DNO reconciling Tawke oil accounts with KRG

DNO International ASA, Oslo, said that the company’s share of oil exports from the Kurdistan Region of Iraq has averaged 40,000 b/d from startup 10 days ago and that the company will continue to deliver these volumes at least through the first week of September as requested by the Kurdistan Regional Government.

DNO International is also nearing completion of its obligation to the KRG under a previously disclosed protocol to reconcile past accounts and begin applying the fiscal terms of the existing production sharing contract covering the Tawke license as from June 1, 2012. To meet this obligation, DNO International allocated its share of Tawke production to the KRG for local consumption during June, July, and part of August.

The reconciliation calculation includes neither current exports nor volumes exported in 2009, 2011, and 2012, for which payments remain outstanding. Those payments will be recorded when received, DNO said.

Under International Financial Reporting Standards (IFRS) rules, the full impact of the reconciliation of accounts since 2007 has been taken in the second quarter of 2012, contributing to a net loss of 190 million kroner on operating revenues of 140 million kroner.

Also affecting DNO’s second quarter results was the shutdown of oil production in Oman due to an offshore pipeline blockage and the cost of repairs (OGJ Online, July 18, 2012). The company’s first half 2012 results remain positive with net profit of 118 million kroner on 851 million kroner in operating revenue.

Bijan Mossavar-Rahmani, DNO International executive chairman, said, “Second quarter losses interrupt a string of four quarters of back-to-back profitability, which is disappointing. On a positive note, under the agreement with the KRG, we will now receive our pro rata share of Tawke cost oil and profit oil as provided for in the original contract.

“Meanwhile, we hope our participation in the delivery of significant export volumes during August will contribute to the resolution of the internal differences in Iraq and lead to recovery of payments due for past and present oil exports by DNO International to enable us to continue to support this new initiative by the KRG.”

In ongoing operations in Kurdistan, the Tawke-18 well, designed to increase Cretaceous production and test a target below the main field-bounding fault, is drilling at 2,359 m. On the Erbil license, a horizontal well drilling at 1,490 m will further appraise the Benenan discovery and contribute additional production.

The company is also mobilizing a second rig for its first deep test of the Jurassic and Triassic potential identified in Tawke field and expects to spud that well in September (OGJ, Feb. 6, 2012, p. 48).

On Block 8 off Oman, West Bukha field oil and gas production is expected to resume by the end of August with the two previously producing wells joined by a third newly completed development well, accelerating the recovery of deferred production. A fourth West Bukha development well is drilling at 3,272 m.

In Yemen, DNO has launched its new drilling campaign by completing the Tasour-27 infill well, currently producing 250 b/d. Another infill well in Nabrajah field on Block 43 was spud earlier this month. Development of Yaalen field on Block 47 is ongoing with first oil expected in the third quarter of 2013 following installation of early production facilities with gross capacity of 5,000 b/d. A permanent, 10,000-b/d processing facility will be installed later.

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