DNO strikes a new deal in Kurdistan as profits slump in Q2

The company will grab a larger stake in the Tawke license to recoup outstanding payments

Workers at the Saleh oil field in Ras Al Khaimah. DNO International, which is operating on this oil field, swung to a second quarter loss. Pawan Singh / The National

DNO,  the Norwegian oil and gas company listed in Oslo and controlled by RAK Petroleum, swung to a loss for the second quarter as it  struck a new deal with the Kurdistan Regional Government (KRG) to offset arrears.

The company reported a loss of US$12.9 million in the three months ending in June, compared to a profit of $4m a year earlier. Revenues increased 33 per cent to $81.7m as the company received regular payments from northern Iraqi region of Kurdistan.

The company announced on Thursday that it would pick up another 20 per cent interest from the KRG in the Tawke license, an arrangement to help trim the amount owed to the company. This will bring DNO’s operated stake to 75 per cent in the license containing the Tawke and Peshkabir fields, with production of more than 100,000 barrels of oil per day.

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"We are very pleased with the government's initiative to settle receivables and normalize export payments to the operators," said Bijan Mossavar-Rahmani, DNO's executive chairman. "This sends a strong positive signal to investors and helps restore confidence in Kurdistan's oil sector.”

DNO, along with other operators in Kurdistan such as Dana Gas, had previously suffered from a lack of payments from the government, compounding the pressure from a low oil price environment. However, Kurdistan has been paying its debt regularly for more than a year.

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The company received $91.2m from Kurdistan for outstanding payments and booked receivables in the second quarter. This brings DNO's export payments from Kurdistan to $181m in the first half of the year, of which $32m was toward past receivables. The company said that it will drill 15 new wells in the region this year after an upturn in consistent payments.

DNO plans to spend $130m this year, up from last year’s $36m, on the back of higher oil prices. This will also help the company turn its sights to Tunisia, where DNO plans to drill an exploration well during the first part of next year.

DNO shares rose 11 per cent to  10.03 Norwegian Krone from its opening price at 9 Krone.