DNO says missing Kurdish payments hits bottom line

The company, which is 42.8 per cent owned by RAK Petroleum, is among operators in the region getting exasperated with the KRG over a lack of payment.

DNO, a Norwegian exploration company which accounts for a large portion of oil production in Kurdish Iraq, said it continued to make operational progress but was struggling financially as it awaited payment from the Kurdistan regional government (KRG).

The company said its gross production in the third quarter was 124,396 barrels of oil equivalent per day (boepd), mostly coming from its flagship Tawke field in Kurdish Iraq.

The company did not give a separate volume for Tawke, but last month it said that exports from the field to Turkey by the KRG for its own account were averaging about 90,000 barrels per day (bpd). It added local sales, from which the company derives revenue, had decreased to 29,960 bpd during the third quarter and were currently down to an average 20,000 bpd in mid October.

“The reduction in local Kurdistan sales contributed to a drop in third quarter operating cash flow to US$25 million,” DNO said. “The company recorded an operating loss of $41.6m on revenue of $115.7m following a one-off charge for impairments as it continues to cut costs.”

The company, which is 42.8 per cent owned by RAK Petroleum, is among the operators in the region getting exasperated with the KRG over a lack of payment.

In its earnings statement, DNO noted that the KRG had last week said it would begin to pay back billions of dollars in arrears as exports through Turkey had surged to 300,000 bpd. Initially, the government said it would disperse $75m this month to operators.

“We are of course very pleased that increasing exports, importantly from Tawke, are enabling Kurdistan to meet its financial needs at a very difficult time and to begin to allocate to DNO and other producers our contractual share of export revenues,” said Bijan Mossavar-Rahmani, DNO’s executive chairman.

The KRG said it hoped to make further regular payments to clear its arrears and allow the additional investment needed to meet its goal of ramping Kurdish production up to 1 million bpd by end of next year.

DNO said operating profit for the first nine months of the year was $43.6m. It said drilling of additional wells continued without interruption during the quarter at Tawke, and a stabilising security environment had allowed the resumption of a field expansion programme, although with some delay.

Costs related to Tawke development totalled $41.7m in the latest quarter.

In Oman, DNO said it would drill the first exploration well on Block 34, as planned, next year.

In Tunisia, there were some promising results on Jawhara-3, with the completion there of the first of several exploration and appraisal wells.

DNO shares were down more than 4 per cent at about 17.80 Norwegian kroner in Oslo on Thursday afternoon.

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