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 DNO shares dive on potential loss of Iraqi Kurdistan licences

 Source : Reuters
  Kurd Net does not take credit for and is not responsible for the content of news information on this page

 


DNO shares dive on potential loss of Iraqi Kurdistan licences  24.9.2009   




September 24, 2009

OSLO, Norway,—  Shares in Norwegian oil producer DNO International (DNO.OL) plunged as much as 55 percent on Thursday, on fears the Kurdish Regional Government (KRG) may make a temporary suspension of its licences in the semi-autonomous Iraqi Kurdistan region permanent.

DNO said it was in talks with the KRG to resolve the spat but analysts were unclear what the company could do to rectify the situation.

By 0953 GMT, shares in DNO were down 46.1 percent at 3.59 crowns -- knocking almost $500 million off its market value. The shares had been suspended since Monday due to the KRG dispute.

Analysts at Credit Suisse said earlier this week, before the share collapse, that Kurdistan accounted for almost 75 percent of DNO's value.
                            
The spat centres on the sale of 44 million DNO shares to the KRG, which later ended up in the hands of a privately-held Turkish company, Genel Energy.

The KRG suspended DNO's licences after details of an Oslo Stock Exchange probe, which revealed the KRG's role, were made public. The KRG said the revelations had caused it "unjustifiable and incalculable harm". On Thursday,
www.ekurd.netNorway's financial watchdog Kredittilsynet said it had asked the police to probe the share sale.

The row has undermined faith in licences signed between the KRG and western oil companies and led to fears for the future of a planned merger between Genel and Heritage Oil (HOIL.L), another significant player in Kurdistan. [ID:nLM261452]

It has also dented hopes that the region, which the KRG said has reserves of at least 40 billion barrels, will become a major oil producer and help Iraq meet its plans to boost oil output sharply in coming years.

APOLOGIES AND COMPENSATION

Analysts have said that it was not clear what DNO could do to rectify the situation with the KRG.

RBC Capital Markets analyst Al Stanton wrote in a note dated Sept 22: "Other than an apology from Oslo -- from the OSE (Oslo Stock Exchange) and DNO -- it is unclear how the situation can be rectified."

"Any financial compensation, say an adjustment to DNO's Production Sharing Contract, would compound the issue, in our view, as it would further highlight the risk of "fiscal creep".

However, others said the KRG had an incentive to find a solution.

"Even with this conflict, the Kurds don't want to frighten away others from the region -- so both parties have an interest in resolving this," said Marius Gaard from brokers Carnegie.

"But there is uncertainty about what kind of solution they can achieve to undo the claimed damages by the Kurdish side."

Gaard said the present valuation prices in DNO gaining some compensation in the event its contract is terminated.

DNO exports around 50,000 barrels per day from its Tawke oilfield in Kurdistan,
www.ekurd.netbut has still not received any revenues due to ongoing disputes between the KRG and central Baghdad authorities over the sharing oil receipts.

The spat has also knocked shares in other foreign oil companies operating in Kurdish-controlled Iraq, such as Heritage Oil and Gulf Keystone (GKP.L).

DNO said it was preparing for legal action against the Oslo Stock Exchange, which it believes breached confidentiality rules by disclosing the buyer of the treasury shares. The Oslo bourse has repeatedly denied any wrongdoing.

The Norwegian company added that it will now "investigate strategic options" including moving its listing to another exchange, or alternatively moving to another exchange only the subsidiary holding the licenses within the Kurdistan region.

Copyright, respective author or news agency, Reuters   

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