DNO Turns to Profit for Q1
DNO ASA on Wednesday announced its results for the first quarter of 2007. A review of the financial and operations highlights follows.
The revenues were NOK 291 million in the first quarter, compared to NOK 415 million in the first quarter of 2006. The reduction is caused by a reduction in production and oil prices. The pre-tax exploration costs were NOK 158 million, with post-tax costs estimated at NOK 66 million, mainly related to dry well costs resulting from the Zita well and Yemen exploration wells.
Total investments amounted to NOK 288 million (compared to NOK 150 million in the first quarter of 2006) and were according to plan. More than 70 % of the investments were related to the development of the Tawke field.
EBITDA was reduced to NOK 70 million compared to NOK 108 million in the first quarter of 2006. However, improved net finance costs and lower taxes contributed to an increase in net profit to NOK 19 million (versus a loss of NOK 29 million in the first quarter 2006).
In the first quarter, the fast track development of the Tawke in Kurdistan has progressed towards completion. Start-up and extended testing of the first production well were undertaken towards the end of the quarter and oil was collected during testing. Tanker trucking facilities have now been installed with a total capacity of 15,000 bopd, and preparation are currently ongoing for delivering oil from Tawke to the domestic market.
Two new oil producers were drilled and completed at Tawke. Tawke #4 achieved a maximum flow rate of 8,500 bopd, while Tawke #5 tested a maximum flow rate of 12,000 bopd, which is the highest well production rate achieved at the Tawke field to date. Tawke #3 was drilled as a combined appraisal and exploration well towards the eastern extension of the Tawke area. DNO is pleased to announce that this well made a new oil discovery in the deeper reservoir horizon. The well tested 1,000 bopd and 6,000 bopd from two individual tests giving an aggregate test flow rate of 7,000 bopd.
In Yemen two new infill wells were brought on stream, one at the Nabrajah Field and one at the Sharyoof Field. Increased infill and development drilling is expected to take place in Yemen during the second quarter. Four exploration wells were also drilled in Yemen year to date, without encountering hydrocarbons. The plan is to drill nine additional exploration wells in Yemen in 2007.
Preparations for the increased exploration drilling program on the Norwegian Continental Shelf (NCS) continued in the first quarter. DNO plans to participate in at least six exploration wells in 2007, of which three wells will be drilled by DNO as operator.
In the first quarter DNO signed an agreement with Bayern Gas to sell our share in PL 263 (containing the Zita prospect) on NCS with effective date 1st July 2007. 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.
DNO's WI production averaged at 12,685 bopd during the first quarter, compared to 16,893 bopd in first quarter of 2006.
Helge Eide, Managing Director of DNO, commented:
"We are pleased with our achievement of developing Tawke into a field ready to produce within less than two years from start of exploration. This also is testament to the commitment of the Kurdistan Regional Government and DNO to develop long-term and sustainable values from their joint projects.
"We are also excited by the new oil discovery confirmed by the Tawke # 3 well, which demonstrates that resource potential of the area is yet to be fully appraised and evaluated.
"The financial results in the quarter underpin the stable cash generation of the company, which continues to support exploration in all areas of operations. Across the group, our exploration program presents a unique opportunity to increase shareholder value through adding new reserves at low costs. "
DNO ASA is an independent exploration and production company with activities in Norway, Middle East and Africa. The Company's P50 reserves and resources amounted to 151 million barrels of oil equivalent at 31.12.06. Average working interest production for 2006 totaled 14,831 bopd, of which 13,800 bopd was from its producing assets in the Yemen. The balance of production was from the Glitne field in Norway. In the Yemen production is from the Tasour and Godah fields (Block 32), the Nabrajah field (Block 43) and the Sharyoof field (Block 53). The Company's working interest production is expected to reach a level of approximately 26,000 bopd by year end 2007, as a result of the planned new production from Kurdistan. DNO is quoted on the Oslo Stock Exchange, ticker DNO, and is currently capitalized at approximately NOK 10 billion (US$1.6bn).
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