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Dana Gas demerger study gets AGM nod

Dubai - Dana Gas' upstream and midstream businesses in a demerger gets approved by shareholders.

Shareholders of Dana Gas, the Middle East's largest private sector natural gas company, gave their green light for a feasibility study to separate the oil firm's upstream and midstream businesses in a demerger.
During the company's annual general meeting on Wednesday, shareholders also approved a proposal to distribute a cash dividend of 5.5 fils per share for the financial year ended December 31, 2019.
The company said a demerger would create two publicly traded companies on the Abu Dhabi Stock Exchange. "Under the plan, existing shareholders would own shares in both the upstream business, which comprises operations in the Kurdistan Region of Iraq and Egypt, and the midstream business, which will hold the UAE Gas project that is currently awaiting arbitration decision or award," the company said.
Currently, the company owns upstream oil and gas producing assets including Dana Gas Egypt and a 35 per cent stake in Pearl Petroleum, its Kurdistan Region of Iraq E&P focussed business. These assets will be collectively known as the upstream business.
The company's midstream business will be the UAE Gas Project. This project is currently under arbitration and two separate damages claims are being made in relation to the periods 2005-2014 and 2014-2030.
The upstream business and the midstream business have quite distinct investment prospects, and the Dana Gas board believes that there are a number of advantages to be realised by shareholders from structuring these as separate listed businesses, which is the reason the company is pursuing a feasibility study on the potential demerger.
According to the company, a demerger would allow shareholders greater flexibility to manage investment, as may be desired, towards their preferred company entity with different assets, business risks and opportunities. The move would allow the market to more clearly value each separate business as independent groups. The midstream business and the upstream business would both be able to manage more appropriately the funding of their business strategies, with capital allocation supported by direct access to forms of capital most appropriate to finance growth opportunities, the company said.
Announcing the dividend, Hamid Jafar, Chairman of Dana Gas, said it is the company's third consecutive dividend and "highlights the excellent results from the hard work the board and management team have delivered over the past several years to strengthen the company's financial position that has been reflected in the steady dividend payments."
He said in 2019 Dana Gas was able to add to production and strengthen operations, making it more resilient to the difficult global economic environment. "The fact that the majority of our natural gas contracts are at fixed prices helps us remain competitive and will allow us to capitalise on any opportunities."
"We are also looking at enhancing shareholder value separating our upstream and midstream assets in a demerger. I would like to extend my gratitude to our shareholders for their continued support for the Company and their confidence in the growth potential of Dana Gas," Jafar said.
Dana Gas posted its highest annual net profit in seven years of $157 million for the 2019 financial year, compared to a net loss of $186 million in financial year 2018.
Net profit from core operations, on a like-for-like basis, excluding one-off items, increased by 80 per cent to $115 million compared to $64 million in 2018. The company's year-end cash balance was $425 million versus $407 million at the end of 2018. - issacjohn@khaleejtimes.com