July 22 (Bloomberg) -- DNO International ASA climbed to a six-year high in Oslo as better-than-expected oil production from the first horizontal well at the Tawke field in northern Iraq triggered speculation it may increase its output targets.
Shares in the oil producer gained as much as 4.6 percent to 12.50 kroner, the highest intraday level since July 11, 2007. The stock traded 4 percent higher as of 10:21 a.m., making DNO the biggest gainer on the Oslo stock exchange’s benchmark OSEBX index. About 1.84 million shares have been traded so far today, equivalent to almost 80 percent of the average daily volume during the last three months.
DNO, based in Oslo, started production from Tawke-20, the first horizontal well at Tawke, at a record rate of 25,000 barrels per day, it said in a statement today. That compares with an average daily rate of 10,000 barrels at the most productive vertical well at Tawke, it said.
“We are pleased with the exceptional results from this well and excited about the prospects for horizontal drilling at Tawke,” Chairman Bijan Mossavar-Rahmani said. “Our next task is to optimize production from Tawke-20 while assessing the potential of horizontal wells in terms of drilling efficiency, well recovery factor and overall Tawke field output capacity,” he said.
The company has started drilling operations at a second horizontal well, Tawke-23, and is preparing to commence drilling of a third horizontal well, Tawke-21, it said.
“Depending on the results of these wells, we think DNO may consider increasing its planned plateau production from the field from 200,000 barrels per day to 250,000 to 300,000 barrels per day,” Pareto Securities AS said in an e-mailed report. “We reiterate our buy recommendation and 18 kroner target price.”
DNO, the first foreign company to drill for oil in Iraq after the U.S.-led invasion in 2003, is the operator of Tawke with a 55 percent stake. Genel Energy Plc has 25 percent, and the Kurdistan Regional Government the remaining 20 percent.
Shares in the company, which have gained more than 60 percent during the last 12 months, have been supported by reports that oil majors including Chevron Corp. and Total SA are looking to buy assets in the Kurdistan region of northern Iraq.
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