50m treasury shares sold on Friday, pushing holdings above the 20% disclosure threshold.
UAE based RAK Petroleum PLC's purchase of more shares in DNO International ASA lifted shares in the Norwegian oil producer on Monday and, analysts said, raised prospects for a full takeover.
DNO said on Monday it sold all its 50 million treasury shares to RAK Petroleum on Friday at 7.35 crowns each, versus the closing price of 6.55, pushing its holding above the 20 percent disclosure threshold.
Based in the northern emirate of Ras al Khaimah in the UAE, RAK Petroleum currently has exploration operations in the UAE and Oman.
RAK said last November, after announcing a 5 percent stake in DNO, that it was interested in buying substantially all the treasury shares held by DNO.
In a note, Panmure Gordon & Co said: "We believe this could well provide RAK with a springboard to launch a bid for DNO, whose main asset is a 55 percent stake in the Tawke oil field in Kurdistan."
DNO also has operations in Yemen.
Shares in DNO were up nearly 8.0 percent by 1525 GMT, against a flat Oslo main index.
Speaking to Reuters, Helge Eide, chief executive, DNO, said: "From the management's side, we've had no dialogue with the company, so we've no clues to what they want."
He added: "We've got a considerable, Middle East-based, industrial owner, and the way I see it, this is both exciting and positive."
He also said that DNO's share sale was made to strengthen the company's cash situation.
DNO has been a trailblazer in Iraq, signing an exploration deal with the Kurdish authorities soon after the 2003 US led invasion to topple Saddam Hussein.
After only a few months of pumping oil from its Tawke field out of Iraq, DNO stopped exports in September. Its payments for the exported oil are expected only after Kurdish authorities and Baghdad iron out a long-awaited deal to share oil revenues.
Brokerage First Securities said it had raised its rating on DNO's stock to "neutral" from "reduce" following the share purchase by RAK. (Reuters)