Dana Gas wins arbitration on termination of Egypt asset sale

The London Court of International Arbitration ruled in favour of the company on 'all key points', validating its cancellation of the SPA

The London Court of International Arbitration has ruled in favour of Sharjah-based Dana Gas, validating the termination of an agreement to sell its onshore oil and gas assets in Egypt.

The arbitration was initiated in April by IPR Wastani Petroleum, a member of the IPR Energy Group which had agreed to buy the assets in October.

However, Dana Gas cancelled the agreement in April saying the buyer had failed to meet certain conditions. A claim brought by IPR Wastani was rejected “in its entirety”, Dana Gas said in a statement on Sunday to the Abu Dhabi Securities Exchange, where its shares are traded.

The tribunal ruled in favour of Dana Gas on “all key points, concluding that Dana Gas’ termination of the SPA was valid”, the company said.

Dana Gas, the Middle East's largest private natural gas company, cancelled the $236 million deal on April 22. The ruling in its favour today means that the UAE energy company will continue to operate the Egyptian assets.

“The award confirms that Dana Gas was correct and within its contractual rights to terminate the sale’s process,” said Patrick Allman-Ward, chief executive of Dana Gas.

“The board has made a decision to continue to hold and operate the assets in the best interests of the company and its shareholders as well as for our broader stakeholders.”

The planned sale transaction involved spinning off Dana Gas’ 100 per cent working interests in the El Manzala, West El Manzala, West El Qantara and North El Salhiya onshore concessions and associated development leases. The deal also included a base cash consideration of $153m, including the net working capital associated with the assets and contingent payments of up to $83m, Dana Gas said in October last year.

The effect of the cancellation of the sale on Dana Gas's finances is still being assessed but can only be "positive" in terms of cash flows, Mr Allman-Ward said in April.

Dana Gas is “pleased with the outcome of this arbitration and with the speed with which this final decision was made”, he said on Sunday.

He said that the company remains committed to operating the assets to the “highest operational and safety standards”.

Dana Gas, which also has operations in Iraq’s Kurdistan region, has been operating in Egypt for the past 14 years and is the fifth-largest gas producer in the country. It currently produces about 30,000 barrels of oil per day from 14 development leases.

The company said it is committed to maximising the value of its onshore producing assets while maintaining focus on testing the enormous potential of its offshore Block 6 Concession Area, which is estimated to contain more than 20 trillion cubic feet of gas.

It plans to drill an exploration well at Block 6 in the first quarter of 2022, depending on the availability of long lead items.

The award confirms that Dana Gas was correct and within its contractual rights to terminate the sale's process
Patrick Allman-Ward, chief executive, Dana Gas

Dana Gas Egypt received payments of $98 million in the first half of the 2021, a 128 per cent rise from a year earlier. It collected $23m in the first three months of the year and the remaining amounts in the second quarter, it said on Sunday.

The company expects its receivables of $131m at the end of the first quarter to drop "significantly" and for its Egyptian operations to contribute positively towards profitability and cash flow in the second quarter.

"A portion of impairments, which the company recognised in 2020, will also be reversed in [the second] quarter [of] 2021 as a result of retaining these assets," the company said.

Dana Gas' overall payments from both Egyptian and Kurdish operations jumped 106 per cent in the first half of 2021 to $185m, the highest in five years, it said in a statement earlier this month.

In May, Dana Gas reported a 41 per cent increase in its first quarter net income to $24m. Higher revenue from its assets in Kurdistan boosted profit, it said in a statement at the time.

Updated: July 25th 2021, 7:51 AM