Hank: DNO. You said: "Stay away from DNO.ol.. hank"
Can you elaborate on your thoughts on that one? I´m really interested.
I sold out of my huge DNO position early this year for a 4-bagger profit around NOK 11-12. At that time they were producing 10k b/day.
Right now (July figures) production is up +70%, stock price down 25% and Iraq finally is looking to pass the new oil law next month..
that makes DNO a decent takeover play right now IMHO.
Small oil firms in Iraq becoming buyout targets
Simon Webb, Reuters
Published: Tuesday, August 21, 2007
DUBAI -- When Iraq approves a new oil law, the smaller firms that took the risk to start up early despite insecurity and the lack of a legal framework will become buyout targets and are already being sized up by larger competitors.
The most attractive targets are those in the semi-autonomous Kurdish region, where relative stability and a government hungry for development has allowed foreign companies a foothold.
"It was a high risk strategy for some of these small companies to get involved in Iraq," said one London-based energy analyst at a private investment bank.
"But that's what they do -- go where nobody else will go and get the head start. If the legal issues are sorted out, they will look quite attractive."
The Kurdish Regional Government (KRG) signed five production sharing agreements (PSAs) from 2004-2006, which it claims will not violate the new federal law.
Iraq's Oil Minister Hussain al-Shahristani said on Tuesday the new law will stipulate a review of all oil and gas deals struck by the Kurdistan government. Shahristani said he expected parliament to pass the oil law next month.
Larger companies were already circling the operators in the Kurdish region with a view to acquisition once the legal issues are ironed out, industry sources said.
"There are rumours that some of the majors are already working deals to back into existing licenses and it seems likely that some will see acquisition as a potential route in," said one industry executive.
Initially, mid-sized firms were more likely to get involved in buyouts and new contracts in the Kurdish region than majors.
The majors would be more cautious as they have their eyes on potentially much bigger prize of Iraq's largest oilfields in the south.
Corporate security policies ban majors from sending personnel into Iraq, including the Kurdish region. Until security improves, they can't do more than sign deals.
With big oil potentially sidelined for years due to security, a similar pattern could emerge in the south as in the Kurdish region with smaller companies moving in first and becoming buyout targets later.
Norway's DNO, the first foreign oil company to drill in post-war Iraq, holds one of the PSAs in the Kurdish region and is already producing from the Tawke field.
DNO has for months been seen as a potential takeover target. In January, its leading shareholder said the company faced possible unsolicited takeover attempts.
"There's been a lot of talk about DNO as a possible acquisition target," said Alex Munton, analyst at global consultancy Wood Mackenzie. "The assets that they have in Iraq look extremely valuable."
Another PSA holder and potential target is WesternZagros, a unit of Canada's Western Oil Sands Inc.
U.S. Marathon Oil Corp is buying Western Oil Sands, but the Iraqi unit is not part of the deal and is being spun off to Western shareholders.
Western said last week that the oilfields covered in its deal with the KRG could yield a billion barrels of oil over their lifetimes.
Addax Petroleum, together with Turkish partner Genel Enerji, is developing the Taq Taq field in the Kurdish region, which it says could produce 200,000 barrels per day.
Addax, which also has operations in West Africa, was more likely to be a future buyer than a seller, industry sources said.
Turkey's Petoil holds two PSAs as part of joint ventures. The KRG has also signed memorandums of understanding with Heritage Oil and Sterling Energy. Sterling said last week it was hoping to sign a deal with the KRG.
The pace should pick up quickly in the Kurdish region once the federal legislation comes into effect, Munton said.
"The legal framework being in place could really kick start quite a lot of activity," he said. The KRG has finalised several other PSAs and has said it wants agreements for all of its exploration blocks by the end of the year.
The region has high exploration potential, Munton said. Iraq holds the world's third-largest oil reserves, but the Kurdish region is relatively unexplored.
"It's very much a frontier region," he said. "There's very little geological data available."
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