DNO ASA, the Norwegian oil and gas operator, today reported strong third quarter revenues of USD 227 million, up 33 percent from a year earlier, on the back of solid production averaging 99,300 barrels of oil equivalent per day (boepd) on a Company Working Interest (CWI) basis, up 22 percent year on year. Notwithstanding strong underlying performance, 2019 third quarter results were impacted by non-recurring items as well as lower oil prices and higher exploration expenses, resulting in a net loss of USD 96 million.

In the Kurdistan region of Iraq, third quarter production at the Tawke license containing the DNO-operated Tawke and Peshkabir fields (shared 75-25 with partner Genel Energy plc) averaged 119,800 barrels of oil per day (bopd). The Company expects to exit the year with Tawke license production averaging 120,000 bopd and to maintain this rate into 2020. The Company recently reached a significant milestone of 300 million barrels of cumulative oil production from the Tawke and Peshkabir fields.

Activity remains high as the Company continues to deliver its largest drilling campaign in its 48-year history with some 36 wells in 2019, of which 22 are development/infill wells and 14 exploration/appraisal wells. DNO projects full-year operational spend of USD 620 million (post-tax), of which USD 454 million was spent through the end of the third quarter, including USD 244 million in Kurdistan and USD 210 million (post-tax) in the North Sea.

Financial results were impacted by impairment charges of USD 138 million, including USD 89 million for technical goodwill on the Brasse discovery (Norway) and USD 33 million for decommissioning of the Schooner and Ketch fields (United Kingdom).

With USD 228 million in cash from operations during the third quarter, the Company resumed its share buyback program and acquired 23 million shares at a cost of USD 35 million, lifting its overall stake to 58 million treasury shares, representing 5.35 percent of the total outstanding shares at end quarter. DNO also bought back an additional USD 17 million of FAPE01 bonds during the quarter.

DNO maintained its previously approved dividend distribution program with another semi-annual payment of NOK 0.20 per share to be made on 4 November 2019.

“We continue to deliver across a range of operating and financial targets even as we paused this quarter for early spring cleaning of our balance sheet,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani. “Given global headwinds, we are budgeting at the low end of the industry’s Brent price range of USD 60-70 per barrel,” he added.

CWI production during the third quarter included 84,400 bopd from Kurdistan and 14,900 boepd from North Sea assets acquired earlier this year.

In 2019, nine wells were spud in Kurdistan through the end of the third quarter, with an additional ten wells planned for the fourth quarter. In the North Sea, 13 wells were spud through the end of the quarter, with an additional four wells planned for the fourth quarter, including DNO’s first operated exploration well, Canela, in the North Sea since 2007.

DNO exited the third quarter with a cash balance of USD 624 million in addition to USD 110 million in treasury shares and marketable securities.

Corporate overview - Q3 2019

• Strong revenues of USD 227 million, up 33 percent from a year earlier
• On back of solid production averaging 99,300 barrels of oil equivalent per day (boepd) on a Company Working Interest (CWI) basis, up 22 percent year on year
• Financial results impacted by non-recurring items as well as lower oil prices and higher exploration expenses, resulting in a net loss of USD 96 million
• USD 228 million in cash from operations including USD 64 million in working capital reduction
• Share buyback program resumed with 23 million shares acquired at a cost of USD 35 million, lifting overall stake to 58 million treasury shares, representing 5.35 percent of total outstanding shares at end quarter
• Bought back additional USD 17 million of FAPE01 bonds

Q3 2019 financial highlights

• Financial results impacted by impairment charges of USD 138 million, including USD 89 million for technical goodwill on the Brasse discovery and USD 33 million for decommissioning of the Schooner and Ketch fields
• Full-year operational spend projected at USD 620 million, of which USD 454 million was spent through end third quarter, including USD 244 million in Kurdistan and USD 210 million (post-tax) in the North Sea
• Exited Q3 2019 with cash balance of USD 624 million (USD 729 million at yearend 2018), plus USD 110 million treasury shares and marketable securities (USD 281 million at yearend 2018)
• Maintain previously approved dividend distribution program with another semiannual payment of NOK 0.20 per share to be made on 4 November 2019

Q3 2019 operational highlights

• Tawke license cumulative production reached significant milestone of 300 million barrels (MMbbls)
• Operated production in Kurdistan region of Iraq averaged 119,800 barrels of oil per day (bopd) compared to 113,200 bopd in Q3 2018
• CWI production averaged 99,300 boepd compared to 81,500 boepd during Q3 2018. Kurdistan production averaged 84,400 bopd and North Sea production averaged 14,900 boepd during Q3 2019
• In 2019 in Kurdistan, nine wells spud through end third quarter with an additional ten wells planned for fourth quarter
• In North Sea, 13 wells spud through end third quarter, with an additional four wells planned for fourth quarter, including DNO’s first operated exploration well, Canela, in the North Sea since 2007
• On track to deliver Peshkabir-to-Tawke gas project in Q1 2020, effectively eliminating gas flaring throughout DNO’s operations while enhancing recoverability in the Tawke field
• Schooner and Ketch (United Kingdom) well plugging and abandonment campaign to commence early November
• Following reduction in reserve estimate, operator DNO and partner Vår Energi recalibrating Brasse project (Norway). Concept selection expected in Q2 2020

Operated gross production averaged 122,753 boepd during the third quarter, of which 119,757 bopd was from Kurdistan and 2,997 boepd from the North Sea segment.

Company Working Interest (CWI) production during the third quarter stood at 99,305 boepd, compared to 103,902 boepd in the previous quarter. In Kurdistan, CWI production averaged 84,428 bopd, down from 89,209 bopd in the previous quarter. The lower production compared to the previous quarter was primarily driven by planned workover and side-track on P-2 and P-3 respectively on the Peshkabir field in the Tawke license. CWI production from the North Sea segment averaged 14,876 boepd, slightly up from 14,692 boepd in the previous quarter. The slight increase in third quarter production compared to the previous quarter was driven by the Ula area fields coming back on stream after the maintenance stop in June and improved production from Tambar, offset by operational issues with the Oda and Vilje fields, and the planned shutdown of the Trym field from September.

Entitlement production averaged 51,487 boepd during the third quarter, down from 52,626 boepd in the previous quarter.

Following reduction in reserve estimate, operator DNO and partner Vår Energi recalibrating Brasse project (Norway). Concept selection expected in Q2 2020.

Kurdistan region of Iraq

Tawke license
Gross production from the Tawke license, containing the Tawke and Peshkabir fields, averaged 119,757 bopd during the third quarter of 2019.

The Peshkabir-11 well was drilled and placed on production during the third quarter of 2019. Nine wells are currently producing from Peshkabir and the Peshkabir-3A well is expected to come onstream shortly. Peshkabir production averaged 51,944 bopd during the third quarter of 2019.

At the Tawke field, the Tawke-56 Cretaceous well was drilled and placed on production during the third quarter of 2019 and the Tawke-58 Cretaceous well was placed on production in October 2019. The Tawke-57A deep well to appraise the Jurrassic was spud in August 2019 with testing to commence shortly. The Tawke-59 Cretaceous well spud in October 2019 and is expected to come on production next month. Two Jeribe wells, Tawke-61 and Tawke-62 were drilled in October 2019 and will be placed on production shortly. Four additional Jeribe wells are planned to spud by yearend. Tawke production averaged 67,813 bopd during the third quarter 2019.

The Company’s active 2019 drilling campaign at the Tawke and Peshkabir fields continues. Nine wells were spud through the end of the third quarter 2019 with an additional ten wells planned for the fourth quarter.

DNO holds a 75 percent operated interest in the Tawke and Peshkabir fields with partner Genel Energy (25 percent).

Baeshiqa license
Rigless testing at the Baeshiqa-2 well targeting the deeper Jurassic and Triassic reservoirs continues. A third well, also targeting the Jurassic and Triassic, but on a separate structure, will be drilled next year.

DNO acquired a 32 percent interest and operatorship of the Baeshiqa license in 2017. Partners include ExxonMobil with 32 percent, Turkish Energy Company with 16 percent and the Kurdistan Regional Government with 20 percent.

North Sea

CWI production averaged 14,876 boepd in Norway and the UK during the third quarter 2019, of which 13,995 boepd was in Norway and 881 boepd was in the UK.

DNO relinquished two licenses PL810 and PL810 B during the third quarter of 2019. The Company now holds 87 licenses in Norway, of which 21 are operated.

The Company has diversified production across 13 fields, of which nine are in Norway and four in the UK.

In the North Sea, 13 wells spud through the end of the third quarter in 2019 with an additional four wells planned for the fourth quarter.

Link to DNO Iraq country profile