DNO Sees Strong 2Q06 Results
During the second quarter, DNO's exploration led strategy again provided significant organic reserve growth as the proven and probable reserves increased by 40 percent to 139 million barrels. In accordance with the company's strategy, the second quarter was characterized by a high level of exploration activity.
DNO continued its solid financial performance and generated a strong operating profit and netback in the second quarter of 2006.
The operating revenues increased to NOK 359 million in the second quarter 2006, up from NOK 162 million in the second quarter of 2005. In the first six months, the operating revenues were NOK 774 million, an increase of more than 141 percent compared to the same period of 2005.
Netback from producing assets remains strong, somewhat offset by lower production in the second quarter compared to the first quarter of 2006. In the second quarter 2006, DNO's netback from producing assets was NOK 217 million compared with NOK 106 million in the second quarter of 2005. Netback from producing assets increased to NOK 495 million in the first six months of 2006, increasing 105 percent from the first half of 2005.
After NOK 111 million in exploration cost was expensed, DNO achieved an operating profit of NOK 132 million, compared with NOK 12 million in the same period in 2005. In the same period DNO had net profit of NOK 75 million, up from a loss of NOK 22 million in the second quarter of 2005.
Year to date, the operating profit increased to NOK 197 million, from NOK 82 million in the first half of 2005. Net profit in the same period was NOK 46 million compared to NOK 129 million in the first six months of 2005. Total exploration cost year to date was NOK 328 million of which NOK 182 million was expensed as dry well costs.
DNO produced an average of 14,470 barrels of oil (working interest) per day in the second quarter of 2006, compared with 13,322 barrels per day in the same period last year. The year to date oil production to DNO was 15,675 barrels per day, an increase of 14 percent compared to the same period last year. The increase is lower than expected primarily due to lack of new production from Nabrajah basement (block 43). Based on a revised production forecast, DNO expects the average oil production for 2006 to be approximately 15,000 barrels per day.
DNO has continued with its high level of exploration activity in the second quarter both through acquisition of seismic data and an extensive drilling program. As a result of the exploration activity DNO has increased proven and probable reserves (working interest) by 40 percent growth organically. DNO's 2P reserves per end of the second quarter were 139 million boe.
An important milestone was reached when our first well in Northern Iraq (Tawke #1) proved commercial flow rates of oil. The results on Tawke #1 indicated gross recoverable oil reserves of approximately 100 million barrels for the shallower Tawke reservoir intervals, with DNO working interest equivalent to 40 million barrels.
Both Tawke #1 and Tawke #1A each confirmed an oil flow of 5,000 barrels per day in one of the shallower resevoirs. Based on these positive results, DNO is currently preparing a fast-track development for test production commencing first quarter of 2007.
In Yemen DNO's extensive exploration and development program continued in the second quarter, including drilling of several exploration and appraisal wells.
DNO expects to uphold a high level of exploration activity in its core areas for the next 18 months.
Commenting on the results, Helge Eide, Managing Director of DNO said:
"The results for the second quarter and year to date are characterized by high exploration activity resulting in a strong organic reserve growth. In view of this we are pleased with the company's solid financial performance.
Our operational achievements and drilling results in Northern Iraq have been encouraging, already providing a basis for a plan for test production which could commence in the first quarter of 2007.
The next months we will continue and intensify our work with transforming resources to reserves, and we look forward to receive and evaluate the results from the many wells that will be drilled in Northern Iraq, Yemen and on the Norwegian Continental Shelf."
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