x Abu Dhabi, UAEWednesday 17 January 2018

DNO profits slip as output falls in Kurdish region

Profits at DNO, the part-UAE-owned oil company, have fallen by half on the back of suspended exports from the Kurdish region of Iraq.

Profits halved for DNO, the Norwegian oil producer with part-UAE ownership, following pared-back output in Kurdistan.

The company, which is 40 per cent owned by RAK Petroleum, earned 169 million Norwegian kroner (Dh106.7m) in the first quarter of this year, compared with 307m kroner in the same period last year.

Revenue stood at 581m kroner, while the cash balance grew to 1.75 billion kroner.

The company's production dropped to 29,061 barrels of oil equivalent per day from 42,116 barrels the previous year.

"We continue to be self funding as we build up our oil and gas reserves with the drill-bit and increase production capacity in line with plans," said Bijan Mossavar-Rahmani, DNO's executive chairman.

Oman delivered nearly half of the company's overall production, helping to sustain DNO during a suspension of exports from its flagship Tawke field in the Kurdish region of Iraq.

Although the company recently expanded its export capacity to 100,000 barrels per day, a political standoff between the regional Kurdish government and federal Iraqi government over contracts and sovereignty have mostly limited sales to the small domestic market.

But executives are optimistic that a political deal for exports will be reached, and plan to build a second pipeline to an export terminal at the Turkish border and double capacity. Two of DNO's five rigs are drilling at Tawke.

"At some point in time we are going to increase capacity to 200,000 barrels per day," Magne Normann, the chief operating officer, said before the earnings report. "We are continuously drilling new wells."

DNO also holds exploration rights in Tunisia and Somaliland, its most recent addition. Somaliland, which is not recognised by most nations as a state, was left unexplored for two decades.

"DNO are known to go to difficult places," said Mr Normann. "Today Kurdistan will not be seen as a difficult place, but we did that in 2004 at the time when there was absolutely nil infrastructure in the oil sector.

"There was not even a bank that could deal with US dollars. There was not even a telephone system that could deal with international calls. Somaliland is very similar to that, meaning very little infrastructure in Somaliland. We have to bring in what we need just the same as what we did in 2004."

Advances in seismic imaging technologies in the past 20 years will help, he added. Genel Energy, the Turkish oil company headed by the former BP chief Tony Hayward and a non-operating partner with DNO in the Tawke field, has also acquired rights in Somaliland.