HIGHLIGHTS FOURTH QUARTER
In Northern Iraq, the Tawke #4 production well drilled, tested and completed. The well flowed 8.500 bopd, which is the highest flowrate achieved from the field to date. In addition, DNO signed an agreement for increased working interest in the Northern Iraq PSAs to 55 % in return for carry of 100% of the project costs. Significant progress was also made in the Tawke early production development during the quarter. An exploration well within another area of the PSA was drilled, Khanke #1, but no hydrocarbons were recovered during testing.
In Yemen, successful appraisal drilling increased production from both Tasour field in BL 32 and Sharyoof field in block 53. In addition, exploration drilling in BL 53 proved several new oil discoveries within the Bayoot/Hekma area south of the Sharyoof field. The Godah field, which was discovered in the first quarter was brought on stream in the fourth quarter, which is within 10 months from discovery. DNO was also awarded a new exploration license (block 84) in Yemen.
On NSC, two exploration wells were drilled, Goliat West and Zita, without proving hydrocarbon bearing reservoir. The Goliat West well was sidetracked and found an oil bearing column. The results from the well will be further evaluated.
The revenues increased to NOK 277 million compared to the fourth quarter 2005, due to higher oil prices, but was somewhat offset by lower production. Due to high exploration activity, NOK 156 million was expensed mainly related to dry wells at Khanke in Northern Iraq, Zita and Goliat West in Norway. During the period DNO increased its investments to NOK 807 million primarily due to development in Yemen and Northern Iraq, including acquisition of additional 15% working interests in Northern Iraq. This led to a result from operating activities of NOK -2 million and a net result of NOK -31 million in the reporting period.
HIGHLIGHTS FOR THE YEAR
During 2006 exploration drilling added 98 million barrels of new reserves and resources to DNO (working interest) and the company achieved an average oil production of 14,831 bopd (working interest). DNO commenced the fast track development of the Tawke oil discovery in Kurdistan, Northern Iraq and continued high drilling activity in Yemen leading to several new oil discoveries.
DNO reports strong revenue growth (70 %) with revenues of NOK 1 335 million and near a doubling of the operating profit to NOK 283 million for the full year. Cash flow from producing assets increased resulting in a netback to exploration coverage of 152 % for 2006. DNO had a net result of NOK 61 million for the full year 2006 with the result figures highly impacted by increased exploration activity in all core areas.
Commenting on the results, Helge Eide, Managing Director of DNO says:
"We are pleased to see that our increased exploration efforts in 2006 delivered strong increase in our reserves and resources during the year Out of 16 exploration wells which DNO participated in during 2006, 7 wells discovered oil. This is a strong achievement.
"As a result of the high exploration activity in 2006 NOK 566 million was expensed as exploration costs. This has made a substantial impact on our financial results. However, with the high number of discovery wells, this has been a successful investment in return for adding new oil at competitive unit costs.
"We are not satisfied with not having achieved our production target for the year. On the other hand, our overall objective of transforming resources to reserves at low costs has been met. In 2007 we will take this one step further by bringing new reserves into production."
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