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Tawke Oil Field Drives DNO Growth

By John Lee.

Norwegian oil and gas operator DNO reported record oil and gas output in 2014, but the results were impacted by one-off impairment charges in the fourth quarter driven in part by the drop in global oil prices.

Gross output was up 66 percent last year to 117,482 barrels of oil equivalent per day (boepd) and company working interest production jumped 76 percent to 68,958 boepd.

Operating revenue stood at USD 452 million in 2014. Impairments of USD 297 million in Kurdistan, Oman, United Arab Emirates and Yemen led to an operating loss of USD 243 million for the year. Excluding impairments, annual operating profit was USD 53 million.

The Tawke oil field in Kurdistan continued to drive the overall increase in DNO’s output. Tawke gross production rose 131 percent to 91,255 barrels of oil per day in 2014 despite ongoing security challenges. The Company remains on track to double field production and processing capacity by early 2015.

Capital expenditures in 2014 reached USD 297 million, up from USD 288 million in 2013, on the back of capacity expansion and development programs in Kurdistan. The Company ended the year with USD 114 million in cash and an additional USD 63 million in marketable securities.

Our focus in 2015 is to align our spending with our earning,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman. “We are targeting operating efficiencies, cutting back on discretionary expenditures and high-grading our portfolio – a process we started late last year,” he said. “We are also looking to generate larger revenues from our Kurdistan operations,” he added.

The Company has restarted sales of oil into the Kurdistan local market and plans to ramp up such deliveries in the first quarter. The Company expects to realize additional payments in respect of past and ongoing exports, the timing and extent of which will drive the 2015 capital program. Mr. Mossavar-Rahmani repeated that DNO continues to have one foot on the accelerator and one on the brake.

(Source: DNO)

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DNO in Kurdistan: “We’ve Only Just Begun”

By Padraig O’Hannelly.

DNO Chairman Bijan Mossavar-Rahmani (pictured) has given an upbeat assessment of the company’s operations in Iraqi Kurdistan.

Addressing CWC’s Kurdistan-Iraq Oil & Gas Conference in London last week, he said that the Tawke well was on target to hit a cumulative output of 100-million barrels of oil at some point in the next quarter.

He added that the company had some of the lowest costs in the industry, claiming:

“I don’t have access to other companies’ drilling costs, but I expect that, adjusted for depth, we drilled some of the lowest cost wells in Kurdistan, and in record time.”

What next for DNO in Kurdistan“, he asked. “More drilling, more discoveries, more production, more investment, more exports, more sales, more revenues — we’ve only just begun.

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DNO Confirms Payment for Kurdish Oil

By John Lee.

DNO ASA, the Norwegian oil and gas operator, today confirmed receipt of USD 30 million (36 billion Iraqi dinars) as first payment for oil exported by the Kurdistan Regional Government from the Tawke field during 2014.

The payment will be shared by DNO (USD 20.625 million) and partner Genel Energy plc (USD 9.375 million), reflecting their relative participation in the Tawke license operated by DNO.

Bijan Mossavar-Rahmani (pictured), DNO’s Executive Chairman, commented:

“This payment and the payments to follow until producers receive full contractual entitlements for exports propel us towards regularisation and internationalisation of the oil industry in Kurdistan…

 “We are committed to Kurdistan and will do more with more.”

(Source: DNO)

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DNO Third Quarter Results

By John Lee.

DNO, the Norwegian oil and gas operator, has reported third quarter 2014 gross production of 124,396 barrels of oil equivalent per day (boepd) on the strength of uninterrupted operations at its flagship Tawke field in the Kurdistan region of Iraq.

Increasing volumes of Tawke oil were directed from local sales to exports through Ceyhan, Turkey during the quarter by the Kurdistan Regional Government which announced last Friday that a payment of USD 75 million would be made to the producing companies towards their share of exports.

The statement also indicated that other payments would follow the November payment on a regular basis, and that with further production increases, producers would receive their full contractual entitlements.

Bijan Mossavar-Rahmani (pictured), DNO’s Executive Chairman, said:

We are of course very pleased that increasing exports, importantly from Tawke, are enabling Kurdistan to meet its financial needs at a very difficult time and to begin to allocate to DNO and other producers our contractual share of export revenues.

“DNO is fully committed to Kurdistan and will continue to reinvest revenues from exports to develop our extensive asset base in the country.”

The reduction in local Kurdistan sales contributed to a drop in third quarter operating cash flow to USD 25 million. The company recorded an operating loss of USD 41.6 million on third quarter operating revenue of USD 115.7 million following a one-off charge for impairments as it continues to cut costs and high grade its portfolio.

Absent this charge, operating profit would have totaled USD 3.8 million during the quarter. Year-to-date operating profit is USD 43.6 million. DNO ended the quarter with cash balances of USD 165.7 million, excluding USD 97.0 million held in treasury shares and shares of RAK Petroleum plc.

Drilling of additional wells continued without interruption during the quarter at Tawke and a stabilizing security environment allowed resumption of field expansion program, though with some delay. Costs related to Tawke development totaled USD 41.7 million in the third quarter.

(Source: DNO)

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DNO Increases Exports to Turkey

By John Lee.

In a market update this morning, Norwegian oil and gas operator DNO said it is logging the 834 meter horizontal section of the recently drilled Tawke-28 well and plans to place the well on production by early November. The next horizontal well in the field development program, Tawke-27, will spud shortly thereafter.

Elsewhere in Kurdistan, the Benenan-4 well has indicated higher volumes of oil in place in the Erbil license with movable Najmeh oil tested deeper than in previously drilled Benenan field wells. Further testing and evaluation are underway.

On the Dohuk license, DNO continues to re-assess the Summail field development plan in light of sharply declining gas production from the first two wells, one of which is now shut-in. A recently completed third well targeting deep gas did not encounter significant volumes of gas but instead discovered a 200 meter oil column in the Cretaceous interval by testing oil in the well’s three deepest zones. The Summail-1 well had earlier confirmed the presence of heavy oil in the Jurassic interval.

The company has taken steps to mitigate delays to its Tawke 200,000 barrel per day deliverability target resulting from the withdrawal of third party contractors from Kurdistan during the past few months. Installation of the new 24 inch pipeline connecting the Tawke field to Fish Khabur is proceeding and slated for completion by yearend. The new pipeline will increase export capacity and provide transportation system redundancy. Other upgrades to infrastructure and facilities to increase production and processing capacity at the Tawke field are progressing as planned.

Meanwhile, exports of Tawke oil to Turkey by the Kurdistan Regional Government for its own account currently average approximately 90,000 barrels per day. Local sales decreased to 29,960 barrels per day during the third quarter and currently average approximately 20,000 barrels per day.

(Source: DNO)

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Ergil Completes DNO Summail Contract

By John Lee.

Turkish engineering company Ergil has announced that it has successfully completed manufacturing of storage tanks and storage tank equipment for DNO’s Summail Gas Project — the first gas field developed by DNO in the Kurdistan Region.

The scope of the order included supply of insulated amine storage tank, teg storage tank, portable storage tank, RO water tank, amine run down tank and teg run down tank equipped with electrical heaters.

Oktay Altunergil, CEO of ERGIL, commented:

It was a great pleasure and experience to work with DNO in the past and I am very pleased that our business set to continue.

“DNO is the fastest growing producer and the number one in proved and probable reserves of oil and gas in Kurdistan.

“We are excited to be involved in DNO’s projects again by supplying ERGIL’s world class quality products and services.

(Source: Ergil)

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DNO: Tawke Production Hits 120,000 bpd

By John Lee.

DNO International ASA (“DNO”), the Norwegian oil and gas operator, today announced that production from the Tawke field in the Kurdistan region of Iraq reached 120,021 barrels of oil per day in May, the first time average monthly production has exceeded 100,000 barrel per day.

May production was split 60-40 between local sales and deliveries to the export pipeline at Fish Khabur.

Ahead of its Annual General Meeting to be held at 10:00 CET in Oslo, the Company also announced that production from the Tawke field passed the 75 million barrels cumulative mark on 31 May.

Plans to increase Tawke deliverability to 200,000 barrels per day by yearend 2014 continue on schedule. As part of that expansion program, production testing has commenced on Tawke-26, the first of two recently completed Tawke horizontal wells, with Tawke-24 to follow. A third horizontal well, Tawke-25, is drilling ahead at 1,873 metres.

Elsewhere in Kurdistan, sales of natural gas from the Summail field to the Dohuk power plant commenced in late May and currently average 60 million cubic feet per day from the first well, some 20 percent ahead of plan. Sales will climb as a second well is put on production in June, followed by a third well later this summer.

“We are focused like a laser on scale and speed of delivery, notwithstanding stretch targets, across our portfolio of assets,” said Bijan Mossavar-Rahmani, DNO International’s Executive Chairman.

(Source: DNO)

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First Natural Gas Arrives at Duhok Power Station

The Kurdistan Regional Government has announced the successful delivery via pipeline of the first quantities of natural gas from the gas field at Summail to fuel the Duhok Power Station (pictured).

The Summail Gas Field lies within the area of the Duhok Production Sharing Contract (PSC) and is operated by the Norwegian company DNO, which together with Anglo-Turkish PSC partner Genel Energy, signed a landmark gas sales agreement (GSA) with the KRG on 18 September 18 2013.

Long-term deliveries are expected to reach 120 million cubic feet per day sold on a take-or-pay basis for the duration of the production, showing the KRG can successfully develop its newly discovered gas assets in Kurdistan.

Under the long-term GSA, the KRG will purchase up to 120mmscf/d. Initial volumes will start at around 55mmscf/d, ramping up to 120mmscf/d within the next few months, and thereafter itis hoped that gas production will eventually rise to around 200mmscf/d.

The Duhok Power Station is a 750 MW power plant in the city of Duhok, located 40 kilometres from the field. The power station’s six turbines have been run on expensive diesel until now, due to significant delays in originally expected gas deliveries from the Khor Mor area. Each of the turbines consumes around 24 million litres per month of diesel, or around 27.50mmscf/d natural gas.

The locally-produced natural gas will displace diesel from the power station and is part of a KRG strategy to save the people of Kurdistan millions of dollars every year in costly diesel imports for power generation.

Natural Resources Minister Ashti Hawrami said that the successful commissioning of the Duhok Power Station operated by Mass Global, the Kurdistan main and feeder gas pipelines constructed by Kar Group, and the Summail gas facilities built by DNO, represented a significant step forward for the Kurdistan Region.

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