$1bn sukuk triggers sell-off for Dana Gas

What's Down: Dana Gas hits lowest price threshold yesterday as investors panic ahead of $1 bn sukuk payment due in October.

Dana dropped 7.5 per cent to close at 37 fils on the Abu Dhabi Securities Exchange. Courtesy Dana Gas

Dana Gas experienced a sell-off yesterday amid uncertainty over how the UAE gas explorer and producer plans to repay a US$1 billion sukuk due in October.

"The company has not announced if they found a solution to refinance the sukuk, and they clearly don't have the cash to pay it," said Hassan El Salah, the head of institutional trading at Al Ramz Securities in Abu Dhabi.

Dana dropped 7.5 per cent to close at 37 fils on the Abu Dhabi Securities Exchange. The shares plunged as much as 10 per cent during the trading session. Dana lost 38 per cent last year.

The yield on Dana's 7.5 per cent Sharia-compliant notes has risen to 53.28 per cent from 36.13 per cent at the start of this month. The price sank to 72.30 cents.

The company held a board meeting on January 4 to address its stake in MOL, Hungary's largest oil refiner, as well as financing projects in Egypt and the UAE.

"They are producing on the assets, but without the correct management, the stock is going to face pressure," said an analyst on condition of anonymity.

"The company said it was exploring options, but the public has the right to know what these options are."

Egypt, which has experienced slower economic growth since the ouster of Hosni Mubarak from the presidency last February, owes Dana Gas about $200 million from natural gas sales, Ahmed Al Arbeed, the company's chief executive, said in November.

Dana slowed production by 4.6 per cent during the third quarter to 3.72 million barrels of oil to "balance expenditure with the collection of accounts receivable", it said in November.

The company decided to suspend the construction of the announced Salma Plant, which was estimated to cost about $200m, and opted to expand its existing El Wastani Plant once Egypt returns to normal.

Dana in August announced plans to list on the London Stock Exchange to gain a wider investor base and boost its stock value. The company appointed Bank of America Merrill Lynch, Citibank, Deutsche Bank and JPMorgan to help with the process, according to Reuters.