DNO ups Iraq reserves amid merger talks
Oslo, July 12, 2011
Norwegian oil firm DNO has upped the estimated size of its prize Tawke field in Iraqi Kurdistan, strengthening the hand of DNO shareholders in merger talks with Rak Petroleum of the UAE.
"After this third-party review by our external auditors, the Tawke oil field is confirmed to be a world class, giant oil field," DNO chief executive Helge Eide said in a statement.
He said a French consultant has put Tawke's probable recoverable reserves at 636 million barrels, compared with an audited 2010 estimate of 306 million. Last month he said he believed Tawke held "in excess of 500 million barrels".
Earlier this month DNO and Rak Petroleum said they had agreed to merge and were discussing terms to be based on independent asset valuations.
The tentative transaction would see DNO issue new shares in a price range of 8.25 to 10 crowns against Rak assets valued at $250 million to $300 million, the two companies previously said.
"The new reserves numbers (at Tawke) far exceed our expectations of even a few months ago and certainly were not envisaged when we made the discovery in 2006," said Eide.
DNO shares opened more than 4 percent higher than Monday's close and were trading up 2.33 percent at 6.15 crowns at 0753 GMT. Oslo's main stock index was down 2.73 percent on concerns over Italy's debt.
"The exchange ratio (previously) suggested for the merger now seems to be less favorable for the existing DNO shareholders, as they are most likely controlling larger values than some weeks ago," said First Securities analyst Teodor Sveen Nilsen.
"It would seem that DNO shareholders should now be better paid."
DNO on Tuesday also gave its first-ever reserve estimates for two other Kurdish discoveries -- 100 million recoverable barrels at its Bastora field and 36 million barrels at its Benenan field.
The Bastora estimate, Nilsen said, is more than ten times larger than First Securities had previously assumed in its valuation.
In the absence of a federal hydrocarbons law in Iraq the local and central governments have argued bitterly over whether to honour profit-sharing contracts signed by DNO and other international oil companies in Kurdistan.
DNO is currently producing 70,000 barrels of oil per day at Tawke. - Reuters