Dana Gas sells Mol shares ahead of earnings



Dana Gas has sold part of its remaining stake in Mol Group and received arrears payments from the Egyptian and Kurdish governments.

Dana Gas, headquartered in Sharjah, said on Thursday it had raised US$83 million from the combination of share sale and arrears payments, with $18m coming from the sale of a quarter of its remaining stake in Mol, the Hungarian oil and gas group.

The company had acquired a 3 per cent stake in Mol in spring 2009 when Mol bought into Pearl Petroleum – then jointly owned by Dana Gas and Crescent Petroleum – which was developing the Khor Mor gasfield in Kurdish Iraq.

Dana Gas and Crescent Petroleum each received a 3 per cent stake in Mol in exchange for a total stake of 10 per cent in Pearl. Also in spring 2009, the companies sold a 10 per cent stake in Pearl to OMV, a Vienna-based oil company, for $350m in cash.

Dana Gas, which was founded in 2005, and in which Crescent Petroleum is a large stakeholder, has acquired several valuable assets in Kurdish Iraq and Egypt over the years but ran into trouble as the political and security situations in both places deteriorated, leading to the accumulation of hundreds of millions of dollars of arrears by both governments. This, in turn, led to difficulties financing Dana Gas’s development plans and to a financial restructuring last year.

Dana Gas sold half of its Mol stake In February last year for a little more than $130m when Mol’s shares were trading substantially above the 2009 price. However, Mol’s shares have since fallen by nearly half.

The company also said on Thursday that the Kurdish Regional Government paid $18m in advance against future deliveries of domestic fuel, including liquefied petroleum gas, from the Pearl project. Also, the Egyptian government paid it $47m of the $300m in arrears it owes, although $36m of that will be used by Dana Gas to pay its own arrears to local operators. The remaining $11m will be used to help fund a deal it announced last month, in which Egypt will pay Dana Gas some arrears as long as it reinvests that money to boost production.

Dana Gas is due to report third quarter earnings next month. Alex Stojanovski, an analyst at Deutsche Bank in Dubai, said he expected higher production volumes but lower realised prices to result in revenue up 5 per cent and clean profit down 1 per cent from the previous quarter. The shares closed at Dh0.62, up Dh0.02, but still well below the high at the start of the year of Dh1.02.

Dana Gas has an $850m outstanding sukuk, divided into conventional and convertible bonds, that was issued after the company’s debt restructuring in May last year. The bonds are both still trading below par, at 94 cents on the dollar, but “have been showing some better dynamics since early August”, said Apostolos Bantis, a bond trader at Commerzbank in Dubai.

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yallacompare profile

Date of launch: 2014

Founder: Jon Richards, founder and chief executive; Samer Chebab, co-founder and chief operating officer, and Jonathan Rawlings, co-founder and chief financial officer

Based: Media City, Dubai 

Sector: Financial services

Size: 120 employees

Investors: 2014: $500,000 in a seed round led by Mulverhill Associates; 2015: $3m in Series A funding led by STC Ventures (managed by Iris Capital), Wamda and Dubai Silicon Oasis Authority; 2019: $8m in Series B funding with the same investors as Series A along with Precinct Partners, Saned and Argo Ventures (the VC arm of multinational insurer Argo Group)

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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