DNO Chief Says Iraq Government Deal Boosts Chances for Kurdish Oil Exports
DNO International ASA said a breakthrough in talks to form a government in Iraq will be an “important milestone” in paving the way for the resumption of oil exports from the Kurdish region.
“Getting a government in place is a necessary step for this process to move on,” Chief Executive Officer Helge Eide said in an interview in Oslo today. “If this happens, it’s a very positive development, and we hope things can now be resolved.”
Legislators in Baghdad reached an agreement on a government last night after eight months of deadlock. The new coalition will have to resolve a dispute over the passage of a law governing the use of Iraq’s oil and gas reserves. The semi- autonomous Kurdish region in northern Iraq suspended oil exports last year following a row over payments to foreign companies, including Oslo-based DNO.
“If we’re able to get a viable government in place I believe everyone, including the Kurds, will have the issues that are important to them heard,” Eide said. “And we know what position they’ve taken with regards to oil exports.”
DNO’s chief executive said negotiations between the Kurdish Regional Government, or KRG, and Iraq’s central authorities on oil exports meant a foundation was in place for an agreement that would enable exports to resume more rapidly.
“We can assume that there have been a lot of discussions around this and perhaps some agreements have been reached, but this can’t be implemented until we have a government,” Eide said.
Shipments Halted
“The Kurds have likely secured a deal regarding concessions on the oil law and approving the Kurdish oil contract in return for their support of” Iraqi Prime Minister Nuri al-Maliki, Trond Omdal, an analyst at Arctic Securities ASA, said in a note. “We therefore regard a new Maliki- government supported by the Kurds as positive for DNO.”
DNO has pumped oil in the Kurdish region since 2007 and in June 2009 started exports through Turkey until shipments halted in September of that year.
The company had been delivering about 45,000 barrels a day through a pipeline to Ceyhan in Turkey. Eide said DNO could bring production at its Tawke field up to full capacity “quite quickly” once the company received permission to resume exports. DNO recently reached capacity of 56,000 barrels a day in production at Tawke’s central processing facilities, Eide said today.
Quarterly Loss
Earlier today, DNO reported a third-quarter net loss of 146 million kroner ($25 million), down from a restated loss of 138 million kroner a year prior. The company in February restated sales for last year after an estimated $133 million in Iraqi revenue failed to materialize.
The stock fell 0.275 krone, or 2 percent, to 8.830 kroner as of 4:03 p.m. in Oslo, capping this year’s advance at 74 percent.
The company’s earnings were affected by a provision of 322 million kroner related to claims and legal costs in connection with a case at the London Court of International Arbitration against undisclosed parties that had held stakes in its assets. DNO is disputing the terms and conditions of the award ruled by the court, Eide said at a press conference today.
Sales rose 73 percent to 407 million kroner, buoyed by a 79 percent increase in net entitlement production to 16,161 barrels of oil equivalents a day. DNO’s realized oil price slipped 8.5 percent to $44.99 per barrel due to an increased shared of its production being delivered to the local market in Kurdistan, where it is sold at a discounted price.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net.
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
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