Shares in DNO, the Norwegian oil and gas operator, closed up more than 10 percent on Wednesday as the company announced the startup of an active drilling program at its flagship Tawke field in the Kurdistan region of Iraq.
The company said it will boost investments on the back of seven consecutive monthly oil payments, the last three of which were in line with its contractual entitlements.
The company also reported the first quarterly profit from operating activities since mid-2014 of USD 8 million and indicated it is on track towards increased profitability in 2016.
At Tawke, workover operations at three existing wells reversed production declines and added 10,000 barrels of oil per day (bopd) of incremental output in the first quarter. Another seven workovers are planned this year. In addition, the company will drill five new Tawke production wells, three targeting the field’s main Cretaceous reservoir and two targeting the shallower Jeribe reservoir.
Tawke production during the first quarter averaged 91,700 bopd, of which 87,200 bopd was delivered for pipeline export through Turkey. Output was down as a result of the extended closure of the Turkish portion of the export pipeline in the second half of February and first half of March. Once pipeline operations were restored, Tawke production averaged 118,900 bopd in April, of which 117,800 bopd was delivered for export.
Later this year, the company plans a well to appraise the Peshkabir
discovery, which if successful, can be quickly tied into existing facilities. Excluding Peshkabir, DNO has set a Tawke production target of 135,000 bopd following its 2016 investments.
“We jump started investments at Tawke once Kurdistan provided regularity and predictability of payments,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani, “and the results speak for themselves.” He noted that the first three workovers were completed in about 30 days and at a combined cost of USD 1.5 million but generate USD 10 million a month in additional field export revenues.
DNO was the first Western oil company to enter Kurdistan following the U.S. led invasion of Iraq and the discovery of the Tawke field in 2006 set off the region’s oil bonanza. A decade later, the Tawke field accounts for 50 percent of the production, 60 percent of the exports and 50 percent of the proven reserves of the three largest foreign operators in Kurdistan.
Since September 2015, the company has received USD 175 million from the Kurdistan Regional Government for Tawke deliveries (of which USD 128 million net to DNO). Included in these figures are three payments totaling USD 65 million (USD 48 million net to DNO) received in the first quarter of 2016.
DNO’s cash balance increased from USD 238 million at the end of last year to USD 262 million at the end of March 2016.