DNO returns to profit after regular oil payments from KRG resume

DNO, the Norway-based oil and gas operator controlled by RAK Petroleum, on Wednesday reported its first quarterly profit since mid-2014 and reiterated its intention to increase investment to boost output.

Revenue in the first three months of the year was just under US$50 million, up from $26m in the same period last year, and DNO reported earnings before interest, tax, depreciation and amortisation (ebitda) of almost $24m, compared with losses of more than $34m for last year’s first quarter.

The improved results were driven by much lower per-barrel costs as well as the resumption of regular payments by the Kurdistan regional government (KRG) in Iraq, where almost all of DNO’s production is based.

Output from the Tawke field in Kurdish Iraq averaged 91,700 barrels of oil per day (bpd) in the first quarter, down from last year’s first quarter average of about 106,000 bpd, with a prolonged outage in the pipeline that carries most of the output for export via the Turkish port of Ceyhan responsible for the decrease.

But DNO said that output rose to nearly 119,000 bpd last month and new investment this year will increase output to 135,000 bpd.

Lifting costs fell to $2.80 per barrel in the first quarter versus $6.00 per barrel for last year’s quarter.

Bijan Mossavar-Rahmani, the executive chairman of both DNO and RAK Petroleum, had previously said DNO will make $100m capital investment this year, which will go further than previous investment because of industry cost deflation.

Last year, DNO spent just $51m, down from $297m the year before, with the company reluctant to invest until the KRG agreed to pay back arrears, which began in September.

“We jump started investments at Tawke once Kurdistan provided regularity and predictability of payments,” said Mr Mossavar-Rahmani, in a statement announcing first quarter results.

Since September 2015, the company has received a net $128m, of which $48m was in the first quarter this year.

DNO shares have nearly doubled since their low of near 4.60 Norwegian krone in January to 9.30 at the end of last month, but they were down 0.59 krone at 8.20 krone in early trading in Oslo on Wednesday.


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Anthony McAuley

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