DNO International ASA (DNO) fell the most in more than a week in Oslo trading after the Kurdistan Regional Government halted exports from the company’s Tawke field.
DNO fell as much as 5 percent, the most since March 22, and was down 2.8 percent at 9.82 kroner as of noon in the Norwegian capital, making it the biggest decliner in the benchmark OBX index.
Shipments were halted because the Federal government in Baghdad has not honored its payment commitments for 10 months, the regional authority said in a statement. “We hope this is a temporary measure,” the authority said, adding that oil will be diverted to the local market.
The Baghdad government is entangled in a dispute with the regional authorities over crude revenue and refuses to recognize production-sharing agreements signed by the semi-autonomous area with foreign companies.
“It’s an illustration that the conflict is still not solved,” Trond Omdal, an analyst at Arctic Securities ASA, said by phone. “We have estimated no export payments this year.”
DNO will be able to withstand the export halt because its lifting, or extraction, costs are as low as $2 a barrel and there’s increasing demand from local refineries, said Omdal, who recommends clients to buy the stock.
“You could see quite good valuation support only from local sales at these levels,” Omdal said. “Strengthening political ties between Turkey and Kurdistan is also a positive factor and could eventually lead to direct exports from Kurdistan to Turkey independently of Baghdad.”
DNO produced 49,000 barrels a day in the Iraqi region in the fourth quarter. DNO, whose shares have gained 32 percent this year, said last month that it plans to drill a further four wells at the Tawke field in 2012 and is seeking to establish sustainable output of 100,000 barrels a day by year end.
The company, based in Oslo, posted net income of 653 million kroner ($114 million) last year, compared with a 283 million-krone loss a year earlier, as output more than doubled.
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