DNO, the largest operator in the oil sector in the Kurdish region of Iraq, said it narrowed its loss last year and will spend about US$100 million on development this year after a period of regular payments from the Kurdistan Regional Government (KRG).
The company, which is controlled by RAK Petroleum and listed on the Oslo bourse, said its net loss attributable to shareholders last year was $32m, compared with $212m the previous year.
Bijan Mossavar-Rahmani, the company’s executive chairman, said that the resumption of regular payments by the KRG, which made 10 payments to oil companies operating in the region last year including back payments owed, had put DNO back on a steady footing. Last year’s payments, together with three so far this year, have totalled $269m net to DNO.
“The resumption of regular payments has brought us back on track to profitability and growth after two difficult years,” Mr Mossavar-Rahmani said. “As the payments have continued – in line with our contractual terms – we began to ramp up our drilling programme while keeping overall spending within cash from operations,” he told investment analysts in Oslo.
DNO is considering spending $100m in the coming year, some of which may go to drill three additional wells at its flagship Tawke oilfield to raise production above current levels of around 115,000 barrels of oil per day (bpd), but that will be contingent on regular payments from the KRG, Mr Mossavar-Rahmani said.
The Tawke oilfield, which is located in the north of the country near the border with Turkey, is the biggest producer in the Kurdish region and accounts for nearly 20 per cent of its output. Most of the region’s 600,000 bpd of oil output is exported via a pipeline to Turkey’s port at Ceyhan, with about 70,000 bpd refined at two plants to meet local needs for petrol and other petroleum products.
Taq Taq, which is operated by Genel Energy, one of DNO’s partners in Tawke, produced at an average rate of just over 60,000 bpd last year, although Genel has told investors it expects its overall production in the region to decline this year from about 53,000 bpd to between 35,000 and 43,000 bpd.
The payment delays in previous years and underinvestment have curtailed the region’s ambitions to develop its oil sector and earn export revenue. DNO said that production last year at Tawke had fallen to 107,000 bpd from 135,000 bpd the year before.
Gulf Keystone, another large operator in the region, last week updated investors that its Shaikan oilfield produced at an average of just over 37,000 bpd last month, up from an average of just below 35,000 bpd last year. It said it expects a range of 32,000 to 38,000 bpd this year, forecasting it will be at the lower end if investment is only at the level required to maintain the field rather than for further development.
Gulf Keystone was the target of an unsolicited offer by DNO last year, but that was withdrawn when market conditions deteriorated.
Atrush, another major oilfield, is expected to ramp up towards target production of 30,000 bpd in the next few months. It is being developed by Abu Dhabi Government-controlled Taqa, which has faced long delays because of fighting with militants as well as contract disputes over payment to build pipeline and other infrastructure needed to get the oil to export markets.
Mr Mossavar-Rahmani also noted that DNO’s drilling activity last year led to a significant discovery in its Peshkabir acreage in the province, allowing it to book an additional 48 million barrels of oil to its contingent reserves, bringing total proven, probable and contingent reserves to 530 million barrels at the end of the year, up about 1 per cent from the end of 2015.
amcauley@thenational.ae