DNO has expanded its position in Norway substantially over the past few years and it is now one of the company's main core areas. Before the transaction announced Wednesday, the Company's license portfolio on the NCS comprised of 24 licenses.
DNO's primary focus is smart exploration, cost effective development and high margin production, where oil prospects are the current priority of the Company. DNO has a strong commitment as an active player at NCS and the Company is planning to participate in seven exploration wells in 2007, of which three as Operator.
In line with the objective of remaining a cost effective explorer, DNO announced that a Sales and Purchase Agreement to divest its 30 % working interests in PL263 and PL263B on the NCS to Bayerngas has been signed.
The main purpose for DNO to enter this license was the Zita oil prospect that was drilled earlier this year. As previously announced to the market, the Zita well did not encounter movable hydrocarbons in the target formations. As the remaining hydrocarbon prospects within the licenses are assumed to be gas, DNO decided to divest its share in the license in line with the Company's current strategy.
The transaction will give a net profit after tax to DNO of minimum NOK 70 million after the recovery of the purchase cost and accrued exploration costs at completion. Subject to achieving certain future targets, an additional consideration of NOK 25 million (net after tax) will be received by DNO. Following this transaction, DNO's portfolio on NCS will comprise of 22 licenses, of which 8 as Operator.
The effective date of the transaction is July 1, 2007, and the transaction is subject to approval from the relevant Norwegian authorities.
Managing Director Helge Eide comments:
"DNO is pleased with this transaction which is in line with our overall strategy for Norway. We are entering a period with increased exploration activity on NCS, and the transaction will enable us to further accelerate our NCS exploration efforts in the near to medium term."
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