Norway's DNO ASA and British-based Genel Energy have struck deals with Iraq's Kurdistan Regional Government (KRG) to clear outstanding debt and restructure oil export payments, the oil producers said on Aug. 24.

The agreements resolve a long-standing issue between two of the main foreign oil producers in Iraqi Kurdistan and the KRG about overdue payments that had clouded relations and made the firms cautious about further investment in the region.

Shares in the firms jumped; by 3:48 p.m. CDT, DNO's shares were up 6.5% and Genel Energy's shares rose 6.9%.

Under its deal, DNO will increase its stake in the Tawke oil field license from 55% to 75% , taking over the KRG's interest, DNO said.

The KRG has also relieved DNO from some payment obligations, including production bonuses worth about $25 million and a $150 million water purification project that is no longer required.

DNO Executive Chairman, Bijan Mossavar-Rahmani, said that the deal “will bolster DNO's balance sheet significantly as well as our cash flow”.

The deal entitles DNO to an additional 20,000 barrels per day (bbbl/d) output from the Tawke field on top of more than 60,000 bbl/d it receives now. The chairman said this would support the firm's further expansion in Kurdistan.

Analysts at Danske bank said the deal was a “game changer” for DNO, which would lead to earnings upgrades and a potential valuation increase of 5 Norwegian crowns (US$ 0.64) per share.

“The net impact should be an increase in corporate valuations driven directly by higher equity stakes, plus a greater commitment by the companies to invest in their existing fields,” analysts at RBC Capital Markets said.

DNO plans to give an update on the Peshkabir field reserves by the end of 2017.

Under its agreement, Genel agreed to waive outstanding KRG debt, which stood at $201.7 million at the end of June, in exchange for a higher share of gross revenue from the Tawke field, put at 4.5%, until July 31, 2022.

The KRG also agreed to lift capacity building payments, which is a tax on Genel's profits from Tawke, the firm said.

Based on an average Brent oil price of $51 a barrel, Genel said the deal would generate proceeds of about $30 million and lead to tax savings of about $12 million until the end of 2017.

Gulf Keystone Petroleum, another foreign oil producer in Iraqi Kurdistan, said it was progressing in its talks with the KRG, without giving a date for any announcement.