RAK Petroleum’s DNO pulls out of offer to buy Gulf Keystone

The company, whose main assets are in the Kurdistan region of Iraq, as are Gulf Keystone’s, said that it might consider another all cash offer for Gulf Keystone – at a discount.

DNO, the Oslo-listed oil and gas company controlled by RAK Petroleum, withdrew its US$300 million offer to buy Gulf Keystone Petroleum, citing a breach of conditions of the original offer made in July.

The company, whose main assets are in the Kurdistan region of Iraq, as are Gulf Keystone’s, said that it might consider another all cash offer for Gulf Keystone but “at a meaningful discount to the previous $300m equivalent cash-and-shares offer”.

The company made the announcement while releasing its third-quarter results, which showed a fall in revenue but higher gross profit and a smaller net loss.

DNO said, however, that payments from the Kurdish regional government (KRG) for its biggest asset, the Tawke oilfield, had been erratic and delayed.

Revenue for the three months to the end of September fell to $48.8m from $52.1m in last year’s third quarter, with gross profit up at $19.8m from $9.3m. The company reported a net loss of $3.2m versus a loss of $14.9m in the third quarter a year earlier.

In withdrawing its offer for Gulf Keystone, DNO cited the latter’s restructuring last month, in which Gulf Keystone issued nearly 22 billion new shares to its debtors, giving them about 10 per cent of the company to reduce debt by $500m to $100m.

DNO said: “Given the resulting uncertainties about Gulf Keystone’s asset, commercial outlook and future rights and obligations at the Shaikan field, and following a careful review of Gulf Keystone’s latest reserves report, DNO is prepared to consider an all-cash transaction but at a meaningful discount to the previous $300m equivalent cash-and-shares offer.”

Oil companies operating in the Kurdistan region have been investing to develop their oil and gas fields since the KRG started to make regular payments over the past year, including covering some of the arrears that had built up while both the regional and central Baghdad governments were in financial turmoil because of continuing conflict.

“While recent payments by the Kurdistan Regional Government for exports have been irregular and delayed, Tawke payments year-to-date have totalled $255m, of which DNO received $184m,” DNO said in its results statement.

“We can’t wait to take our foot off the brake at Tawke,” said Bijan Mossavar-Rahmani, the executive chairman of DNO and of Dubai-based RAK Petroleum.

He said the company plans further investments to drill new wells at Tawke, whose production was steady at nearly 120,000 barrels per day during the latest quarter, and also develop the Peshkabir oilfield.

“But to proceed with significant new investments at Tawke, we need regular export payments from the Kurdistan Regional Government and a firm plan for repayment of the $1 billion in arrears to DNO,” Mr Mossavar-Rahmani said.

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