RAK Petroleum and Norway’s DNO International have signed a heads of agreement that allow for a merger of the two energy companies.

The merger will align the two upsteam companies’ Middle East and North Africa (Mena) operations.  The UAE company holds concessions locally and in Oman and Tunisia, while DNO’s operates in Yemen and Iraq’s Kurdistan. DNO also holds concessions in Mozambique, Equatorial Guinea and the UK.

“There is a compelling logic in combining the DNO and RAK Petroleum operating assets to build a first-rank independent Mena upstream operator,” said Bijan Mossavar-Rahmani, chairman and chief executive officer of RAK Petroleum, in a statement.  

RAK Petroleum already owns a 30 per cent stake in the Norwegian firm and Mossavar-Rahmani was appointed as chairman of DNO on 9 June. Once the agreement has been finalised, RAK Petroleum will receive shares in DNO equivalent to the value of the Ras al-Khaimah-based company.

In return for assets valued at between $250m and $300m, DNO will transfer around 10 per cent of its shares, priced at a minimum of NOK8.25 ($1.5) and a maximum of NOK10.0 a share.

In addition to its listing on Norway’s Oslo stock exchange, DNO is considering listing the merged entity on the London Stock Exchange. RAK Petroleum is currently not a listed entity. The firm is owned by about 400 shareholders and its shares traded through selected brokers.

In the first quarter of 2011, RAK Petroleum made an operating profit of $5m. DNO’s operating profit were $13m for the same period.