DNO International ASA (DNO), the first foreign oil company to drill in Iraq following the 2003 U.S.-led invasion, said doubling output capacity from its major field in the Kurdistan region would help resolve a conflict over exports.
“The more capacity we have, in a certain way, the more quickly issues will be resolved,” Executive Chairman Bijan Mossavar-Rahmani said in an interview in Oslo today. “It focuses minds of all the parties to try to find solutions, because the prize is so large.”
The Norwegian explorer along with companies including partner Genel Energy (GENL) Plc has been caught in a dispute between the semi-autonomous regional government of Kurdistan and central authorities over revenue sharing, contracts and land. DNO, which gets two-thirds of its output from the region, has received only two payments for on-and-off exports, which were halted again early last year.
Still, DNO today reiterated plans to double its production capacity at Tawke to 200,000 barrels of oil a day thanks to a nine-well program on the field. The Oslo-based company will be “very happy” if the Tawke 21 and 22 wells, for which results will be announced soon, flow at a rate of 15,000 to 20,000 barrels a day, Mossavar-Rahmani said.
“The more oil we put in production, the more the pull from the market, and the more the push from different parties for us to move that oil to market,” he said. “If we had a million barrels of capacity sitting there, I expect some of these other issues would have been resolved long ago.”
While the Kurds completed a new pipeline to Turkey last year, talks with Baghdad have yet to yield an agreement on how to market the exports. DNO will continue to sell oil to the local Kurdish market as long as exports are halted, though it would be able to deliver 100,000 barrels a day to the pipeline if asked, Mossavar-Rahmani said.
“We’re making no assumption about the timing or volume of exports,” he said in a presentation. “We’re hopeful the issues will be resolved and that market will open up to us. When it does, DNO is the best-positioned company in the Kurdistan region.”
DNO will update its reserves in coming months, and said proven reserves at Tawke may eventually exceed 1 billion barrels of oil. “At what point are the proven-reserves numbers at that level, is it next year or the year after, it’s hard for me to say,” Mossavar-Rahmani said.
The company today reported a net loss of 506 million kroner ($83 million) for the fourth quarter, down from a profit of 810 million kroner a year earlier because of impairment and goodwill charges on assets in the United Arab Emirates and Oman. Still, earnings before interest, tax, depreciation and amortization of 576.8 million kroner beat the average of nine analyst estimates in a Bloomberg survey by more than 30 percent.
DNO was the best performer among big companies on the Oslo exchange. It rose as much as 7 percent to 23.6 kroner, trading 6.4 percent higher as of 12:49 p.m. local time.
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