DNO Says Tawke 1 Testing Showed Good Results

DNO reports the preliminary results from testing of Tawke # 1 in Kurdistan.

A maximum flow rate of approximately 5,000 barrels of oil per day of good quality oil was achieved during testing of Tawke # 1 in Kurdistan. The flow rate was restricted by well equipment.

Based on the oil column proven by Tawke # 1 preliminary evaluation indicates gross recoverable oil reserves of approximately 112 million barrels for the shallower Tawke reservoir intervals. In addition oil was recovered during testing of two deeper reservoir intervals but reserve estimates have not yet been undertaken for these zones. Further exploration and appraisal drilling is required to determine the full oil potential of the Tawke structure.

As reported in the Stock Exchange Notice on 10 April 2006, DNO in consultation with Kurdistan Regional Government (KRG) decided to perform several tests in Tawke # 1.

The decision was based on interpretations of wire line logs and other well data which showed the presence of oil in five reservoir intervals. The objectives of the well tests in Tawke # 1 were to evaluate the production capacity of the individual reservoir intervals and to determine the characteristics of oil.

A total of six individual reservoir intervals were tested in Tawke # 1. Testing confirmed the presence of oil in four intervals: two in the shallower reservoir intervals and two in deeper zones. Two tests produced formation water.

Commercial flow rate has only been achieved from one of the shallower oil bearing reservoir interval. This interval flowed at a maximum oil rate of approximately 5 000 barrels per day. The flow rate was restricted primarily by the small diameter of the available test-pipe installed in the well during flowing.

The reason why the other oil bearing intervals did not flow properly during testing is assumed to be due to formation damage caused by drilling fluid, and particularly cement behind casing, restricting the oil to flow into the well bore. Several attempts to repair the formation damage with acid treatment were undertaken without significant improvements. For this reason two additional potential oil bearing intervals in the shallower section was not tested. However, oil of good quality was recovered from all oil bearing tested intervals. Tawke # 1 will be suspended and preserved as a potential future oil producer.

In order to fulfil the remaining test objectives at this structural location, a "twin well" to Tawke #1 named Tawke # 1B will drilled trough the shallower reservoir intervals penetrated by Tawke # 1. The surface location of Tawke # 1B is some 20 meters from Tawke # 1. Testing of Tawke # 1B is planned to be undertaken in all shallower reservoir intervals: both the reservoir intervals tested in Tawke # 1 as well as the two potential oil bearing intervals which were not tested in Tawke # 1. Upon completion of the testing program Tawke # 1B is planned to be completed as a future potential oil producer. The rig will thereafter be moved to the Tawke # 2 location some 2.0 km west of Tawke # 1.

Tawke # 1 is located close to the crest of the structure, and based on the oil column proved by the well preliminary evaluations indicates 375 million barrels of oil in place. Applying a recovery factor of 30 % the gross recoverable oil reserves is estimated at 112 million barrels (45 million barrels net to DNO , pre-tax). Further appraisal drilling is required to determine the full potential of the Tawke structure, and acquisition of 204 km2 of 3-D seismic across the Tawke area commenced last month.

DNO has also contracted a second rig from Greatwall Drilling Company Ltd. which will be mobilized to the PSA area of operations in the near future. This rig has the same drilling capabilities as the first rig and is expected to commence exploration drilling in another area of the PSA during 3Q 2006.

Commenting on the results Managing Director Helge Eide says:
"We are very pleased with the results obtained from the testing of Tawke # 1. The oil flow rate achieved combined with the preliminary reserves estimates and the good quality of oil, form sufficient basis to proceed with installing the test production facilities, targeting first oil in Q1 200.

7 Acquiring 450 km of 2D seismic, drilling the first exploration well and now testing commercial flow rates of oil, all within a period of 12 months, is a strong achievement. This is a product of the excellent work undertaken jointly by our friends and colleagues at Kurdistan Regional Government and our project team within DNO.

The cooperation and contribution from KRG to this success has been substantial and of high value to DNO. I am looking forward to our continued cooperation with KRG to bring this and future projects into a long term and sustainable success."


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