DNO posts first-half losses as it struggles to collect from Kurdish government in Iraq
Anthony McAuley

August 20, 2015
Updated: August 20, 2015 08:01 PM

Topics: RAK Petroleum Gas Oil
Norwegian oil and gas company DNO, one of the largest independent oil and gas operators in Iraq’s Kurdish region, said revenues fell sharply in the first half and its financial losses deepened.

The company swung to a second-quarter operating loss of US$23 million from a profit of $55m in the same period last year, as second-quarter sales plunged about 62 per cent to about $55m.

DNO incurred a first-half operating loss of $93m, compared with a $84m profit for the same period last year.

DNO racked up the financial losses despite producing a record quarterly average of 153,346 barrels per day in the three months through June from its Tawke oilfield in the Kurdish region.

The company, in which RAK Petroleum holds a 40.45 per cent stake, was one of the earliest foreign companies to invest in new oilfield development in the region.

But it has struggled to get paid by the Kurdistan Regional Government (KRG). In its second-quarter financial report yesterday, DNO said the KRG owed it nearly $1 billion in accumulated arrears for oil exports as of the end of June.

The KRG pledged this month to start paying the independent oil operators – which have not received payments since early last year – from next month, after it broke with Baghdad over the non-payment of its share of central government revenues.

The KRG said it had decided to export independently on a regular basis again via a pipeline to Turkey’s port at Ceyhan, although the government in Baghdad had launched several lawsuits to challenge KRG’s international oil sales. Bijan Mossavar-Rahmani, the executive chairman of both DNO and RAK Petroleum, said: “We welcome regular export payments which are necessary to sustain our operations in Kurdistan.

“Without such payments, we will not be in a position to make further investments and production from the Tawke field will decline.”

He said DNO was continuing its discussions with the KRG about regular payments to clear the arrears.

DNO said more than three-quarters of crude production from the Tawke field in the second quarter went to export markets, with the rest sold to the local market or processed at its Tawke refinery.

The company produced an average of about 9,000 barrels of oil equivalent in the second quarter from its share of an offshore field in Oman. Production from its Yemen properties remain suspended because of the conflict there.

DNO shares yesterday ended trade up 0.47 per cent to 7.43 Norwegian kroner in Oslo.

Although they rose sharply on the KRG news earlier this month, DNO shares are down 1.69 NOK on the month and down 61 per cent over the past year