Based on the preliminary calculation, the award is expected to imply additional loss of USD 45-65 million in the Company's accounts for the third quarter of 2010. This will affect the Company's income statement and equity, but DNO will remain in full compliance with its financial covenants.
DNO reported a total cash position of NOK 822 million for the second quarter of 2010. As a result of increased production and cash flow, the Company's cash position has increased to around NOK 940 million (USD 160 million) by end of the third quarter. Consequently, the Company is in a position to fully cover the estimated range of damages from its cash reserves.
Background:
DNO Iraq AS, a subsidiary of DNO International ASA (DNO) is involved in arbitration proceedings related to certain claimed third party interests in The Kurdistan Region of Iraq, where DNO Iraq AS has entered into Production Sharing Contracts (PSC) with the Kurdistan Regional Government.
Following a review of the PSCs completed in March 2008, the third parties were not approved by the Kurdistan authorities to be part of nor have any rights in the PSC. Hence, DNO has rejected the basis for any such claims. However, in the first award the arbitrator ruled that the claimants had a right to seek compensatory damages from DNO Iraq AS.
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