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DNO slides to loss on impairments as production declines

BY MIKAEL HOLTER

OSLO, Norway (Bloomberg) -- DNO International ASA, the Norwegian oil producer focused on northern Iraq, slid to an unexpected loss in the fourth quarter as it booked one-time charges on assets in the United Arab Emirates and Oman.

The company, based in Oslo, posted a net loss of 506 million kroner ($83 million), compared with a profit of 810.1 million kroner a year earlier, after it booked impairment and goodwill charges of 869 million kroner, it said in a statement today. DNO had been expected to post a profit of 198.8 million kroner, according to the average of 10 analyst estimates compiled by Bloomberg.

Quarterly production fell 23 percent to 35,896 barrels of oil equivalent a day on a working-interest basis as output from the Kurdistan region of northern Iraq fell after exports ceased early in 2013. At the same time, earnings before interest, tax, depreciation and amortization of 576.8 million kroner beat the average of nine analyst estimates by more than 30 percent.

DNO and other companies including Genel Energy Plc have been caught in a dispute between the autonomous Kurdish government and central authorities in Baghdad over oil-revenue sharing, contracts and land. While the Kurds completed a new pipeline to Turkey last year, talks with Baghdad have yet to yield an agreement on how to market the exports.

“Adjusted for the impairment, the company delivered better than expected” earnings before interest and tax, Pareto Securities AS said in a note. That result can be “explained by a lower than estimated government take in Kurdistan and lower exploration costs,” the broker said.

DNO repeated its target of doubling production capacity at the Tawke oil field, its main asset in Kurdistan, to 200,000 barrels a day by the end of 2014.

Last year was “a banner year for the company marked by several milestones including great success from horizontal drilling at the Tawke field,” executive chairman Bijan Mossavar-Rahmani said in the statement. “We have an aggressive work program planned for 2014 to drive up production and delivery capacity in existing fields while testing exploration prospects across the portfolio.”

Shares in DNO gained as much as 7 percent and traded 3.1 percent higher at 22.72 kroner as of 10:42 a.m. in Oslo, giving the company a market value of 23.2 billion kroner.

02/20/2014

 

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