September 4, 2017 / 5:43 AM / 3 months ago

MIDEAST STOCKS-UAE to reopen, Kurdistan deal to boost Dana Gas

DUBAI, Sept 4 (Reuters) - United Arab Emirates stock markets look likely to trade quietly as they reopen on Monday after Eid holidays, although Abu Dhabi’s Dana Gas may rise sharply after it reached an agreement on overdue payments from Kurdistan’s government.

The UAE markets are the only ones in the Gulf to open; others, and Egypt, will resume trading later this week. The international environment is mixed, with Brent oil back above $52 a barrel after a surge on Thursday while MSCI’s emerging market index is down 0.4 percent.

There is no fresh, major corporate news in the UAE except Dana’s settlement, which will see Kurdistan immediately pay Dana’s consortium $1 billion, including $400 million that will be used for investment in the region. Dana will receive 35 percent of the money.

In addition, $1.24 billion will be reclassified from debt owed by the government to outstanding costs to be recovered by the consortium from future revenues as it operates in Kurdistan.

Allen Sandeep, head of research at Cairo-based Naeem Brokerage, said: “Overall, we view this as a major positive development for Dana Gas.”

In addition to Dana’s share of the $600 million payment, “future benefits to Dana Gas should be much larger, given the massive resource potential of the two fields, Khor Mor and Chemchemal. Dana Gas’s share of 2P reserves in the two fields amounts to close to 1 billion barrels of oil equivalent, with huge upside.”

Dana has not said the Kurdistan settlement will have any impact on its dispute with creditors over its $700 million of outstanding sukuk. However, Sandeep said Dana’s credit rating should now “witness a big leap”, making refinancing its debt a much less expensive option compared to profit rates of around 9 percent paid under the existing sukuk.

Any special dividend payment by Dana using the Kurdistan money appears unlikely, as a July injunction in the sukuk case at London’s High Court forbids it from making dividend payments without settling the sukuk. (Reporting by Celine Aswad; Writing by Andrew Torchia)

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