UPDATE 2-DNO Q1 hit by low Iraq oil prices, export limbo

(Recasts with quotes, details)

By Wojciech Moskwa and Ole Petter Skonnord

OSLO May 14 (Reuters) - Norwegian oil and gas producer DNO (DNO.OL) posted weaker-than-expected first-quarter results due to lower oil prices on local Iraqi markets and repeated that it expected to win a long-awaited export licence in 2008.

The first foreign firm to drill for oil in Iraq after the U.S.-led invasion, DNO continued to truck oil from its Tawke field in north Iraq to the local market -- where it realised an oil price of $62 per barrel over January-March.

But on world oil markets prices surged past $100 per barrel in early 2008 and crude traded around $125 on Wednesday.

Earnings before interest and tax amounted 154 million Norwegian crowns ($30.34 million) in January-March, against 93 million in the same quarter a year earlier and below an average forecast of 182 million in a Reuters survey of eight analysts.

DNO maintained its production outlook for 2008 with a caveat that it would ramp up output quickly once it gains the nod to export the oil by pipeline to Turkey or elsewhere.

Asked about the timing of exports, Chief Executive Helge Eide said: "We can reference the statement we had made where the Kurdistan Regional Government (KRG)... said it would make sure we would export and that this could happen this year."

"The timing of the licence for exports is solely under control of the KRG and all statements regarding the process and the timing will have to come from them," Eide told a news conference.

The semi-autonomous KRG remains at odds with Baghdad over deals it signed with foreign oil companies, such as DNO, blocking agreement over a draft national oil law designed to open up the war-torn country's energy sector to investment.

STEADY OIL PRICES

Shares in DNO were volatile after the results, weakening on the below-forecast earnings then gaining on Eide's comments on Iraq exports. At 1026 GMT they were off 2.0 percent at 10.36 crowns on a rising Oslo bourse .OSEBX.

Asked about oil price developments in Iraq since the end of March, Eide said: "We have not seen any significant change in the pricing mechanism, maybe a slight increase."

Eide said DNO's exploration efforts in the first quarter paid off with three oil discoveries in new areas, including in Yemen where its gas production has come off peaks.

"We expect (the new discoveries) will further increase our resource base at low costs during 2008," Eide said.

DNO's net entitlement production -- the share of production it sells -- surged 67 percent year-on-year to 14,404 barrels of oil equivalent per day (boed) in January-March.

"Basically, there was no big news as they kept their view about Iraq exports sometime this year. But it was nice that they made a couple discoveries in Yemen and showed good production growth," said one analyst, who asked not to be named.

DNO, a group worth nearly $2 billion, targets "working interest" production -- a figure that does not take into account production sharing contracts which give the KRG a bigger share of output at higher prices.

Its first-quarter working interest production amounted to 17,752 boed, above its full-year 2008 target of 15,000 boed. For the second quarter DNO forecast output of 15,500 boed.

Last month DNO renegotiated its Tawke field agreement, with the KRG, weakening its terms and said it took "an important step in the direction of exports", which boosted its shares.

DNO stock has jumped by nearly 50 percent over the past three months on hopes for Iraqi exports as well as speculation among investors that the group could be taken over by a bigger oil producer seeking a speedy entry into Iraq.

(editing by Elizabeth Fullerton)