DNO Starts Gas Capture in Kurdistan

DNO ASA, the Norwegian oil and gas operator, today announced that the USD 110 million Peshkabir Gas Capture and Injection Project in its Tawke license in the Kurdistan region of Iraq is onstream and has reached the one billion cubic feet of gas injection milestone.

The project is expected to reduce annual emissions from the Company's operated production by over 300,000 tonnes of CO2 equivalent, offsetting the emissions from some 150,000 automobiles.

Engineering and construction were launched in mid-2018 and commissioning completed in mid-2020 in what is the first gas capture and storage project in Kurdistan. Some 20 million cubic feet a day of previously flared gas at the Peshkabir field is gathered, treated and transported 80 kilometers by pipeline to the Tawke field where it is injected for storage and reservoir pressure recharging.

Effective June 2020, the project halves the average carbon intensity of the Company's operated production from 14 kilograms CO2 equivalent for each barrel of oil equivalent produced (kg CO2e/boe) to an average of 7 kg CO2e/boe. This compares to the target set by a group of 12 of the world's largest oil companies comprising the Oil and Gas Climate Initiative (OGCI) to reduce the average carbon intensity of their aggregated upstream oil and gas operations to between 20-21 kg CO2e/boe by 2025 from a collective baseline of 23 kg CO2e/boe in 2017.

"Gas injection and the associated carbon capture and storage is proven, practical and potentially profitable," said Bijan Mossavar-Rahmani, DNO's Executive Chairman. "Our project was completed on schedule and on budget notwithstanding the challenges of working in what is still a frontier oil and gas operating environment and the obstacles posed in the late stages by the Covid-19 pandemic," he added.

Gas flaring at the Peshkabir field has been reduced by over 75 percent, with work underway to reduce it further. Any Peshkabir field injected gas produced at the Tawke field will be recovered and recycled into the latter or used as fuel to displace diesel.

Reservoir models suggest gas injection will increase gross Tawke field recoverable volume by 15 to 80 million barrels of oil, of which 23 million barrels are included in the gross proven and probable (2P) Tawke field reserves in the DNO 2019 Annual Statement of Reserves and Resources.

DNO's greenhouse gas emissions increased following commencement of production from the Peshkabir field in 2017 as the oil contains a relatively high associated gas content. Flaring from the Peshkabir field was the largest single contributor to DNO's total 2019 greenhouse gas emissions of 639,200 tonnes of CO2e.

Mr. Mossavar-Rahmani announced the launch of a new initiative to more actively measure, monitor and mitigate methane leakages at DNO's operated sites, noting that while CO2 emissions from oil and gas operations receive the greatest attention, methane emissions are a significant but underreported source of greenhouse gas with an impact 25 times greater than CO2 on a 100-year horizon.

DNO operates the Tawke license containing the Tawke and Peshkabir fields with a 75 percent interest; partner Genel Energy plc holds the remaining 25 percent.

The Company will publish its Corporate Social Responsibility Report, which covers greenhouse gas emissions developments and strategies, next week.

(Source: DNO)

The post DNO Starts Gas Capture in Kurdistan first appeared on Iraq Business News.

DNO “Steps Up Activity”

DNO ASA, the Norwegian oil and gas operator, today reported stepped up investments across its portfolio on the back of higher production and significantly improved liquidity outlook as the Company recovers from the oil market turmoil that upended the second quarter of 2020.

Operated production in July at the Company's flagship Tawke license in the Kurdistan region of Iraq is up 15,000 barrels of oil per day (bopd) month-on-month to 115,000 bopd following a well intervention campaign fast tracked in June with the stabilization of oil prices and improved export payment terms.

In the North Sea segment, DNO projects receipt of USD 215 million in tax refunds in the second half of the year, including USD 70 million from the recently announced temporary changes to petroleum taxation in Norway.

"The worst of the coronavirus pandemic hit to our business is behind us and DNO is back identifying and capturing opportunities," said Bijan Mossavar-Rahmani, DNO's Executive Chairman. "Still, we are prepared to act quickly, as we did in March, if a strong second wave comes," he added.

Second quarter Company Working Interest (CWI) production stood at 89,700 barrels of oil equivalent per day (boepd) of which Kurdistan contributed 71,900 bopd and the North Sea 17,800 boepd.

Gross operated Tawke license production averaged 102,000 bopd, including 58,100 bopd from the Tawke field and 43,900 bopd from the Peshkabir field, together down 11 percent from the first quarter as development activity dropped off to preserve cash at a time of historically low and uncertain oil prices.

Second quarter revenues slid to USD 72 million and operating losses climbed to USD 81 million, both driven by weak commodity prices across the portfolio and lower cargo liftings of produced oil in the North Sea.

At the Baeshiqa license in Kurdistan, DNO continued drilling the third exploration well on a second structure (Zartik) some 15 kilometers southeast of the Baeshiqa-2 discovery well. The rig has been released and testing will commence in August in Lower Jurassic and Upper Triassic zones intersected by the well and expected to last three months. Evaluation of the Baeshiqa-2 results is ongoing to determine commerciality.

During the first half of 2020 DNO received a total of USD 224 million in payments from the Kurdistan Regional Government. In addition, the Company received a USD 23 million June entitlement payment after the end of the reporting period. Discussions are ongoing to reach an agreement on acceptable terms and timing of payment of arrears totaling USD 240 million due to DNO for the November 2019-February 2020 entitlements and November 2019-June 2020 override payments.

Notwithstanding the interruption of these payments and DNO's repayment of the remaining USD 138.5 million of the DNO01 bond at maturity on 18 June 2020, the Company exited the first half of 2020 with a strong cash balance of USD 427 million. Net debt at the end of the second quarter stood at USD 537 million, down from USD 559 million at the end of the first quarter.

Last month, DNO commissioned the Peshkabir-to-Tawke gas reinjection project, the first enhanced oil recovery project in Kurdistan, to unlock additional oil volumes at Tawke while significantly reducing gas flaring and CO2 discharges at Peshkabir.

Prompted by the tax changes in Norway, the Company is working with partners to accelerate infill drilling at the Ula, Tambar and Brage producing fields, revisit development options for the Brasse field and actively evaluate the Iris/Hades, Fogelberg and Trym South discoveries.

DNO will remain an active explorer in the North Sea, targeting 4-6 wildcat wells a year.

(Source: DNO)

DNO Guides 2020 Production and Spend

By John Lee.

DNO ASA, the Norwegian oil and gas operator, today provided production and spend guidance for the balance of the year ahead of its Annual General Meeting on Wednesday.

The Company reported that it has implemented the target 35 percent reductions across all spend categories to shrink its 2020 budget by USD 350 million to USD 640 million in response to turbulence and uncertainty in global oil and financial markets triggered by the coronavirus pandemic.

While strengthening its balance sheet, cutbacks in spend will throttle back 2020 Company Working Interest (CWI) production to a projected 88,000 barrels of oil equivalent per day (boepd), of which the Kurdistan region of Iraq will contribute 71,000 barrels of oil per day (bopd) and the North Sea 17,000 boepd. DNO's CWI production averaged 104,800 boepd last year.

In Kurdistan, DNO has reduced the number of rigs deployed in drilling, testing and workovers from five in 2019 and early 2020 to two; these two rigs are believed to be the only ones currently active in Kurdistan, down from an overall count approaching 20 last summer.

Of the two active rigs, one is drilling the Zartik-1 exploration well on the DNO-operated Baeshiqa license and the other is a Tawke license workover rig that will shortly be moved for scheduled maintenance. However, two third-party rigs have been warm stacked at the Tawke and Peshkabir fields and can quickly be mobilized if oil prices climb and export payments are regularized.

"Our cost cutbacks have been thoughtful and deliberate as we moved at warp speed to preserve cash and our balance sheet," said Bijan Mossavar-Rahmani, DNO's Executive Chairman. "The resulting reductions in oil production especially in Kurdistan are reversible with a restart of drilling," he added. "We have not lost reserves but simply parked a portion until the market recovers. And it will."

Gross production at the DNO-operated Tawke license in the Kurdistan region of Iraq containing the Tawke and Peshkabir fields, absent drilling of new infill wells to arrest natural field decline, is expected to average 100,000 bopd in 2020. This reflects a drop from 115,210 bopd in Q1 2020 to 100,000 bopd in Q2 2020 and 90,000 bopd over the balance of the year. The Tawke license exit rate at yearend 2020 is projected at 85,000 bopd absent new wells. Production continues to be split 55-45 between the Tawke and Peshkabir fields.

On a CWI basis, DNO's production in Kurdistan in the second half of the year is projected to average 65,000 bopd (81,220 bopd in Q1 2020 and an estimated 70,000 bopd in Q2 2020). CWI in North Sea operations will contribute another 17,000 boepd in the second half of 2020 (18,640 boepd in Q1 2020 and an estimated 17,000 boepd in Q2 2020).

Budget cuts and the newly announced Norwegian production caps are not expected to make a material change to DNO's 2020 North Sea projections; the majority of the Company's fields subject to the restrictions are not fully utilizing their previous higher production permits.

DNO ASA 2020 Projected Spend
Q1 2020 Q2 2020 Q3+Q4 2020 2020 2019
Actual Projected Projected Projected Actual
USD million USD million USD million USD million USD million
Exploration expenditures 34 36 65 135 187
Capital expenditures 78 37 40 155 339
Operating expenditures 59 49 92 200 237
Abandonment expenditures 17 7 7 31 23
Operational spend 187 129 204 520 786
Other 40 34 46 120 203
TOTAL 227 163 250 640 989

Note: Figures above are pre-tax (i.e., before exploration tax refund in Norway). The category
"Other" includes general and administrative expenditures (G&A), net interest payments and

(Source: DNO)

DNO Completes Baeshiqa Testing, Prepares to Spud Next Well

DNO ASA, the Norwegian oil and gas operator, has announced completion of testing and appraisal of the Baeshiqa-2 exploration well in the Kurdistan Region of Iraq and the imminent spud of an exploration well on a separate prospect, Zartik, located 15 kilometers southeast on the same license.

The testing has proven oil and gas in three separate Triassic aged reservoirs. Evaluation of the test results will determine next steps towards further appraisal and assessment of commerciality.

As previously reported, in November 2019 DNO issued a notice of discovery to the government that hydrocarbons had been flowed to surface from the upper part of Triassic Kurra Chine B reservoir during first phase of testing. The reservoir produced between 900 and 3,500 barrels of oil per day (bopd) with specific gravity ranging between 40o and 52o API and sour gas between 8.5 to 15 million standard cubic feet per day (MMcfd).

Following a workover and acid stimulation, testing resumed in March 2020 in three other separate Triassic aged reservoirs with each flowing variable rates of light oil and sour gas, too.

During the second phase of testing, the lower Kurra Chine B reservoir produced between 600 to 3,500 bopd with specific gravity ranging between 47o and 55o API and sour gas between 4 to18 MMcfd. The test demonstrated that the upper and lower Kurra Chine B reservoirs are in communication, proving a hydrocarbon-bearing reservoir interval of around 150 meters.

The Kurra Chine A reservoir flowed between 950 to 3,100 bopd of 30o to 34o API and sour gas ranging from 1.8 to 3.6 MMcfd from a hydrocarbon-bearing reservoir interval of 70 meters.

The Kurra Chine C reservoir was the deepest encountered in the well covering only 34 meters of what is expected to be a thicker reservoir of around 200 meters. The drilled interval has been exposed to significant fracture damage due to the pumping of lost circulation material. The reservoir produced between 200 to 1,200 bopd of 52o API gravity and sour gas between 3.8 to 6 MMcfd.

Shallower Jurassic aged reservoirs were encountered during drilling and tested. However, the tested zones were not acid stimulated, and the results are inconclusive. The well was spud in February 2019 and drilled to a total depth of 3,204 meters (2,549 meters TVDSS), encountering almost a kilometer of fractured carbonates with poor to good oil shows. Baeshiqa-2 well was drilled safely, below budget and with all exploration objectives achieved.

The Zartik-1 well is anticipated to spud on 15 May 2020. Site construction was completed ten days ago on time and below budget.

DNO acquired a 32 percent interest and operatorship of the Baeshiqa license in 2017. Partners include ExxonMobil with 32 percent, Turkish Energy Company (TEC) with 16 percent and the Kurdistan Regional Government with 20 percent.

(Source: DNO)

DNO reports Record Revenues and Production

DNO ASA, the Norwegian oil and gas operator, today reported interim 2019 revenues of USD 971 million, the highest in the Company’s 48-year history, on the back of acquisitions and a record drilling campaign driving a 28 percent year-on-year increase in Company Working Interest (CWI) production to 104,800 barrels of oil equivalent per day (boepd). Net profit last year stood at USD 74 million.

The Company exited 2019 with a cash balance of USD 486 million and USD 145 million in marketable securities.  The cash balance excludes two delayed export payments totaling USD 107 million net to DNO received from the Kurdistan Regional Government in 2020.

In January 2020, DNO completed a buyback program of up to 10 percent of own shares, having acquired 108,381,415 shares at a weighted average price of NOK 10.61 per share (for a total cost of USD 129 million). The Board of Directors has called for an Extraordinary General Meeting later this month to seek shareholder approval to cancel the treasury shares.

The Board of Directors also plans to approve distribution of the next semi-annual dividend of NOK 0.20 per share in March 2020, following which DNO will have returned USD 200 million to shareholders since August 2018.

Last year, the Company delivered its largest ever annual drilling program with 36 wells drilled or spudded across its portfolio, of which 24 were development/infill and 12 exploration/appraisal wells. Planned operational spend (capital and exploration expenditures plus lifting costs) will remain high in 2020 at USD 650 million.

In Kurdistan, gross production from the two fields in the DNO-operated Tawke license climbed to 124,000 barrels of oil per day (bopd) in 2019 (87,400 bopd CWI), up from 113,100 bopd in 2018 (79,700 bopd CWI). Average production of 122,800 bopd in the fourth quarter of 2019 was up 3,000 bopd from the previous quarter. In November 2019, the Company reported a discovery in its operated Baeshiqa license, with the well now undergoing a workover prior to resumption of acid stimulation and testing of remaining reservoirs to assess commerciality.

Through acquisition of Faroe Petroleum plc, the Company added North Sea production of 17,400 boepd in 2019. Average production of 19,000 boepd in the fourth quarter of 2019 was up 4,100 boepd from the previous quarter. The Company was awarded 10 licenses in Norway’s Awards in Predefined Areas (APA) 2019 licensing round adding to the 87 licenses already held in Norway and 15 across the United Kingdom, the Netherlands and Ireland. Of these licenses, 28 are on production (13 fields) and the balance in various stages of evaluation, exploration and development.

The Peshkabir-to-Tawke gas gathering and reinjection project designed to increase oil recovery rates at Tawke while eliminating flaring at Peshkabir will be completed in spring 2020. Once completed, CO2 emissions from DNO’s operated Kurdistan fields are expected to drop to around 7 kilograms per barrel, compared to an industry average of about 9 kilograms per barrel in Norway and about 18 kilograms per barrel globally.

(Source: DNO)

DNO Production Increases

DNO ASA, the Norwegian oil and gas operator, today announced a 29 percent year-on-year increase in its net Company Working Interest (CWI) production in 2019 to 104,800 barrels of oil equivalent per day (boepd) on the back of acquisitions and a record drilling campaign.

In the Kurdistan region of Iraq, production from the two fields in the Tawke license climbed from 113,100 barrels of oil per day (bopd) in 2018 (79,700 bopd CWI) to 124,000 bopd in 2019 (87,400 bopd CWI). Production of 122,800 bopd in the fourth quarter of 2019 was up 3,000 bopd from the previous quarter. The Company is operator of the Tawke license with a 75 percent interest.

At Tawke, 2019 production stood at 68,800 bopd, with wells drilled last year contributing 13 percent of field production at yearend. At Peshkabir, 2019 production stood at 55,200 bopd, with wells drilled in 2019 contributing 40 percent of field production at yearend.

Even though Tawke is now a mature field, we are continuously finding ways to slow its decline while teasing additional production from the newer Peshkabir field, all the while probing for other opportunities in Kurdistan,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani.

Elsewhere in Kurdistan, DNO reported a discovery in the Baeshiqa-2 exploration well last November after flowing variable rates of light oil and sour gas to surface from the upper part of Triassic Kurra Chine B reservoir following acid stimulation. Further testing of this and several other Jurassic and Triassic zones will determine the next steps towards appraisal and assessment of commerciality. DNO holds a 32 percent interest and operatorship of the Baeshiqa license.

Meanwhile, the Peshkabir-to-Tawke gas injection project designed to increase oil recovery rates at Tawke while eliminating flaring at Peshkabir will be completed in March 2020. Once completed, CO2 emissions from DNO’s operated fields will average 7 kilograms per barrel of oil equivalent (boe) produced, compared to an average of 9 kilograms per boe on the Norwegian Continental Shelf and a global average of 18 kilograms per boe.

DNO retained a strong cash balance of USD 480 million at yearend 2019 plus USD 144 million in marketable securities. Following a delay in export payments last month from the Kurdistan Regional Government to oil operators, DNO has since yearend received payment for its August oil sales totaling USD 52 million net to the Company.

(Source: DNO)

DNO announces Oil and Gas Discovery

DNO ASA, the Norwegian oil and gas operator, today announced issuance of a notice of discovery to the Kurdistan Regional Government of Iraq on the Baeshiqa-2 exploration well, in accordance with the requirements of the Production Sharing Contract, after flowing hydrocarbons to surface from the upper part of Triassic Kurra Chine B reservoir.

Following acid stimulation, the zone flowed variable rates of light oil and sour gas. Further testing of this and other Jurassic and Triassic zones is ongoing and will determine the next steps towards appraisal and assessment of commerciality.

The Baeshiqa-2 well was spud in February 2019 and drilled to a total depth of 3,204 meters (2,549 meters TVDSS).

DNO acquired a 32 percent interest and operatorship of the Baeshiqa license in 2017. Partners include ExxonMobil with 32 percent, Turkish Energy Company (TEC) with 16 percent and the Kurdistan Regional Government (KRG) with 20 percent.

(Source: DNO)

DNO announces Oil and Gas Discovery

DNO ASA, the Norwegian oil and gas operator, today announced issuance of a notice of discovery to the Kurdistan Regional Government of Iraq on the Baeshiqa-2 exploration well, in accordance with the requirements of the Production Sharing Contract, after flowing hydrocarbons to surface from the upper part of Triassic Kurra Chine B reservoir.

Following acid stimulation, the zone flowed variable rates of light oil and sour gas. Further testing of this and other Jurassic and Triassic zones is ongoing and will determine the next steps towards appraisal and assessment of commerciality.

The Baeshiqa-2 well was spud in February 2019 and drilled to a total depth of 3,204 meters (2,549 meters TVDSS).

DNO acquired a 32 percent interest and operatorship of the Baeshiqa license in 2017. Partners include ExxonMobil with 32 percent, Turkish Energy Company (TEC) with 16 percent and the Kurdistan Regional Government (KRG) with 20 percent.

(Source: DNO)

DNO Shares Down 7.5%

By John Lee.

Shares in DNO ASA, the Norwegian oil and gas operator, were trading down 7.5 percent on Thursday morning, after the company reported a net loss for the third quarter.

The company reported what it described as strong third quarter revenues of USD 227 million, up 33 percent from a year earlier, on the back of solid production averaging 99,300 barrels of oil equivalent per day (boepd) on a Company Working Interest (CWI) basis, up 22 percent year on year.

In its statement, the company added:

Notwithstanding strong underlying performance, 2019 third quarter results were impacted by non-recurring items as well as lower oil prices and higher exploration expenses, resulting in a net loss of USD 96 million.

In the Kurdistan region of Iraq, third quarter production at the Tawke license containing the DNO-operated Tawke and Peshkabir fields (shared 75-25 with partner Genel Energy plc) averaged 119,800 barrels of oil per day (bopd). The Company expects to exit the year with Tawke license production averaging 120,000 bopd and to maintain this rate into 2020. The Company recently reached a significant milestone of 300 million barrels of cumulative oil production from the Tawke and Peshkabir fields.

Activity remains high as the Company continues to deliver its largest drilling campaign in its 48-year history with some 36 wells in 2019, of which 22 are development/infill wells and 14 exploration/appraisal wells. DNO projects full-year operational spend of USD 620 million (post-tax), of which USD 454 million was spent through the end of the third quarter, including USD 244 million in Kurdistan and USD 210 million (post-tax) in the North Sea.

Financial results were impacted by impairment charges of USD 138 million, including USD 89 million for technical goodwill on the Brasse discovery (Norway) and USD 33 million for decommissioning of the Schooner and Ketch fields (United Kingdom).

With USD 228 million in cash from operations during the third quarter, the Company resumed its share buyback program and acquired 23 million shares at a cost of USD 35 million, lifting its overall stake to 58 million treasury shares, representing 5.35 percent of the total outstanding shares at end quarter. DNO also bought back an additional USD 17 million of FAPE01 bonds during the quarter.

DNO maintained its previously approved dividend distribution program with another semi-annual payment of NOK 0.20 per share to be made on 4 November 2019.

“We continue to deliver across a range of operating and financial targets even as we paused this quarter for early spring cleaning of our balance sheet,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani. “Given global headwinds, we are budgeting at the low end of the industry’s Brent price range of USD 60-70 per barrel,” he added.

CWI production during the third quarter included 84,400 bopd from Kurdistan and 14,900 boepd from North Sea assets acquired earlier this year.

In 2019, nine wells were spud in Kurdistan through the end of the third quarter, with an additional ten wells planned for the fourth quarter. In the North Sea, 13 wells were spud through the end of the quarter, with an additional four wells planned for the fourth quarter, including DNO’s first operated exploration well, Canela, in the North Sea since 2007.

DNO exited the third quarter with a cash balance of USD 624 million in addition to USD 110 million in treasury shares and marketable securities.

(Source: DNO)