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Iraqi-focused DNO oil company turns a profit

Norwegian oil company puts an offer on the table for a rival at a hefty discount.

By Daniel J. Graeber
Iraqi-focused DNO oil company turns a profit
Norwegian oil company DNO reports good results from its Iraqi oil portfolio and puts offer on the table to acquire a rival. Photo by cherezoff/Shutterstock

OSLO, Norway, Nov. 10 (UPI) -- DNO, a Norwegian oil company with a good Iraqi oil portfolio, said it had a successful third quarter and expressed interest in acquiring a rival player.

DNO reported revenue for the third quarter that was lower year-on-year, but year-to-date revenues of $159 million beat the same period from 2015. Third quarter profit of $19.8 million was better year-on-year and year-to-date figures vastly outperformed the previous period.

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The Norwegian company is focused on exploiting the Tawke oil field in the Kurdish north of Iraq and said its production rate of 118,000 barrels of oil per day is more than the combined regional output from all other companies working there. The company credited new production wells with the success, but said market pressures and the lack of regular payments for exports from the semi-autonomous Kurdistan Regional Government made forward progress difficult.

"To proceed with significant new investments at Tawke, we need regular export payments from the Kurdistan Regional Government and a firm plan for repayment of the $1 billion in arrears to DNO," Executive Chairman Bijan Mossavar-Rahmani said in a statement.

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DNO made a $300 million bid for Gulf Keystone Petroleum in July. Both companies are working in the Kurdish north of Iraq, with the latter working through a debt restructuring effort. The Norwegian company said the merger, if accepted by Gulf Keystone Petroleum and approved by the Kurdish government, made strategic sense because of the combined reserve potential.

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Gulf Keystone Petroleum in September reached an agreement with the majority of its creditors and shareholders to restructure its debt obligations. Once completed, the company said it would cut its debt load by approximately 80 percent to $100 million, which could in turn free up millions of dollars in cash.

From DNO's perspective, the restructuring plan wasn't working.

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"DNO is prepared to consider an all cash transaction but at a meaningful discount to the previous $300 million equivalent cash-and-shares offer," the company said.

A company spokesman from Gulf Keystone Petroleum declined to comment on the DNO proposal.

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