DNO Stock Surges on RAK Petroleum Bid Talk

Iraqi oil producer DNO International ASA (DNO.OL) leapt to a 14-month high on Wednesday, following reports that Emirates-based RAK Petroleum may bid for the 70 percent in the Norwegian company it does not already own.

DNO was the first Western company to drill for oil in Iraq following the U.S.-led invasion and although it cannot export due to Iraqi disagreements over how to divide up revenues, it has repeatedly been the subject of takeover talk.

Britain’s Daily Telegraph newspaper reported that RAK Petroleum had made an offer to buy DNO shares at 11 crowns per share, citing what it called ‘well-placed market sources’.

Trade in DNO shares was suspended after they jumped 7.3 percent to 8.945 crowns. After the resumption, they touched 9.39 crowns — up 12.7 percent on the day and the highest level since May 2009 — before dipping to 8.8 crowns by 1500 GMT.

“I will not comment on rumours and speculation,” DNO Chief Executive Helge Eide told Reuters in a brief telephone interview.

RAK Petroleum was not available for comment.

The Daily Telegraph said there could be a counter-offer from other companies. DNO’s main asset is the Tawke oilfield in Kurdish northern Iraq, a reservoir estimated to hold 220 million barrels of oil.

CHATTER OR INTEREST?

“The chatter doing the rounds is that there is a potential counter bidder from the U.S.,” said the UK paper. “Goldman Sachs is said to be advising the mystery suitor, while Enskilda bank is working for DNO International.”

Goldman Sachs and SEB Enskilda representatives declined to comment, according to Reuters.

Some analysts questioned the reported bid price at 11 crowns per share, a valuation which priced in more cash flow from Iraqi activities than other foreign oil firms were due to receive.

A takeover attempt by RAK would not be a surprise, however, given increasing interest by the Ras Al Khaimah-registered company in running Oslo-based DNO.

In June, RAK — the biggest single shareholder in DNO with a 30 percent stake — gained two seats on DNO’s five-strong board, including one for former U.S. ambassador to Iraq and Afghanistan, Zalmay Khalilizad.

Shares in RAK Petroleum are “closely held by public entities and individuals in the United Arab Emirates and Saudi Arabia,” the company said on its website. Its business is to “to build an upstream business focused geographically in the Middle East and North Africa through both drilling and strategic acquisitions.”

Data from Reuters Trader showed JP Morgan as the buyer of nearly 43 percent of the volume of DNO shares traded on Tuesday.

Nornet, a Nordic online trader for retail investors, was second with over 14 percent of the volume. The biggest sellers were Nomura with 35 percent and UBS at 23 percent.

(Sources: Daily Telegraph, Reuters)

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