RAK Petroleum subsidiary DNO's profit doubles in second quarter

DNO, the Oslo-listed oil and gas company controlled by UAE’s RAK Petroleum, said it planned to boost output from its main asset in Iraq’s Kurdish region after posting a second-quarter profit.

Earnings before interest, tax, depreciation and amortisation (ebitda) reached US $29.5 million, more than double the $12.3m in last year’s second quarter, the company said in a statement.

DNO returned to profit in the first quarter, reporting its first quarterly profit since mid-2014 thanks to lower per-barrel costs and resumption of regular payments from the Kurish Regional Government (KGR), where almost all of its assets are.

Net profit in the three months to June 30 reached $4m, compared with a net loss of $39.9m in a year-earlier period.

The improvement in financial results was the result of both rising revenue and lower costs.

Revenue in the quarter was up 12 per cent year-on-year at $61.2m.

The company’s executive chairman, Bijan Mossavar-Rahmani, also told investors on a conference call that he expects to hear back next month from stakeholders in Gulf Keystone Petroleum about a $300 million conditional offer DNO made for the company last month.

“We would hope to have a response from bond and noteholders in first part of September but this is not an open, indefinite offer,” Mr Mossavar-Rahmani said.

The offer, which was at a 20 per cent premium to Gulf Keystone’s share price at the time it was made, is conditional on Gulf Keystone creditors reaching a deal on financial restructuring, as well as approval by the semi-autonomous Kurdish regional government.

Mr Mossavar-Rahmani said DNO also is looking at potential alternative asset acquisitions.

DNO said its main Tawke oilfield in the Kurdish region is expected to raise production capacity by 12.5 per cent to 135,000 barrels per day from 120,000 bpd in the second half of the year after new wells are drilled.

DNO has struggled from falling oil prices and lack of payment from the Kurdish regional government but is one of the more financially robust players operating in the region.

Since the KRG started making regular monthly payments to producers earlier this year, their financial positions have improved and DNO said cash on hand at the end of the second quarter was $249m.

It resumed drilling activity with two rigs earlier this year and will add another rig later this year. After a hiatus, capital spending this year is expected to total $100m, chief financial officer Haakon Sandborg, said.

“It feels good to be back and active and drilling again,” said Mr Mossavar-Rahmani. “We are back in business as a growth company once more.”

The addition of Gulf Keystone would add its share of the 40,000 bpd production from the Shaikan oilfield in the Kurdish region. DNO has argued that it would be able to make the combined business more profitable by eliminating duplicate corporate and operational costs.

Gulf Keystone has $575m debt due next year, so the decision is primarily in its creditors’ hands.


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