Dana Gas considering demerger of businesses with possible ADX listing

The company is considering splitting its upstream and midstream business into separate entities

Dana Gas, the Sharjah-based gas company, is considering the demerger of its upstream and midstream businesses, with the former expected to be listed on the Abu Dhabi Stock Exchange.

The energy firm will couple its assets in Egypt as well as in the Kurdistan Region of Iraq, where it has a 35 per cent stake in Pearl Petroleum as upstream business.

The company's midstream business will comprise its UAE Gas Project, currently under arbitration. Two separate damages claims are being made in relation to the project for the periods 2005-2014 and 2014-2030, the company said in a statement on Tuesday.

Both firms will trade on the ADX, if the demerger goes ahead.

A demerger could add "accretive value" to Dana Gas' shareholders, the company's chairman Hamid Jafar said.

"Our upstream business has grown considerably over the last 13 years and will continue to deliver growth in the years to come," he said. "A pure-play upstream company may attract significant new investment both locally and internationally linked to future production growth".

A wholly-focused midstream business on the other hand would be "more stable" with less exposure to the volatility of commodity prices.

Shareholders will have the option to remain invested in both companies or choose which firm to be invested in at their discretion, he added.

A possible demerger would allow Dana Gas' shareholders to manage the investment in different assets with varying risk assessments and opportunities. The move would also help the market value the upstream and midstream aspects of the business separately, the company said.

Funding for each segment of the energy value chain could also be managed more appropriately with capital allocation supported by direct access to finance most appropriate for each entity, it added.

The company will table a feasibility study on the demerger at its annual general meeting and proceed once sufficient approvals have been obtained, including from the Securities and Commodities Authority. Once the required approvals have been obtained from the authorities, the demerger will be presented again to the general assembly for approval.

The latest move comes amid Dana Gas' plans to sell its Egyptian upstream assets to pay down its sukuk due in October.

The company had earlier said it would finalise the sale of its assets in the North African country by the end of March.

Dana Gas reported an annual net profit of Dh575m for 2019 compared with a net loss of Dh682m the previous year. The rise in profit was supported by higher production from the Kurdistan Region of Iraq, where the company has gas assets.