July 28, 2019 / 7:28 AM / 4 months ago

Exclusive: UAE's Dana Gas hires adviser to sell Egypt assets

LONDON/DUBAI (Reuters) - United Arab Emirates’ Dana Gas has hired investment bank Tudor, Pickering, Holt & Co. (TPH) to advise it on the sale of its Egyptian assets, worth over $500 million, two sources familiar with the matter said, as the company shifts its focus to its Kurdistan operations.

The Abu Dhabi-listed energy producer - whose main assets are in Egypt and in the Kurdistan Region of Iraq (KRI) - has been considering an alternative listing in London, and focusing on a single geographical area could be appealing to future investors in the company, said one of the sources. The sources did not wish to be identified because the information has not been made public.

A spokesman for Dana Gas declined to comment while TPH did not immediately respond to a request for comment, sent outside working hours.

Dana’s exploration and production assets in Egypt are onshore the Nile Delta except for Block 6 in the Eastern Mediterranean Sea.

In May Dana began drilling at the offshore Merak well in Block 6, saying it could hold up to 4 trillion cubic feet of gas.

On Sunday Dana said in a bourse filing that the drilling has not found commercial hydrocarbons and that the well is being abandoned. It added its operations in Egypt continue production normally.

The gas producer started marketing its Egyptian assets over the past few weeks and while it has received interest from the market there are no buyers lined up yet, said the first source, who added the assets are worth “well over $500 million.”

The decision to sell in Egypt is “strategic” as Dana wants to focus its resources on investments in KRI, where it has large capital expenditure requirements and sees potential for growth, the source added.

In a second bourse filing on Sunday, Dana said a new independently audited report showed the fields in which it has stakes in KRI could be “the biggest gas fields in the whole of Iraq”.

Pearl Petroleum, a consortium majority-owned by Dana Gas and its affiliate Crescent Petroleum, plans to increase gas production from the KRI’s Khor Mor field to 650 mmscf per day by 2022 and 900 mmscf per day by 2023, Dana said.

The expansion plan, worth some $700 million, will include adding two new production trains as well as drilling new wells to raise output from the current 400 mmscf a day, Dana Gas and Crescent Petroleum said in March, when they announced a 20-year gas sales deal with the Kurdistan Regional Government.

In May, Dana’s Chief Executive said Pearl Petroleum would raise funding for the KRI investments through several types of financing.

Dana’s 2019 capital expenditure for Iraqi Kurdistan was estimated at $70 million-$90 million, while its capex for Egypt this year would have been about $90 million, he said at the time.

Dana Gas, which at the end of this year’s first quarter had a cash balance of $442 million, rocked the world of Islamic finance in 2017, when it halted payments on $700 million in sukuk saying the instruments had become unlawful in the UAE.

After a protracted and complex legal dispute it reached a consensual restructuring agreement with its creditors in May last year.

Reporting by Clara Denina and Davide Barbuscia; Editing by Susan Fenton

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