OSLO (Reuters) - Norwegian oil company DNO has agreed to buy rival Sval Energi from private equity group HitecVision in a deal valued at $1.6 billion, it said on Friday, marking the latest case of consolidation among North Sea oil and gas producers.

The transaction, involving a $450 million cash payment for 100% of the shares in Sval plus assumption of debt, accelerates DNO's pivot back to its North Sea roots after decades of exploration and production in the Middle East.

The shares of Oslo-listed DNO rose 7.8% by 0914 GMT, outperforming a 0.1% drop in the wider European oil and gas index, bringing the company's year-to-date gain to 16%.

The deal will quadruple DNO's North Sea production to around 80,000 barrels of oil equivalent per day (boepd) and lift its total output to around 140,000 boepd based on pro-forma 2024 data, it said.

DNO's remaining production comes primarily from two operated fields in the Kurdistan region of Iraq where the company has been forced to sell oil at a discount due to a legal dispute over the shutdown of an export pipeline to Turkey in 2022.

The Iraqi federal government, the Kurdistan Regional Government (KRG) and the international oil companies operating in Kurdistan are discussing a potential resumption of pipeline exports.

"The Sval Energi assets are complementary to DNO's North Sea portfolio and will add scale and diversification to solidify the company's position," DNO said in a statement.

But while DNO's cash flow would rise, its leverage was also set to increase significantly while the Kurdish exposure adds uncertainty, DNB Markets said in a note to clients, adding that a spin-off could be one way to mitigate the risk.

Sval Energi holds stakes in 16 producing fields offshore Norway, including ConocoPhillips-operated Ekofisk and Equinor-operated Martin Linge, with net total production of 64,100 boepd in 2024, split about equally between liquids and gas.

The acquisition will be financed with existing cash and other debt financing facilities available to DNO, it added.

(Reporting by Terje Solsvik and Nerijus Adomaitis, editing by Anna Ringstrom)