking to buy more assets after its recent takeover of London-listed Faroe Petroleum to further expand its North Sea presence.

Oslo-listed DNO, which produces most of its oil in the Kurdistan region of Iraq, clinched a hostile takeover bid for London-based Faroe Petroleum, valuing Faroe at 634 million pounds ($823 million), in January.

"We would like to have another Faroe Petroleum under our belt," DNO's executive chairman Bijan Mossavar-Rahmani told Reuters, adding that he was speaking in terms of asset size.

Potential "bolt-on acquisitions" included buying extra stakes in the licenses where DNO already operates or swapping assets near its hubs, Mossavar-Rahmani said.

DNO said Faroe puts it among the top five companies by production licenses held on the Norwegian continental shelf.

Norway was a sellers' market with oil and gas assets fully priced, Mossavar-Rahmani said.

"But our advantage is that we are sitting at a table with the top players now," he said, adding that he was "already getting calls from executives from top Norwegian players wanting to speak about assets swaps or other deals".

DNO has not yet decided what to do with Faroe's holdings on the UK continental shelf (UKCS).

"We are still in very early stages, but we hope that there are some opportunities there as well," Mossavar-Rahmani said.

Spending to rise
DNO posted a higher-than-expected fourth quarter operating profit of $230 million, up from $25.7 million a year before and beating a $68.5 million forecast in a Reuters poll of analysts.

The earnings increase came as a result of a change in revenue recognition criteria.

The move did not impact its cash flow reporting, though, with quarterly free cash flow of $111 million also beating expectations, analysts at Sparebank 1 Markets said.

Last September, DNO's board decided to pay an annual dividend of 434 million Norwegian crowns, its first in 13-years, in two tranches of 0.2 crowns per share, one in March 2019.

Mossavar-Rahmani told a news conference he hoped that the dividend program will be extended beyond March, but declined to speculated about a potential size as it also has to consider capital and exploration spending needs.

DNO said it would lift its total spending, including exploration, by $420 million in 2019, up 40 percent from last year as it planned a record drilling program, including up to 20 wells in Kurdistan and 5 to 10 wells in Norway.

Its working interest production stood at 91,570 barrels of oil equivalent per day (boepd) in the fourth-quarter, up from 77,232 boepd from a year ago, helped by the ramp-up of output from its Peshkabir field in Kurdistan.

DNO said it would publish pro-forma results and its 2019 investment program later this month and in March. Its shares were up 1.1 percent by 1419 GMT, outperforming the wider European oil and gas index, which was down 0.8 percent.


($1 = 0.7708 pounds)

(Editing by Gwladys Fouche, Dale Hudson and Alexander Smith)

Categories: Industry News Europe


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