DNO ASA, the Norwegian oil and gas operator with operations in Kurdistan and the North Sea, is now expanding to West Africa with the agreed acquisition of offshore fields in Ivory Coast. DNO said Monday that RAK Petroleum plc would transfer its ownership of Mondoil Enterprises LLC to DNO.
"The all-share transaction comprises Mondoil Enterprises’ 33.33 percent indirect interest in privately-held Foxtrot International LDC whose principal assets are operated stakes in offshore production of gas and associated liquids in Côte d'Ivoire, forming a bridgehead for DNO in West Africa," DNO said.
According to DNO, Foxtrot International holds a 27.27 percent interest in and operatorship of Block CI-27 offshore Ivory Coast containing the country’s largest reserves of gas, produced together with condensate and oil, from four offshore fields tied back to two fixed platforms, meeting more than three-quarters of the country’s gas needs.
Foxtrot International also operates an exploration license offshore Côte d’Ivoire, Block CI-12, in which it holds a 24 percent interest. In addition to the Foxtrot gas field, which began production in 1999, Block CI-27 contains the Mahi gas field, developed in 2012, as well as the Marlin oil and gas field and the Manta gas field, which began production in 2016, following a four-year, $1 billion development campaign by the joint venture.
Gas produced from these fields is transported by pipeline to fuel power stations in Abidjan under a gas sale and purchase (take-or-pay) agreement put into force in June 1999 and subsequently increased to 140 million cubic feet per day with a base price of $6.00 per MMBtu, subject to an indexation formula which has lifted the current price to $6.47 per MMBtu.
In early 2020, in connection with the signature of amendments and extension of the production sharing contract and the gas sales agreement to 2034, the Block CI-27 joint venture embarked on a two-year, $350 million field development and onshore facilities construction project to supply gas to two new power stations. Cash flow from operations has funded these capital investments. This work is nearing completion following the drilling of three new and two side-track wells; the last well in the program, a side-track, is currently progressing.
This additional processing and well capacity are slated to increase gas supply to over 230 million cubic feet per day, subject to electricity sector demand and well performance. Drilling of up to another two wells over the period of the extension is planned to maintain the higher production capacity of the license. During the first half of 2022, gross sales averaged 200 million cubic feet of gas and 1,500 barrels of oil and condensate per day. Oil and condensate (and limited quantities of gas) are sold to the local refinery at arms-length prices.
Transaction terms
DNO said that the effective date of the transaction was 1 January 2022 and the agreed consideration is $117.25 million, covering the transfer of 100 percent of Mondoil Enterprises share capital valued at $95 million, comprising 9.09 percent indirect working interest in Block CI-27 and 8 percent in Block CI-12 both held through the ownership in Foxtrot International, and $22.25 million including $21 million in cash and USD 1.25 million in working capital.
DNO will issue 78,943,763 shares as consideration at a share price of NOK 14.38 (rounded). The share price is based on the dividend adjusted weighted average share price of DNO over the 15 trading days prior to the transaction agreement date and the average USD/NOK exchange ratio reported by Norges Bank over the same trading period.
The transaction is subject to RAK Petroleum distributing, by way of a capital repayment, its DNO shareholding, including the transaction consideration shares, to its shareholders. This process is expected to be completed in October 2022. DNO will receive 26,269,183 number of own shares from its 5.1 percent shareholding in RAK Petroleum which it will retain as treasury shares.
Completion of the transaction is conditional upon shareholder approval at an extraordinary general meeting of DNO resolving to issue the consideration share