x Abu Dhabi, UAETuesday 19 September 2017

First half profits dip for RAK Petroleum

DNO's recent progress in Kurdistan looks to lift the company

West Texas Intermediate futures for October delivery ended the trading the session on the New York Mercantile Exchange at $49.89, unchanged from the highest close since July 31 Pawan Singh / The National
West Texas Intermediate futures for October delivery ended the trading the session on the New York Mercantile Exchange at $49.89, unchanged from the highest close since July 31 Pawan Singh / The National

RAK Petroleum reported a slide in profits for the first half of the year, impacted by losses at its subsidiary DNO, coupled with a low oil price environment.

The Oslo-listed company reported a 15 per cent drop in profits for the first six months of the year to US$2.8 million compared to $3.3m the year earlier.

RAK Petroleum owns a 40 per cent stake in Norwegian oil and gas firm DNO and a 33 per cent interest in Foxtrot International, a privately held company that produces 75 per cent of the Ivory Coast’s gas needs from offshore fields in the Gulf of Guinea.

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DNO has struggled recouping outstanding arrears from the Kurdistan Regional Government (KRG). However, regular payments - including Thursday’s $34.75m for June deliveries - and a new agreement between the parties have resulted in DNO kickstarting its investment in the area.

The Norwegian company announced last week that it picked up half of ExxonMobil’s stake in the Baeshiqa licence on the heels of signing a “landmark agreement” with the KRG to offset arrears. The new terms give DNO a 20 per cent interest from the KRG in the Tawke licence, bringing the company’s operated stake to 75 per cent.

The licence includes the Tawke and Peshkabir fields, producing more than 100,000 barrels of oil per day.

RAK Petroleum’s half year report said that DNO will also receive a monthly sum from the KRG equal to 3 per cent of gross licence revenues for a period of five years as further payment towards the receivables. In addition, DNO is no longer on the hook for funding a $150m water purification plant that the government had initially deemed necessary.

Meanwhile,RAK Petroleum received $14.4m in cash distributions from Foxtrot and reinvested $2.5m toward capital and operating expenditures.

RAK Petroleum said that the principal risks and uncertainties facing the company remain largely unchanged. However, it said that successes in recent military campaigns against ISIL in Iraq and Syria, as well as DNO’s new deal with the KRG, “reduce the risk to DNO and improve the overall oil and gas investment climate in Kurdistan”.