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Charges in Iraq's Kurdistan cause DNO to
slide into the red
23.8.2012
By Florian Neuhof - The National UAE |
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August 23, 2012
OSLO,— DNO, a Norwegian oil and gas company
with a focus on the Iraqi autonomous region of
Kurdistan, does not expect to be paid for its
exports out of Iraq this year, adding further
pressure to its already strained finances.
The company on Wednesday revealed second-quarter
earnings plunged into the red as it renegotiated its
most important production contract with the
Kurdistan Regional Government (KRG).
DNO recorded a loss of 176.2 million krone(Dh109.5m)
on sales of 155.4m krone. This contrasts with a
profit of 162.9m krone in the second quarter last
year.
The company was hit by retrospective charges arising
from the renegotiation of the production-sharing
agreement for its share in the Tawke field in
Kurdistan,www.ekurd.net
its prime asset. Production also declined, after a
long-running dispute over oil payments between the
KRG and Iraq's central government resulted in a
renewed halt to exports out of Kurdistan. DNO pumped
about 17,000 barrels per day (bpd) in the second
quarter at Tawke, down from about 43,000 bpd a year
earlier.
Exports have since resumed but DNO is not expecting
a repeat of last year's windfall when the finance
ministry in Baghdad opened its purse strings to dish
out payments for exported Kurdish oil. The Norwegian
company received 500m krone for such exports last
year, said Helge Eide, the managing director. "We
don't expect that this year," he said.
DNO merged with the UAE's RAK Petroleum last year
after insufficient payments out of Iraq had
exhausted its finances.
While revenues have improved, most of the money it
receives is from crude sold into Kurdistan itself.
Nevertheless, there is optimism at DNO. "If you look
at the first quarter in isolation, it doesn't look
good at first glance. But if you look behind the
figures, it is not all that bad," said Mr Eide.
Despite losses in the second quarter, the company
posted a profit of 131m krone for the first half of
the year. The company is on track to increase
production at Tawke to 100,000 bpd by the end of the
year, said Mr Eide, and production costs have
fallen.
The reimbursements to the KRG are coming to an end,
meaning future earnings will be unencumbered by
one-off charges.
DNO's share-buyback programme is continuing apace,
with the company currently holding 9 million newly
acquired shares.
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