DNO to Book Q2 Loss on Kurdistan, Oman Charges

By John Lee.

DNO International, the Norwegian oil and gas company, announced today that its share of oil exports from the Kurdistan Region of Iraq has averaged 40,000 barrels per day from startup ten 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 (KRG).

DNO International is also nearing completion of its obligation to the KRG under a previously disclosed protocol to reconcile past accounts and commence application of the fiscal terms and conditions of the existing Production Sharing Contract covering the Tawke license as from 1 June 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 does not include current exports nor volumes exported in 2009, 2011 and 2012 for which payments remain outstanding. Those payments will be recorded when received.

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 NOK 190 million on operating revenues of NOK 140 million.

The second quarter results have also been impacted by the shutdown of oil production in Oman due to an offshore pipeline blockage and the associated cost of repairs. The Company's first half 2012 results remain positive with net profit of NOK 118 million on operating revenues of NOK 851 million.

""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," said Bijan Mossavar-Rahmani (pictured), DNO International's Executive Chairman.

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