DNO launches hostile takeover of Canadian firm



DNO International, the Norwegian oil and gas producer that last year merged with the UAE's RAK Petroleum, has launched a hostile takeover of a Canadian competitor invested in Yemen.

DNO, which already holds assets in Yemen, is offering equity holders of Calvalley Petroleum C$2.30 per share, valuing the producer at C$215 million (Dh774.5m), after the board of the Calgary-based company had rejected an earlier offer.

The core of Calvalley's operations revolve around a 50 per cent stake in the Block 9 concession in Yemen's Sayun-Masila Basin, which yields the company about 3,500 barrels per day (bdp) of crude, with proven reserves of almost 15 million barrels.

The bid is in line with DNO's ambition to grow its presence in the Middle East and North Africa (Mena) region. "For DNO, this transaction is complementary to our existing Yemen asset base and fits well with our strategy of continuing to build a balanced portfolio of production, development and exploration assets in the Middle East and North Africa," Bijan Mossavar-Rahmani, DNO's executive chairman, said last week.

DNO has five assets in Yemen, three of which produce oil at a rate of about 4,200 bpd, equivalent to 10 per cent of the company's global production.

Calvalley responded the next day, saying it would "evaluate" the unsolicited offer for its common shares, while urging its shareholders not to sell. "Calvalley advises shareholders not to take any action until further notice," it said in a statement.

The board had in May rejected a bid made by DNO as too low, the statement added.

The company's share price surged by as much as 79 per cent in Friday trading, closing at C$2.63 per share, well above the offer price.

DNO last November merged with RAK Petroleum to create an oil and gas company that is producing or exploring in the Kurdistan region of Iraq, Yemen, the UAE, Oman and Tunisia. Its finances were boosted last year when it received payments for the crude it produced in Kurdistan, where hydrocarbon producers are caught in the middle of a dispute between the Kurdistan Regional Government and the central government in Baghdad.

The bid to take over Calvalley fits into its strategy of expanding by acquisition rather than growing organically.

"It's a lot cheaper now to buy oil on the London Stock Exchange or the New York Stock Exchange or Toronto by buying companies than it is to try to buy assets," Mr Mossavar-Rahmani said at the time of the merger.

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