RAK Petroleum, the oil and gas exploration and production company, today announced that following completion of due diligence and agreement on relative valuations, the Boards of Directors of DNO International and RAK Petroleum signed definitive documents on 3 September to merge RAK Petroleum’s oil and gas operating companies into DNO International in exchange for DNO International shares. The transaction values DNO International at US$1.64 billion corresponding to NOK 9.50 per share and RAK Petroleum’s subsidiaries at $250 million.
Upon completion of the merger, RAK Petroleum will own 40 percent of the share capital of DNO International up from 30 percent currently. The transaction is contingent upon government approvals and affirmative votes by shareholders of both companies, with closing expected around yearend.
The number of shares to be issued was determined through a relative valuation process based on an independent assessment of the two companies’ oil and gas assets by international petroleum consultants DeGolyer & MacNaughton and preparation of Competent Person’s Reports. Based on June 30, 2011 working interest basis figures provided by DeGolyer & MacNaughton, DNO International´s net remaining proven and probable reserves consisted of 355 million barrels of oil equivalent in Iraq and Yemen, while RAK Petroleum’s net remaining proven and probable reserves consisted of 52 million barrels of oil equivalent in Oman and the United Arab Emirates. The calculation of shares to be issued includes a positive working capital balance of USD 15 million in the RAK Petroleum subsidiaries as at the June 30, 2011 economic date.
“For RAK Petroleum shareholders, this is an important first step towards building more transparency in the share value. The merger will also provide exposure to a more diversified portfolio of MENA oil and gas assets — including world class reserves in the Kurdistan Region of Iraq — through the ownership of the 40 percent stake in the enlarged DNO International entity,” said Bijan Mossavar-Rahmani, Chairman of the Board of Directors and Chief Executive Officer of RAK Petroleum.
“An eventual London listing anticipated in 2012 by DNO International in addition to the Oslo listing should offer greater access to global investors and capital, which in turn, should provide opportunities for additional investment and growth,” he added.
Mr Mossavar-Rahmani, who since 9 June has also served as Executive Chairman of DNO International, added that the combined organisation will form a highly skilled, competent and experienced operating group. And importantly, one with regional roots and regional relationships, unlike most independent exploration and production operators active in this part of the world, he noted. The combined entity will have approximately 630 staff and offices in Oslo, London, Erbil, Sana’a, Dubai, Ras Al Khaimah and Muscat, with plans for a Tunis presence in 2012.
The two RAK Petroleum executives on the DNO International board, including Mr. Mossavar-Rahmani and Shelley Watson, abstained from involvement in the valuation considerations and related discussions on the DNO International side and the final approval of the merger plan was unanimously taken in a DNO International board meeting in which only the three independent Norwegian directors deliberated and voted.
DNO International will continue to be headquartered in Oslo. Post merger, RAK Petroleum expects to maintain small administrative offices in Ras Al Khaimah and Dubai to manage its portfolio of investments.
