Dana Gas secures approval of shareholders for sukuk restructuring

Dana Gas, the Abu Dhabi-listed energy firm embroiled in a $700 million sukuk dispute, secured on Thursday the approval of the majority of its shareholders to move ahead with its sukuk restructuring programme.

"We had 62.3 per cent of the shareholders appearing at the first call, which we're very pleased about, because we needed substantially more than quorum [more than 50 per cent] and again the shareholders, those who were present voted unanimously in favour of the consensual restructuring of the $700m," chief executive Patrick Allman-Ward told The National in a phone interview after the firm's annual general meeting of shareholders.

The Sharjah-based firm, which operates gas concessions in Iraq's Kurdistan and Egypt, took the Islamic finance world by surprise last year when it declared its sukuk non-Sharia compliant, plunging it into a long legal battle with its debtholders, which include Blackrock, the world’s largest asset manager and investment bank Goldman Sachs.

The lengthy 12-month long court battle, which played out in courts in Sharjah and the UK, has neared closure following Dana Gas’ recent sukuk restructuring proposal. According to the new terms, debt holders have two options - to either exit and cash in their claims at 90.5 US cents per dollar of the face value of their holdings or to exchange their sukuk for new three-year instruments, with a profit rate of four per cent, while still receiving the profits owed upon the maturing of the old sukuk in October 2017.

“Only $24m worth of sukuk holders voted for that option of a cash-in and leave and everybody else voted to stay in the new paper,” said Mr Allman-Ward.

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The firm announced earlier this month that it had secured 93.69 per cent of sukuk holders to favour the restructuring proposal. That figure had increased marginally due to more debtholders joining the consensus after the deadline Dana Gas had proposed, said Mr Allman-Ward.

Around 90.9 per cent of the nine per cent ordinary sukuk holders as well as 96.4 per cent of the seven per cent exchangeable sukuk holders agreed to the new structure, he added.

Dana Gas will now proceed with a litigation dismissal agreement, first in the Sharjah courts and then in the English court to end all pending cases associated with its sukuk issuance.

“We hope that that [Sharjah litigation dismissal] will take place over the next week or 10 days or so, and as soon as that has been confirmed, then there will be a submission for a dismissal of the court cases in the UK in the English court and that will happen very quickly,” said Mr Allman-Ward.

Following the settlement of its sukuk dispute, Dana Gas will look to prioritise development of its assets in the Nile Delta in Egypt. The firm confirmed it had secured $88.8 million from the Egyptian government towards paying $190m in receivables.

Dana Gas, which had earlier adopted a wait-and-see approach to investing in Egypt pending payments, is now looking to develop commensurate to its receivables.

“We always said we would balance our payments with our capital investment profiles and that obviously if we weren’t paid, we wouldn’t be able to invest,” said Mr Allman-Ward.

Following the latest payment, the firm will now look to go ahead with additional onshore drilling in the Nile Delta region that would allow it to fill its gas processing capacity by year-end.

Dana Gas is also set to move ahead with plans to increase gas production from its Kurdish assets and will produce the additional amounts by the fourth quarter of the year, said Mr Allman-Ward.

The scheme will deliver around 60 to 80 million standard cubic feet a day of gas as well as 2,000 barrels per day of condensate that will feed into the 10-year agreement signed with the Kurdish Regional Government by the Pearl consortium. The consortium includes Dana Gas, its parent Crescent Petroleum, OMV of Austria, Germany’s RWE and Hungary’s MOL and builds on improved ties with the regional Kurdish government following its billion dollar settlement last year. The settlement, which boosted the Sharjah company's 2017 profit, also includes a $400m reserve to be allocated towards the consortium’s further investment in the region’s gas fields.

Dana Gas will look to tap third-party financing for its Kurdish gas projects, such as contractor, multilateral or bank financing, and will release such secured amounts from its $400m back to shareholders if it secures such funds.

Mr Allman-Ward declined to comment on the company’s planned spend on upstream exploration for 2018, saying Dana Gas had “enough” to fund future investment.

The firm was also looking to participate in state-owned Abu Dhabi National Oil Company’s first-ever licensing round this year.

“We are currently evaluating the data and we are certainly interested in due course, if we can confirm that we can find an opportunity that is attractive to us, we’ll be interested in making a bid,” said Mr Allman-Ward.