Exploration company Petroceltic and its partner Hess Middle East New Ventures have suspended operations in Iraqi Kurdistan and are evacuating non-essential staff, the company said.
"It has been decided, as a precautionary measure, to temporarily secure and suspend operations, including the drilling of Shireen-1 exploration well in the Dinarta licence," Petroceltic said.
The partners started drilling a first well, Shireen-1, on the Dinarta block in June and had expected exploration work to last five months.
They plugged and abandoned the Shakrok-1 well earlier this year after disappointing exploration results.
The decision follows announcements on evacuations and suspensions of production from other oil companies active in the region as violence spreads with the advance of Islamic State militants.
London-listed Afren and Toronto-listed Oryx said on Friday they were cutting production at oilfields closest to the fighting.
Genel, led by ex-BP CEO Tony Hayward and one of the biggest producers in Iraqi Kurdistan, said it was withdrawing "non-essential" workers but maintaining the combined 230,000 barrel per day output from its large Taq Taq and Tawke fields.
Marathon Oil also said last week it was evacuating personnel from the region and all were safe.
Kurdish production totalled about 360,000 barrels per day in June, according to the Paris-based International Energy Agency. About a third of that was exported, though Baghdad has been working to block sales outside its central system.
Production has been cut by less than 5,000 barrels per day so far, according to company statements, but there are concerns that this could increase.