UPDATE 1-DNO Q3 down as expected, eyes production surge

* Q3 operating profit sinks 82 pct due Iraq outage

* Says shifting focus to production ramp-up from exploration

* No new update on timing of Iraqi oil export license

* Shares rise 6.4 pct in early trade

(Adds guidance, other details, shares)

OSLO, Nov 12 (Reuters) - Norwegian oil and gas producer DNO (DNO.OL) posted a fall in third quarter operating profit due to a temporary shutdown of its Iraqi field and said on Wednesday that it was shifting focus to production from exploration.

Shares in DNO, battered hard by financial market turmoil and dropping oil prices, were up 2.22 percent to 4.61 crowns at 0845 GMT, against a 1.26 percent fall on Oslo's key index .OSEBX, applauding the company's shift away from costly exploration.

Earnings before interest and tax fell to 27 million crowns ($3.93 million) in July-September from 150 million crowns a year ago, in line with a mean forecast of 26 million crowns from a Reuters survey of nine analysts.

"After several years with high exploration activities adding new reserves and resources... we are now facing a period with the focus more towards increased production and near term developments," Chief Executive Helge Eide said in a statement.

"This will change the balance between exploration and production activities within DNO and we are now positioning the company to deliver growth in production going forward."

Eide said the financial crisis accelerated DNO's planned shift towards production, which remains hinged on the company gaining an oil export license from Iraq.

DNO was the first foreign firm to drill in Iraq following the U.S.-led invasion in 2003 but has been forced to sell its production on the local market at below market prices because of lingering problems between the Kurdish authorities, with which it signed its deal, and Bagdad which controls export pipelines.

DNO has said the timing of the license would be "during 2008". DNO's prized Tawke field in north Iraq was shut in August by Kurdish authorities to review operations of a topping plant.

DNO said it had agreed with the Kurdistan authorities' amendments to its production sharing contracts (PSC), boosting the Tawke area to include another prospect increasing DNO's working interest by 15 points to 55 percent in this prospect.

"In return, DNO will pre-relinquish most of the Dohuk area," it said. "Incurred petroleum costs to date from the Dohuk area will be transferred to the Tawke PSC and will be recovered from the Tawke production."

DNO said it maintained its full year production guidance of 9,000 barrels of oil equivalent per day from its Yemen assets. It said it expected full-year capex in Yemen at 400 million crowns and at 750 million crowns in Kurdistan. (Reporting by Wojciech Moskwa and Joergen Frichl; Editing by Sharon Lindores)