DNO notched up higher revenue in the second quarter on record output as it ramps up its flagship Tawke oilfield in Kurdistan despite the threat of Islamic State (IS) militants that has forced a retreat by other foreign operators in the northern Iraq region.
Sales revenue surged 10% year on year to $143.4 million in the latest quarter as gross output surged to a record 138,569 barrels of oil equivalent per day, up 76% on the previous quarter, while DNO’s own working interest production was up 78% to a new high of 81,669 boepd.
The Oslo-listed company attributed the increase largely to higher crude deliveries from Tawke along a new independent pipeline from Kurdistan to the Turkish port of Ceyhan for onward export by tanker to international markets, despite efforts by the federal Iraqi regime to halt the shipments that it claims are illegal.
The exports accounted for about third of DNO’s working output from Tawke in the quarter of 71,215 barrels per day, with the remainder sold to the local Kurdistan market, but the company underlined it has still not received any revenue for volumes exported via the pipeline.
"Our next challenge is to properly monetise all oil produced at Tawke by tapping international markets," said executive chairman Bijan Mossavar-Rahmani.
He underlined the company still has its “foot on the accelerator” at its operated Tawke field, where gross output hit a record 133,192 bpd during the quarter, with the aim of boosting production capacity to 200,000 bpd by year-end.
"We've had our feet on the ground in Kurdistan for 10 years, including during the recent crisis as well as in past ones, and remain fully and firmly committed to our operations," Mossavar-Rahmani said.
His statement of intent comes as other international players, including Tawke partner Genel Energy, ExxonMobil and Chevron, have started pulling out non-essential staff from the semi-autonomous region while others such as Petroceltic and Afren have suspended operations amid fears IS terrorists could target oil installations despite US air strikes aimed at halting their advance.
He told a results presentation on Thursday the company has “responded to the recent crisis by enhancing security protocols, retaining key operational staff and reinforcing the management team with resources from Oslo and Dubai”.
“Operations at the Tawke field have continued without interruption and the Tawke expansion programme is on track, though we recognise the timing of some projects across our three Kurdistan blocks likely could be impacted by developments beyond our control,” said.
The operator now aims to drill two more horizontal development wells at Tawke later this year, as well as shoot more 3D seismic on the northern flank, but stated that “security issues will dictate execution”.
Elsewhere in the Tawke licence, DNO is also looking to bring online the Peshkabir oil discovery, having submitted a development plan last year, and intends to drill another "high-impact" exploration well, Peshkabir-2, later this year.
DNO also operates two other licences in Kurdistan – Dohuk, which hosts the Summail gas field, and Erbil, where it has made the Benenan and Bastora oil discoveries.
Meanwhile, the company aims to launch production from its Yaalen field in Yemen in the second quarter of next year and has also identified a new prospect for drilling at its West Bukha field in Block 8 off Oman.
The company saw its net profit for the latest quarter drop to $44.4 million from $48 million a year earlier despite the revenue hike as it increased investments to $97.4 million, compared with $80 million in the same period of 2013.