Dana Gas awarded $607.5m in case against Iran's state oil producer

The payout will 'significantly bolster' the company's balance sheet

Dana Gas says a second arbitration against NIOC with a 'much larger claim' is currently under way. Jaime Puebla / The National

An international arbitration tribunal awarded Sharjah-based Dana Gas $607.5 million as compensation for damages in a case against the Iranian state-owned energy producer.

The dispute concerns a 25-year gas sales and purchase contract between Dana Gas affiliate Crescent Petroleum and National Iranian Oil Company (NIOC), Dana Gas said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded.

The project was due to commence in December 2005, however, NIOC never delivered on its commitments.

“This first arbitration is now concluded and covers the period of the first eight and a half years of the 25-year gas sales agreement from 2005 to 2014,” Dana Gas said.

The current award will “significantly bolster the balance sheet of Dana Gas”.

The company said it would update the market on collection of the award sum in due course.

"The news definitely comes as a positive surprise, given that the market typically discounts any possibility of an award from this case," EFG Hermes analysts Ahmed Hazem Maher and Alaa Saleh Aly said on Tuesday.

"Collection is now key to unlock value."

The award, if enforced fully, would strengthen Dana Gas’ cash position and the company could use it for a one-off dividend payment.

A second arbitration with a “much larger claim” for the remaining sixteen-and-a-half-year period of the contract from 2014 to 2030 is currently under way.

The final hearing in the case is scheduled for October 2022 in Paris. A final award on the damages is expected to be announced in 2023, the company said.

"We have not [yet] assigned any value in our numbers to the possibility of awards in relation to the NIOC case," EFG Hermes analysts said.

In June, Dana Gas also received a London Court of International Arbitration ruling in its favour that validated the termination of an agreement to sell its onshore oil and gas assets in Egypt.

The arbitration was initiated in April by IPR Wastani Petroleum, a member of the IPR Energy Group, which had agreed to buy the assets in October.

But Dana Gas cancelled the $236m deal on April 22 on the grounds that the buyer had failed to meet certain conditions, it said in a statement at the time.

Dana Gas, which is the Middle East's largest private natural gas company, swung to second-quarter net profit on operational efficiencies and a rebound in crude prices this year.

It posted net income of $113m for three months to the end of June after reporting a $36m loss in the same period last year. Revenue for the second quarter rose about 70 per cent to $78m.