Norway’s DNO has struck a deal to buy a stake in Foxtrot International, which owns gas producing assets in Cote d’Ivoire.
DNO described the deal as forming a “bridgehead” for the company in West Africa.
“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 acquisition of producing fields, development assets and exploration licences,” said DNO managing director Bjørn Dale.
DNO is also looking at other opportunities in the region, he said.
Welligence Energy Analytics vice president for sub Saharan Africa David Thomson welcomed the deal.
DNO, he said, is “acquiring a mature, producing asset at a decent price. The Foxtrot development is also mostly gas and this will help balance DNO’s currently heavily oil weighted portfolio. It can help breathe new life into Foxtrot. DNO also has operational experience and it can bring this to the table.”
The company will issue 78.9 million shares to RAK Petroleum, which owns Mondoil Enterprises. Mondoil has a 33.33% indirect stake in Foxtrot International. DNO put its share price value at 14.38 Norwegian krone ($1.46), giving a value for the deal of around $115.3mn.
RAK owns 44.94% of DNO following a 2012 merger. RAK will distribute its DNO shares to its shareholders as part of the planned deal. DNO owns 5.1% of RAK and will receive some shares back, which it will hold in the treasury.
DNO said it valued Mondoil at $95mn, for its 9.09% stake in CI-27 and 8% of CI-12 off Cote d’Ivoire. The company also has $21mn in cash and $1.25mn in working capital. It will have an effective date of January 1, 2022.
Offshore plans
Foxtrot has a 27.27% stake in CI-27, which is a producing asset with four fields tied back to two offshore platforms. CI-12 is an exploration licence.
The Foxtrot gas field began producing in 1999. CI-27 also includes the Mahi field, which started in 2012, and the Marlin and Manta fields, which began producing in 2016.
The fields export gas to onshore power plants in Abidjan, receiving $6.47 per mmBtu for its gas. A sale and purchase agreement, from 1999, now covers the supply of 140 million cubic feet per day of gas.
Partners in CI-27 launched a field development plan in early 2020. This represented a $350mn investment over two years. This work covers three new wells and two sidetracks. The last well in the programme, a sidetrack, is underway.
This will see production increase to more than 230mmcf per day. In the first half of the year, gross production was 200mmcf. The fields also produce 1,500 barrels per day of liquids, which go to the local refinery.
The partners are planning two more wells on the licence, in order to maintain production.
Welligence’s Thomson went on to say the move into Cote d’Ivoire would help moderate DNO’s exposure to Kurdistan.
“It adds production to the portfolio and there is also exploration upside. DNO’s balance sheet is also strong and the deal into Cote d’Ivoire is an all-share transaction. This means it can keep most of its war chest and continue to look for opportunities. There are a lot of opportunities throughout West Africa and this will help it establish a presence and potentially expand in the region.”
For the deal to go through, DNO shareholders will be asked for their approval at an EGM, on September 13. RAK will also hold an EGM for its capital repayment plan.
Benefits for DNO include an expanded free float and reducing the company’s carbon footprint, by expanding its gas production.
Foxtrot paid RAK $8.8mn in cash in the first half of 2022. The company reinvested $9mn in the Cote d’Ivoire company.
Updated at 11:33 am with comments from Welligence’s Thomson.