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DNO Profit Misses Estimates as Kurdistan Crude Stuck in Turkey

DNO International ASA, a Norwegian oil producer focused on Iraq’s northern Kurdish region, said first-quarter profit fell 21 percent as oil exports to Turkey were stuck in storage amid a dispute over revenue sharing.

Net income fell to $23.7 million from $30.1 million a year before as sales grew 9.2 percent to $112.8 million, the Oslo-based company said today in a statement. The profit missed the $46 million average of eight analyst estimates compiled by Bloomberg.

DNO, the first foreign company to drill for oil in Iraq after the U.S.-led invasion in 2003, has been caught in a dispute between the semi-autonomous Kurdistan region and the central government in Baghdad over oil-export revenue sharing, contracts and land. The Kurds were still negotiating with Iraqi authorities as exports began from northern Iraq to Turkey, including from DNO and partner Genel Energy Plc’s Tawke field.

Earnings “were weaker than we and consensus had expected due to no revenue recognition for its export volumes,” Swedbank First Securities analyst Teodor Sveen Nilsen said by e-mail. “Financials were hit by substantial inventory effects, which probably will be reversed when (or if) the Tawke partners get paid for the Q1 export volumes.”

DNO fell 0.7 percent to 21.39 kroner by 9:33 p.m. in Oslo.

While the company more than tripled its production from Kurdistan to 35,600 barrels of oil equivalent a day on a working-interest basis in the first quarter from a year earlier, more than 20 percent of those volumes were piped to the Turkish port of Ceyhan and kept in storage. DNO had 700,000 barrels of oil held there at the end of the quarter with no revenue booked.

Total production increased by almost 60 percent to 45,700 barrels a day, even as output from Oman was almost halved.

Deliveries to Ceyhan from Tawke, which DNO operates with a 55 percent stake, have averaged a gross 100,000 barrels a day in the past 10 days from a total field output of 120,000 barrels.

DNO maintained its goal of raising production capacity at Tawke to 200,000 barrels of oil a day by the end of the year. Output reached a record 129,000 barrels on March 5.

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