Ivory Coast : DNO ASA, Norwegian oil company expands offshore

DNO ASA, the Norwegian oil and gas operator with operations in Kurdistan and the North Sea, is now expanding into 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-equity transaction includes Mondoil Enterprises' 33.33% indirect interest in privately held Foxtrot International LDC, whose main assets are operated interests in offshore gas and associated liquids production in Côte d'Ivoire, forming a beachhead for DNO in West Africa," said DNO. 

According to DNO, Foxtrot International has a 27.27% interest and operation of Block CI-27 offshore Côte d'Ivoire containing the largest gas reserves in the countryproduced with condensate and oil, from four offshore fields connected 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% interest. In addition to the Foxtrot gas field which began production in 1999, the CI-27 block contains the Mahi gas field, developed in 2012, as well as the Marlin oil and gas field and the gaseous Manta , which began production in 2016, following a $1 billion, four-year development campaign by the joint venture. 

Gas produced from these fields is transported by pipeline to the Abidjan power plants under a take-or-pay agreement that came into effect in June 1999 and was subsequently increased to 140 million cubic feet per day with a base price of $6.00 per MMBtu, subject to an indexation formula that brought the current price to $6.47 per MMBtu. 

In early 2020, as part of the signing of amendments and extension of the production sharing contract and gas sales agreement through 2034, the Block CI-27 joint venture embarked on a two-year, $350 million field development and onshore facility construction project to supply gas to two new power plants. Cash flow from operations has financed these capital investments. This work is nearing completion following the drilling of three new wells and two sidetracks; the final well in the program, a side-track, is currently progressing. 

This additional processing and well capacity is expected to increase gas supply to over 230 million cubic feet per day, subject to power sector demand and well performance. The drilling of up to two additional wells during the extension period 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 amounts of gas) are sold to the local refinery at arm's length prices.  

Transaction conditions

DNO said the effective date of the transaction is Jan. 1, 2022, and the agreed consideration is $117.25 million, covering the transfer of 100 percent of the capital stock of Mondoil Enterprises valued at $95 million, comprising 9.09 percent indirect working interest in Blocks CI-27 and 8 percent in Block CI-12, both of which are held through the Foxtrot International stake, and $22.25 million, of which $21 million is cash and $1.25 million is working capital. 

DNO to issue 78,943,763 shares in consideration for the share price of NOK 14.38 (rounded). The share price is based on DNO's dividend-adjusted weighted average share price over the 15 trading days preceding the date of the transaction agreement and the average USD/NOK exchange ratio reported by Norges Bank over the same trading period.

The transaction is subject to RAK Petroleum distributing its stake in DNO, including the consideration shares in the transaction, to its shareholders in the form of a return of capital. This process is expected to be completed in October 2022. DNO will receive 26,269,183 treasury shares of its 5.1% stake in RAK Petroleum, which it will retain as treasury shares. 

Completion of the transaction is conditional upon the approval of the shareholders at an Extraordinary General Meeting of DNO to issue the consideration share