DNO has reported its September and third quarter 2008 production together with a summary of ongoing drilling activities.
The next stage of test production from the Tawke field in the Kurdistan Region of Iraq resumed in September. The oil is being lifted by the KRG who will also process the crude oil for local needs. As reported in the Stock Exchange Notice dated September 25, 2008, reporting of test production volumes to the Company from Tawke
As a result of this change, DNO's production report for September includes production volumes from Yemen only. DNO's WI production from Yemen in the third quarter was 8,836 bopd, down from 9,924 bopd in the second quarter. The YTD production to DNO from Yemen is 9,706 bopd, which is in line with management`s expectations.
DNO's revenue entitlement from the Tawke test production in the third quarter was NOK 38,6 million. The temporary halt in test production from Tawke in the third quarter will result in lower revenues to the Company in the third quarter compared to the second quarter 2008.
SUMMARY OF ONGOING DRILLING ACTIVITIES
The Suwehed-1 exploration well was completed September 12, 2008, after which rig 908 was moved to drill the Nabrajah-19 development well on the southeast flank of the Nabrajah field. The well was completed as a water injector October 14, 2008. The rig will now be moved to drill Wasaa-1 exploration well on the same block.
Rig 905 was moved from block 32 to block 44, and Ghatel-1 exploration well was spudded September 21, 2008. This well is targeting a Qishn prospect in the block.
Exploration well Raoq-1 was spudded October 1, 2008 with rig 919, and will explore the resource potential on a Basement structure to the south of the Bayoot area.
KURDISTAN REGION OF IRAQ
Tawke PSC area
On September 20, the Sindy rig completed the Tawke-9 appraisal well as a future oil producer, without prior testing. Following these operations a maintenance program was initiated on the Sindy rig itself.
The Tawke-15 well is drilled as a combined Cretaceous delineation well and Jurassic/Triassic exploration well. The well has been drilled to a current total measured depth of 3160 meter within the Jurassic section, and the 9 5/8' casing has been installed. The well will be suspended at this stage, to allow for later re-entry of the well following a re-evaluation of the Jurassic and Triassic interval. Hydrocarbons have not been encountered in Jurassic at this stage.
As previously reported the KRG has authorized DNO to proceed with the remaining work in preparation for export, and this will be the key activities at Tawke going forward.
Following Tawke-9 and Tawke-15, a total of 14 wells have been drilled at Tawke and this ends the initial drilling phase at the Tawke field. As the initial aggregate well capacity from the field is now in excess of 100,000 bopd, further drilling is not required on the Tawke field at this stage.
Erbil PSC Area
The Hawler-2 well is primarily targeting Jurassic and Triassic intervals to further explore the oil discovery in Hawler-1 well. The well has been drilled through the Jurassic interval and to the planned total depth in the Triassic. As the reservoir pressure is likely to by higher than originally expected equipment with higher pressure rating is required. Therefore testing of the well is planned to be undertaken at a later stage.
The 3D survey across the Hawler structure is currently being processed. These data and the well results will form the basis for the evaluation of the resource potential and the forward plans for the Hawler oil discovery. Further drilling within the Hawler area will not take place until this work has been completed.
Expensed exploration costs in the third quarter are estimated to NOK 124 million, of which NOK 79 million are dry well costs. The remaining balance is primarily related to seismic acquisitions. The dry well costs relate to drilling of wells in Mozambique (Sangussi-1) and Yemen (Suwehed-1, Dahgah-1 and Tasour-17S). The dry well costs related to Suwehed-1 and Tasour-17S (NOK 29,2 million) are recoverable as cost oil under the PSA's.
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