DNO said it discovered oil while drilling in the Benena-3 well in the Kurdish region. The company said it was assessing the find.
It added that a series of wells were under examination in the region. DNO Executive Chairman Bijan Mossavar-Rahmani said the drilling campaign in the Kurdish north was aggressive.
"Through these wells and others planned next year, the company is targeting in excess of 500 million barrels of gross unrisked oil and gas reserves, predominantly in Kurdistan," he said in a statement.
The central government in Baghdad had said it was considering cutting ties with foreign energy companies signing unilateral deals with the semiautonomous Kurdistan Regional Government, which controls oil-rich northern Iraq.
Baghdad blacklisted some international oil companies that have engaged the KRG.
Washington has advised U.S. energy companies working in Iraq that signing deals without Baghdad's approval is a risky move.