Payments to DNO help RAK Petroleum trim losses

RAK Petroleum said it narrowed its loss sharply last year, helped by regular payments from the Kurdistan Regional Government (KRG) of Iraq to its main holding, DNO, which operates the Tawke oilfield there.

The company, which has a listing on the Oslo bourse, owns a stake of just more than 40 per cent in DNO, which is also listed in Oslo, and a one-third stake in Foxtrot International, a privately held company that produces about 75 per cent of the Ivory Coast’s gas needs from offshore gasfields it operates in the Gulf of Guinea.

RAK Petroleum’s net loss last year was US$6.9 million, down from a loss the previous year of $75.5m, with better financial results from DNO (which had a $6.1m operating profit versus a $174m loss the year before) bolstered by steady income from its much smaller holding in the Foxtrot asset.

DNO has suffered together with other operators in Iraq’s Kurdish region from a lack of payment by the KRG, which has been faced with severe financial strain because of its continuing battle with militants in the west, as well as unresolved disputes with the central government in Baghdad.

However, DNO received 10 payments last year from the KRG, which have helped eat in to the $1 billion of arrears that had built up by the end of 2015. DNO revenues were up 8 per cent last year at $202m, despite lower production and average oil prices.

RAK Petroleum’s annual report said the KRG payments to DNO have continued into this year and DNO is resuming investment with the drilling of four new wells, which it expects will reverse a 22 per cent decline in production from Tawke last year, to 112,600 barrels of oil equivalent per day on average in 2016.

Foxtrot International’s profit increased to $52m last year from $30m in 2015, with RAK Petroleum’s share doubled to $16m.

The company said that it reinvested about half its profit from Foxtrot last year to meet development obligations but that the profit from this asset might be available in future for investment in other projects, to pay down debt or for dividends.

RAK Petroleum’s thinly traded shares in Oslo closed down 1.2 per cent at 7.65 Norwegian krone on Thursday.

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