Norwegian player moves to expand its oil & gas portfolio with assets in West Africa

Norwegian oil and gas firm DNO has inked a deal with Oslo-listed RAK Petroleum, which will enable it to acquire a stake in oil and gas assets in West Africa.

DNO informed on Monday that it had entered into a transaction agreement with RAK Petroleum to acquire the ownership of Mondoil Enterprises LLC. The all-share transaction comprises 33.33 per cent 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 (Ivory Coast), forming a bridgehead for DNO in West Africa.

Bjørn Dale, DNO’s Managing Director, remarked: “As DNO targets expansion beyond the Kurdistan region of Iraq and the North Sea, the move into Côte d’Ivoire is an important first step into a highly prospective region offering a broad set of growth opportunities through the acquisition of producing fields, development assets and exploration licenses.”

According to Dale, the Norwegian firm is already evaluating other opportunities in the region. Furthermore, Foxtrot International holds a 27.27 per cent interest in and operatorship of Block CI-27 offshore Côte d’Ivoire, 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.

Aside from 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. In the Gulf of Guinea, the production platform Foxtrot-PFA and Marlin-PFB are respectively located in the Foxtrot and Marlin fields in Bloc CI-27, 8 km apart and about 18 km away from the Jacqueville shore.

Moreover, Foxtrot International operates an exploration license offshore Côte d’Ivoire in Block CI-12 where it holds a 24 per cent interest. Based on DNO’s statement, the gas produced from these fields is transported by pipeline to fuel power stations in Abidjan in line with 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.

Back in 2020, 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 and cash flow from operations has funded these capital investments. DNO elaborates that this work is nearing completion following the drilling of three new and two sidetrack wells with the last well in the programme – a sidetrack – currently progressing.

As a result, the 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. DNO outlines that the drilling of up to another two wells, over the period of the extension of the production sharing contract and the gas sales agreement to 2034, is planned to maintain the higher production capacity of the license.

The firm pointed out that 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. DNO reveals that the effective date of the transaction is 1 January 2022 and the agreed consideration is $117.25 million, covering the transfer of 100 per cent of Mondoil Enterprises’ share capital valued at $95 million. This comprises 9.09 per cent indirect working interest in Block CI-27 and 8 per cent in Block CI-12 – both held through the ownership in Foxtrot International – and $22.25 million including $21 million in cash and $1.25 million in working capital.

On the other hand, DNO will issue 78,943,763 shares as consideration at a share price of NOK 14.38 while receiving 26,269,183 own shares from its 5.1 per cent shareholding in RAK Petroleum which it will retain as treasury shares. The completion of this transaction is conditional upon shareholder approval at an extraordinary general meeting – to be held by DNO on 13 September 2022 – resolving to issue the consideration shares.

In addition, RAK Petroleum is expected to hold an extraordinary general meeting as well to seek shareholder approval of the capital repayment plan. The process is expected to be completed in October 2022.