DNO Sees 23% Growth in 3Q06 Sales
DNO further built on its active exploration strategy in the third quarter, positioning the company towards continued reserve growth at low cost.
Due to higher oil prices DNO achieved a 23% growth in sales from NOK 230 million in the third quarter of 2005 to NOK 284 million in 2006. The sales in the third quarter were influenced by a correction of approximately NOK 29 million due to overlifting of oil in first and second quarter in block 43 (Yemen). In the first nine months, the operating revenues increased by 93% to NOK 1,058 million versus NOK 550 million in the same period in 2005 due to increased production and higher oil prices.
The netback from producing assets was NOK 104 million in the third quarter 2006 compared with NOK 123 million in the third quarter 2005. Netback from producing assets increased to NOK 599 million (+ 65%) in the first nine months of 2006, compared to NOK 364 million in the same period in 2005.
DNO expensed NOK 82 million in exploration costs (NOK 10 million in dry well costs) in the third quarter compared with NOK 45 million in the same period in 2005. Increased exploration through high drilling activity and seismic surveys are the main reasons for the higher expenses. The total exploration costs expensed in the first nine months of the year were NOK 410 million of which NOK 194 million were expensed as dry well costs.
Net profit for the third quarter was NOK 46 million and NOK 92 million for the first nine months of 2006.
DNO produced an average of 13,978 bopd (working interest) per day in the third quarter of 2006, compared with 14,672 bopd in the same period last year.
Based on a revised production forecast, DNO expects the average production for 2006 to be approximately 15,000 bopd. DNO has continued with its high level of exploration activity in the third quarter, and the Company's proven and probable reserves (working interest) per end of the third quarter were 137.6 million boe.
The development plan for the Tawke field has now been approved by Kurdistan Regional Government and DNO is preparing a fast-track development for early production from the Tawke discovery which could commence during the first quarter of 2007. DNO has secured pipeline and processing facilities which are capable of delivering 50,000 bopd. As a result of this the Company plans to accelerate development drilling within the Tawke area. The first exploration well on the Khanke prospect was spudded in July, on the Dihok PSA, and currently two tests are planned.
DNO is also in the process of finalizing an agreement with the Kurdistan Regional Government to increase its working interest in the Production Sharing Agreements by 15% to 55% in return for providing 100% funding of the project costs.
In Yemen, successful appraisal drilling of Tasour 22ST, has added new gross production at an initial level of around 8,000 bopd from September. The well is currently delivering approximately 5,300 bopd, and the well performance to date is among the best producers at the field. In the same block, the production from the first two wells at the Godah field have commenced with an initial gross production of approximately 1,400 bopd. This is expected to increase to 2,000 - 4,000 bopd by year-end.
On the Norwegian Continental Shelf (NCS), the first of a two well back-to-back drilling program at the Goliat field started in September and the plan is thereafter to drill an exploration well at the western flank of the prospect.
Also, within DNO operated licenses, preparations of 2007 NCS drilling program are ongoing, by collecting seismic and EM data.
Commenting on the results, Helge Eide, Managing Director of DNO said:
"In view of our increased exploration strategy we are pleased with the operational and financial results for the third quarter. We have reached important milestones in exploration, and the company is well positioned to continue to create values through building reserves at low cost.
We expect continued high drilling activity in the remainder of 2006 and throughout 2007, which will form a strong basis for the future development of DNO".
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