KRG files Civil suit against Baghdad Minister of Oil

By John Lee.

The Minister of Natural Resources of the Kurdistan Regional Government (KRG) has filed a civil suit against the Baghdad Minister of Oil, accusing him of sending emails and letters with the intention of intimidating international oil companies (IOCs) and interfering with the contractual rights of the IOCs and the KRG.

The KRG has also filed a criminal complaint against a Director General in the Baghdad Ministry of Oil for allegedly abusing his power and position by intimidating and harassing the IOCs working in the Kurdistan Region of Iraq.

This follows a series of summonses issued to the IOCs by a court in Baghdad, relating to their operations in Kurdistan Region.

Full statement from the KRG:

On 19 May 2022, a commercial court sitting in Al Karkh, Baghdad, acted at the request of the Minister of Oil in Baghdad and purported to issue summonses to international oil companies (IOCs) operating within the Kurdistan Region of Iraq. Those IOCs - which include Addax, DNO, Genel, Gulf Keystone, HKN, Shamaran, and WesternZagros - operate in the Kurdistan Region in accordance with the Kurdistan Region's Oil and Gas Law (No. 22 of 2007), which was issued by the Kurdistan Regional Government in accordance with its powers under the Constitution of Iraq.

These court summonses are the latest in a series of illegal actions taken by the Minister of Oil and his staff under the current caretaker government in Baghdad. These illegal actions are apparently based upon a ruling by a court in Baghdad that calls itself the "Federal Supreme Court". This so-called "Federal Supreme Court" issued a politically motivated decision on 15 February 2022, which purported to declare the 2007 Oil and Gas Law void.

No court in Baghdad has the authority to make such a declaration. On 28 February 2022, the President of the Kurdistan Region, together with the presidents of the legislative, executive, and judicial branches of the Kurdistan Regional Government, issued a statement rejecting the 15 February decision. On 4 June 2022, the Judicial Council, the highest judicial institution in the Kurdistan Region, issued a statement upholding the validity of the 2007 Oil and Gas Law. The Council noted that Article 92(2) of the Constitution of Iraq requires that the Iraqi Council of Representatives pass a law to establish an Iraqi Federal Supreme Court. No such law has ever been enacted. Iraq, therefore, does not have a constitutionally established Federal Supreme Court. The court that issued the 15 February 2022 opinion purporting to invalidate the 2007 Oil and Gas Law has no constitutional authority to do so. On the contrary, the issuance of the 2007 Oil and Gas Law was entirely authorised under the Constitution of Iraq. As such, legally, the Oil and Gas Law remains in full force.

On 2 June 2022, the Kurdistan Regional Government filed a criminal complaint against a Director General in the Baghdad Ministry of Oil for abusing his power and position by intimidating and harassing the IOCs working in the Kurdistan Region of Iraq. In the view of the Kurdistan Regional Government, emails and letters sent to the IOCs undertaking work in the Kurdistan Region by that Director General were sent with the intention of intimidating the IOCs and interfering with the contractual rights of the IOCs and the Kurdistan Regional Government. The contracts entered into between the IOCs and the Kurdistan Regional Government are entirely in accordance with the 2007 Oil and Gas Law.

On 5 June 2022, the Erbil Court of Investigation ruled that the lawsuits filed in the Al Karkh commercial court against the IOCs must be brought to the Erbil Court to be examined as evidence in this criminal complaint. The Erbil Court also ruled that any lawsuits in the Al Karkh court must be delayed for this purpose, and that named criminal defendants, including the Baghdad Minister of Oil, must attend the criminal hearing in Erbil on 22 June 2022. Iraqi law (Article 26 of Criminal Procedural Law No. 23 of the year 1979) requires that civil proceedings cannot take place while a related criminal investigation is underway. In addition, Article 38 of Civil Procedural Law No. 83 of the year 1969 states that any civil proceeding against the IOCs must take place in the Kurdistan Region, where the IOCs are registered and operate.

Furthermore, on 5 June 2022 the Minister of Natural Resources of the Kurdistan Regional Government filed a civil suit against the Baghdad Minister of Oil. In the view of the Kurdistan Regional Government, the Minister is liable under applicable civil law provisions for sending emails and letters with the intention of intimidating the IOCs and interfering with the contractual rights of the IOCs and the Kurdistan Regional Government.

(Source: KRG Ministry of Natural Resources)

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DNO Profits Surge on Back of High Oil and Gas Prices

DNO ASA, the Norwegian oil and gas operator, today reported an 84 percent jump in operating profit in the first quarter of 2022 to USD 236 million on the back of high oil and gas prices and solid production performance. Net debt dropped USD 126 million quarter-on-quarter to USD 27 million.

"Oil and gas are back," said DNO's Executive Chairman Bijan Mossavar-Rahmani, "and of course, DNO never left." Operations have continued uninterrupted across the portfolio, notwithstanding the challenges faced by the industry in the past two years. "We've remained true to our commitment to develop oil and gas in a cost-effective and responsible way," he added.

In addition to raising investments in its core business with the additional financial firepower, the Company will now step up to pay down debt and return cash to shareholders, according to Mr. Mossavar-Rahmani.

Yesterday, DNO announced a USD 200 million partial redemption of the DNO03 bond. In addition, USD 23.8 million of the bond previously acquired by the Company will be cancelled. At the late May AGM, the Company will ask shareholders to authorize an increase in annual dividend payments from NOK 0.40 to NOK 1 per share and retain the flexibility to resume its buyback program.

As previously reported, gross production at the Company's flagship Tawke license in Kurdistan averaged 106,500 barrels of oil per day (bopd) during the quarter, of which the Peshkabir field contributed 64,500 bopd and the Tawke field 42,000 bopd. Of the total, 79,800 bopd were net to DNO's interest. North Sea net production averaged 12,700 barrels of oil equivalent per day (boepd), bringing the Company's total quarterly net production to 92,500 boepd.

In Kurdistan, DNO has ramped up drilling activities to maintain Tawke license gross production of 105,000 bopd on average in 2022. The first phase field development of the Baeshiqa license has been fast-tracked, with a third well, Zartik-2, currently drilling ahead at 2,300 meters.

In the North Sea, the Company projects net production in 2022 to remain 13,000 boepd on average. DNO's active 2022 exploration program comprising seven wells was kicked off with the Kveikje discovery well (25-50 million boe gross resources and a DNO participating interest of 29 percent) which has proven up a new play concept in an area offshore Norway in which DNO has a significant acreage position. Six additional exploration wells will be drilled this year.

An earnings call with DNO CFO Haakon Sandborg will be held today at 11:00 (CET). A link to the call is available on the Company's homepage www.dno.no.

Key figures

Q1 2022 Q4 2021 Full Year 2021
Gross operated production (boepd) 106,465 107,472 108,713
Net production (boepd) 92,548 94,175 94,477
Revenues (USD million) 339 396 1,004
Operating profit/-loss (USD million) 236 128 321
Net profit/-loss (USD million) 140 65 204
Free cash flow (USD million) 152 227 362
Net debt (USD million) 27 153 153

(Source: DNO)

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DNO releases latest Production Data

By John Lee.

DNO has issued an update on production and sales volumes for the quarter as well as other key financial information.

Volumes (boepd):

Gross operated production Q1 2022 Q4 2021 Q1 2021
  Kurdistan 106,465 107,472 111,985
  North Sea - - -
Net entitlement production Q1 2022 Q4 2021 Q1 2021
  Kurdistan 26,670 29,367 28,593
  North Sea 12,700 13,571 15,173
Sales Q1 2022 Q4 2021 Q1 2021
  Kurdistan 26,670 29,367 28,593
  North Sea 10,689 23,289 10,953

Selected cash flow items

During the quarter, DNO received USD 206.6 million net from the Kurdistan Regional Government, of which USD 160.7 million represents the entitlement share of October, November and December 2021 Tawke license crude oil deliveries.

Of the balance, USD 13.8 million represents override payments equivalent to three percent of gross October and November 2021 Tawke license revenues and USD 32.1 million represents payments towards arrears built up from non-payment of certain invoices in 2019 and 2020.

DNO paid one tax installment of USD 12.6 million in Norway as tax losses for 2021 ended lower than estimated tax losses that were the basis for tax refunds received during H2 2021.

The Company paid a dividend of NOK 0.20 per share, totaling USD 22.2 million.

(Source: DNO)

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DNO Updates Oil Reserves

By John Lee.

DNO ASA, the Norwegian oil and gas operator, today announced it exited 2021 with 321 million barrels of oil equivalent (MMboe) of net proven and probable (2P) reserves, notwithstanding production of 34 MMboe during the year. The Company's 2P reserves life stood at 9.3 years. Combined with contingent (2C) resources of 189 MMboe, DNO's reserves and resources life stood at 14.8 years.

Of the total, the Company's Kurdistan portfolio accounted for 267 million barrels of oil (MMbbls) of net 2P reserves compared to 295 MMbbls in 2020, and 71 MMbbls of net 2C resources compared to 27 MMbbls at yearend 2020.

Across its North Sea portfolio at yearend 2021, DNO's net 2P reserves stood at 54 MMboe compared to 64 MMboe a year earlier. 2C resources totaled 113 MMboe compared to 120 MMboe at yearend 2020.

Effective from 2021, the Company reports its net production, reserves and resources based on the participation interest in all of its licenses. Prior to 2021 and for the licenses governed by Production Sharing Contracts, the Company reported its net figures after royalty and included DNO's additional share of cost oil covering its advances towards the government carried interest (if any) as well as volumes attributed to the three percent of gross Tawke license production under the August 2017 Receivables Settlement Agreement. The main reason for the change is to improve comparability with peer companies and to show the Company's share of production before the government take.

International petroleum consultants DeGolyer and MacNaughton carried out an independent assessment of the Tawke and Baeshiqa licenses in Kurdistan. Gaffney, Cline & Associates carried out an independent assessment of DNO's licenses in Norway and the United Kingdom.

Full report here.

(Source: DNO)

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DNO reports Record Revenues

DNO ASA, the Norwegian oil and gas operator, today reported record revenues exceeding USD 1 billion in 2021, up 63 percent from a year earlier, on the back of high oil and gas prices and solid production performance. Annual operating profit climbed to USD 321 million, reversing operating loss of USD 315 million in 2020.

Strong 2021 free cash flow of USD 362 million drove a 68 percent reduction in net debt to USD 153 million at yearend.

"Notwithstanding the continued impact of the pandemic, DNO became a billion-dollar company last year on the fiftieth anniversary of its founding," said DNO's Executive Chairman Bijan Mossavar-Rahmani. "We are as committed as ever to explore for and produce oil and gas in a commercially attractive but also socially responsible and environmentally sensitive manner," he said, adding, "This is our business model, this is DNO's DNA."

As previously reported, gross production at the Company's flagship Tawke license in Kurdistan averaged 108,700 barrels of oil per day (bopd) last year, of which the Peshkabir field contributed 61,800 bopd and the Tawke field 46,900 bopd. Of the total, 81,500 bopd were net to DNO's interest. North Sea net production averaged 12,900 barrels of oil equivalent per day (boepd), bringing the Company's total 2021 net production to 94,500 boepd.

In 2022, DNO plans an operational spend of USD 800 million across the portfolio.

In Kurdistan, DNO is ramping up its drilling activities to maintain Tawke license gross production at around 105,000 bopd during the year, as well as a contribution from the operated Baeshiqa license in excess of 4,000 bopd. In December, the first phase field development plan for the license was approved by the Kurdistan Regional Government, clearing the way for a fast-track project to deliver early production from previously drilled but suspended discovery wells. Three additional Baeshiqa development wells will also be drilled this year.

In the North Sea, DNO projects net production in 2022 to remain around 13,000 boepd. The Company will participate in drilling the highly anticipated Edinburgh exploration well in the UK and six additional prospects offshore Norway, aiming to build on last year's successes with the Røver Nord exploration well and the Bergknapp appraisal well.

Also in Norway, the DNO-operated Brasse project as well as the partner-operated Iris-Hades, Gjøk and Orion discovieries target 2022 project sanction, supporting the Company's North Sea growth ambitions.

The Company's net reserves stood at 321 million barrels of oil equivalent (MMboe) of proven and probable reserves (2P) at yearend 2021 with additional contingent resources (2C) of 189 MMboe, according to preliminary numbers.

A videoconference call with executive management will follow today at 10:00 (CET). Please visit www.dno.no to access the call.

Other key figures

Q4 2021 2021 2020
Gross operated production (boepd) 107,472 108,713 110,282
Net production (boepd) 94,175 94,477 100,063
Revenues (USD million) 396 1,004 615
Operating profit/-loss (USD million) 128 321 -314
Net profit/-loss (USD million) 65 204 -286
Free cash flow (USD million) 227 362 150
Net debt (USD million) 153 153 473
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DNO reports Third Quarter 2021 Results

DNO ASA, the Norwegian oil and gas operator, today reported third quarter revenues of USD 253 million, a 38 percent quarter-on-quarter increase driven by higher North Sea sales and strengthening commodity prices.

The Company's operating profit climbed seven percent to USD 65 million, weighed down by non-cash net impairments of USD 40 million primarily related to revised Ula area cost and production profiles in the North Sea.

Cash flow from operating activities totaled USD 163 million in the third quarter. Net debt was reduced by USD 36 million to USD 360 million, the lowest level since 2018.

"Like much of the rest of our resilient industry, we are recovering rapidly from the early ravaging of the oil and gas markets by the runaway pandemic," said DNO's Executive Chairman Bijan Mossavar-Rahmani. "We are back delivering value to our host countries, shareholders and other partners in an efficient and responsible manner," he added.

Gross operated production at the Company's flagship Tawke license in Kurdistan averaged 105,200 barrels of oil per day (bopd) in the third quarter, of which the Peshkabir field contributed 59,900 bopd and the Tawke field 45,300 bopd. Of the total, 78,900 bopd were net to DNO. In the North Sea, net production averaged 13,100 barrels of oil equivalent per day (boepd), bringing the Company's total third quarter net production to 92,000 boepd.

DNO's USD 110 million Peshkabir-Tawke gas project, which was commissioned in mid-2020, has injected eight billion cubic feet of otherwise flared gas through the end of the third quarter, capturing 480,000 tonnes of CO2 equivalent. In September, the Company initiated a USD 25 million second phase of the gas capture project to reinject and retain gas in the Tawke reservoir and avoid flaring. Having already eliminated routine venting of methane in operations in 2019, DNO recently launched a leak detection and repair initiative to measure, monitor and mitigate fugitive methane emissions.

Elsewhere in Kurdistan, commerciality was declared on the DNO-operated Baeshiqa license and plans submitted for a fast-track development.

DNO's active North Sea exploration program notched up a success in the third quarter with appraisal drilling on the 2020 Bergknapp discovery (DNO 30 percent) resulting in a 35 percent upgrade of DNO's recoverable resource estimate. Also during the quarter, DNO made an oil discovery on the Gomez prospect (DNO 65 percent and operator). Due to uncertainty of producibility, no estimate of recoverable volumes has been established pending further analysis. Another third quarter 2021 appraisal well, Black Vulture (DNO 32 percent), was dry. Following the end of the quarter, the Mugnetind exploration well (DNO 30 percent) encountered limited hydrocarbons and is unlikely to be commercial.

The Brasse development (DNO 50 percent and operator) is on track for a 2022 project sanction with DNO recently entering into a strategic framework agreement with Technip FMC covering subsea deliveries (SURF and SPS).

During the third quarter, the Company completed the placement of USD 400 million of new five-year senior unsecured bonds with at a coupon rate of 7.875 percent, lowering DNO's average interest rate on its debt while extending the maturity profile.

A videoconference call with executive management will follow today at 15:00 (CET). Please visit www.dno.no to access the call.

(Source: DNO)

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DNO Completes $400m Bond Placement

DNO ASA, the Norwegian oil and gas operator, has completed the private placement of USD 400 million of new five-year senior unsecured bonds with a coupon rate of 7.875 percent.

The placement met strong investor demand across international markets and was significantly oversubscribed, leading the Company to upsize the new bond issue from USD 300 million to USD 400 million.

Settlement is expected on or about 9 September 2021, subject to customary conditions precedent, and an application will be made for listing of the new bonds on the Oslo Stock Exchange.

Net proceeds will be used towards refinancing of the DNO02 bonds (ISIN: NO0010823347) and general corporate purposes. In connection with the placement, the Company has agreed to buy back USD 154 million in nominal value of the DNO02 bonds with a call notice for the remaining DNO02 bonds and other details to be announced upon settlement of the new bond.

Pareto Securities AS acted as Global Coordinator and Joint Lead Manager together with Danske Bank and SEB as Joint Lead Managers.

(Source: DNO)

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KRG Approves DNO Purchase of Exxon Stake in Baeshiqa

By John Lee.

DNO ASA, the Norwegian oil and gas operator, today announced that the Kurdistan Regional Government has approved the Company's acquisition of ExxonMobil's remaining 32 percent interest in the Baeshiqa license, doubling DNO's stake.

In parallel, commerciality has been declared on the license with plans submitted for fast-track development including early production from previously drilled but suspended wells.

DNO has already demonstrated proof of concept of producing these wells through temporary test facilities, having trucked some 15,000 barrels of 40 degree API and 22 degree API oil for export in 2019 and 2020 from the Baeshiqa-2 and Zartik-1 discovery wells.

Following the transaction, the joint venture comprises DNO as operator with a 64 percent (80 percent paying) interest, the Turkish Energy Company (TEC) with a 16 percent (20 percent paying) interest and the Kurdistan Regional Government with a 20 percent carried interest.

Bijan Mossavar-Rahmani, DNO's Executive Chairman, said:

"This acquisition and plans for fast-track development underscore our belief in the potential of the Baeshiqa license and more broadly our long-term commitment to Kurdistan.

"Once we get the green light from the authorities to proceed, first production will be a matter of months rather than years."

DNO's 3,204 meters discovery well, Baeshiqa-2, tested hydrocarbons to surface from multiple stacked Jurassic and Triassic zones. Two zones flowed naturally at rates averaging over 3,000 barrels of oil per day (bopd) of light gravity oil each and another averaged over 1,000 bopd also of light gravity oil. DNO drilled Zartik-1, the second discovery well, 16 kilometers to the southeast of Baeshiqa-2, to a depth of 3,021 meters. This well tested hydrocarbons to surface from several Jurassic zones, with one zone flowing naturally at rates averaging 2,000 bopd of medium gravity oil.

DNO acquired its first 32 percent interest and assumed operatorship of the Baeshiqa license from ExxonMobil in 2018. As consideration for both acquisitions DNO has covered ExxonMobil's share of exploration costs since January 2019 and the seller will receive payment of USD 15 million.

In addition to the 327-square kilometer Baeshiqa license, DNO operates the Tawke license containing the Tawke and Peshkabir fields in Kurdistan. Combined production from these fields averaged 110,300 bopd in the second quarter of 2021.

(Source: DNO)

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KRG Bureaucracy Delays DNO Investment

DNO ASA, the Norwegian oil and gas operator, has reported operating profit of USD 61 million in the quarter ending 30 June 2021, its second consecutive profitable quarter since the onset of the COVID pandemic. Revenues totaled USD 184 million, up USD 14 million from the previous quarter, as higher oil and gas prices more than compensated for lower North Sea volumes sold.

Gross operated production at the Company's flagship Tawke license in Kurdistan averaged 110,300 barrels of oil per day (bopd) in the second quarter, of which the Peshkabir field contributed 63,000 bopd and the Tawke field 47,300 bopd. Of the total, 82,700 bopd were net to DNO's interest during the quarter.

DNO's North Sea net production dropped to 9,900 barrels of oil equivalent per day (boepd) in the second quarter, primarily due to planned summer maintenance shutdowns at Marulk and Alve and infill drilling at Ula and Tambar. The Company expects the North Sea contribution to average 13,000 boepd for the year.

In the wake of an ongoing reorganization of Kurdistan's Ministry of Natural Resources, the Company has experienced extended delays to the final approval of its 2021 Tawke field work program and budget as well as to the approvals necessary to fast track early production from the Baeshiqa license. The delays are expected to defer USD 50 million in 2021 DNO net spending in Kurdistan which could have generated up to 15,000 bopd gross production across DNO's three operated fields (Tawke, Peshkabir and Baeshiqa) going into 2022.

With no new wells coming on production at the Tawke field in more than a year, the natural production decline has been partially offset by pressure support from reinjection of over 20 million cubic feet of gas per day from the Peshkabir field in addition to workovers and interventions of existing wells.

"We are eager to invest and produce more oil in Kurdistan," said DNO's executive chairman Bijan Mossavar-Rahmani. "In nearly two decades of operations in Kurdistan, DNO has confronted and overcome multiple challenges and we are well positioned to continue to do so," he added.

In the North Sea, DNO maintains an active drilling program in 2021, including two appraisal wells on previous discoveries and three exploration wells, the first of which has been drilled leading to a discovery. In addition, the Company plans 10 development wells this year.

Recently, the DNO-operated Brasse project selected the Equinor-operated Oseberg facilities as the preferred development host. With total field reserves of 35 million boe and a relatively modest topside construction scope on Oseberg, Brasse has robust project economics based on a 2022 project sanction target.

With an operational cash flow of USD 160 million, an increase of 135 percent from the first quarter, the Company reduced its bond debt to USD 700 million through a USD 100 million partial bond redemption. DNO exited the quarter with a net interest-bearing debt of USD 396 million, the lowest level since yearend 2018.

DNO received USD 159 million in the second quarter from Kurdistan, up from USD 75 million in the first quarter of 2021. Additional payments this week bring the total 2021 receipts from Kurdistan to USD 290 million year-to-date. The arrears built up as a result of Kurdistan's withholding of payment of certain invoices to DNO in 2019 and 2020 total USD 214 million, excluding any interest.

(Source: DNO)

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