DNO International's Production Up 70%, Sales Up 30%
DNO International ASA has announced its interim results for the second quarter and first six months of 2008. DNO reported strong growth in production and sales during the quarter. The WI production increased by 70% to 20,151 bopd (11,855 bopd) and the sales increased by 30% to NOK 412.5 million (NOK 316.6 million) in the second quarter.
After exploration costs expensed of NOK 85.9 million in the second quarter (NOK 10.4 million) the netback was NOK 185.4 million (NOK 214.5 million) and the net profit before discontinued operations was NOK 13.6 million
(NOK 62.3 million).
"We have delivered production well above plan so far this year. The increased production contributes to strong cash flow, funding our high exploration activity as well as a significant portion of our development costs. With yet another oil discovery in the second quarter we have made four new discoveries this year, all in new exploration areas," said Helge Eide, Managing Director.
Following the Hawler-1 oil discovery well in the Erbil PSC area which tested 11,000 bopd aggregated from two tests in the Jurassic interval, the Hawler-2 appraisal well spudded during the second quarter. Three new oil discoveries has been made in Yemen so far this year; two during the first quarter an one in the second quarter The Sharnah-1 well in Block 47 in Yemen confirmed oil in a new structure and the well was completed as a future potential producer. Both Yaalen-1 and Yaalen-2, also in Block 47 wells confirmed oil while drilling and from open-hole fluid sampling. Testing of these wells commenced during the second quarter but the final results are not available to date.
The total gross delivery from DNO's producing assets increased by 27% in the second quarter as a result of the increased production from the Tawke field, which is well ahead of plan. DNO's working interest (WI) production during the second quarter was 20,151 bopd (11,855 bopd), and during the first six months 18 952 bopd (11,839 bopd). The WI production so far this year is well ahead of the guided volumes.
The net entitlement (NE) production to DNO in the second quarter was 12,809 bopd (8,790 bopd) and 13,607 bopd (8,718 bopd) for the first six months. The achieved oil price was US $71.5 (USD 68.9) per barrel in the
second quarter and US $66.4 (US $61.9) per barrel for the first half of 2008.
In the second quarter 2008, DNO's sales increased by 30 percent to NOK 412.5 million compared to the second quarter 2007. For the first six months sales increased to NOK 834.4 million, an increase of 44 percent compared to NOK 579.9 million in the first half of 2007. The increase is related to both higher production volumes and higher achieved oil price (NE).
DNO has maintained its focus on exploration activities in both Kurdistan as well as Yemen. Total exploration expenditure in the second quarter of 2008 was NOK 199.1 million, compared to NOK 18 million in the second quarter of 2007. In the first six months, total exploration expenditure was NOK 356 million.
Exploration expenditure consists of expensed and capitalized exploration. The exploration efforts in the second quarter resulted in one new oil discovery, adding up to four discoveries in the first half of 2008.
DNO expensed NOK 85.9 million in exploration in the quarter. This is substantially higher than the corresponding quarter last year (NOK 10.4 million). For the first half year, the exploration expensed amounted to NOK 120.1 million, compared to NOK 73.5 million in the first six months last year.
The capitalized exploration costs during the second quarter were NOK 113.9 million, while DNO capitalized NOK 236.0 million in exploration costs in the first half of 2008.
As a result of the increased level of exploration, the EBITDA decreased from NOK 248.8 million in the second quarter in 2007 to NOK 242.8 million in this year's second quarter. For the first six months, the EBITDA increased to NOK 533.6 million from 407.5 million in 2007.
The second quarter net profit amounted to NOK 13.6 million, compared to NOK 62.3 million (before discontinued operations) in the second quarter last year. In the first six months, net profit amounted to NOK 76.0 million (before discontinued operations) compared to NOK 102.5 million in 2007.
Based on the discoveries made during the first six months combined with the exploration program going forward, the company expects to see a further growth in the reserves and resources during 2008.
Once export of oil from the Tawke field is in place DNO will face a step change in production volumes resulting in a substantial growth in the cash flow to the Company. This will further strengthen DNO's financial capacity and flexibility.
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