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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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DNO announces Ramp-Up of Oil Production in Iraq

DNO ASA, the Norwegian oil and gas operator, today reported receipt of USD 54.0 million net to the Company from the Kurdistan Regional Government (KRG), of which USD 35.2 million represents DNO’s entitlement share of February 2021 crude oil deliveries to the export market from the Tawke license in Kurdistan.

Of the balance, USD 4.6 million is an override payment equivalent to three percent of gross February 2021 Tawke license revenues under the August 2017 receivables settlement agreement and USD 14.2 million is a payment towards the Company’s arrears relating to withheld payment of Tawke license 2019 and 2020 entitlement and override invoices.

Following receipt of the latest arrears payment, the outstanding balance has dropped from USD 259.0 million at the end of 2020 to USD 238.6 million.

DNO operates and has a 75 percent stake in the Tawke license, which contains the Tawke and Peshkabir fields, with partner Genel Energy plc holding the balance.

With resumption of payments, the partners have stepped up drilling of new wells at Peshkabir and workovers of existing wells at Tawke in 2021, raising gross operated license production from an average of 110,300 barrels of oil per day (bopd) in 2020 to 110,900 bopd in January, 112,000 bopd in February, 113,100 bopd in March and 115,500 bopd month-to-date in April.

(Source: DNO)

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DNO Adds New Oil Reserves

DNO ASA, the Norwegian oil and gas operator, has announced it replaced 87 percent of 2020 production through additions to its proven (1P) reserves notwithstanding reduced activity in the wake of low oil prices.

In the Kurdistan region of Iraq, the Company replaced 111 percent of last year’s production through additions to 1P reserves.

Yearend 2020 Company Working Interest (CWI) 1P reserves totaled 201 million barrels of oil equivalent (MMboe) compared to 206 MMboe at yearend 2019, after adjusting for 35 MMboe of production and 30 MMboe of upward technical revisions.

DNO exited the year with 332 MMboe of CWI proven and probable (2P) reserves and 507 MMboe of CWI proven, probable and possible (3P) reserves. DNO’s CWI contingent (2C) resources stood at 152 MMboe.

At yearend 2020, DNO’s 1P reserves life stood at 5.8 years, its 2P reserves life at 9.6 years and its 3P reserves life at 14.6 years; all were up slightly from 2019 levels.

On a gross basis, yearend 1P reserves at the Tawke license in Kurdistan containing the Tawke and Peshkabir fields climbed to 234 million barrels of oil (MMbbls) from 228 MMbbls a year earlier. Tawke license 2P reserves stood at 394 MMbbls at yearend 2020 (400 MMbbls in 2019) and 3P reserves at 605 MMbbls (641 MMbbls in 2019).

Across its North Sea portfolio at yearend 2020, on a CWI basis, DNO’s 1P reserves stood at 41 MMboe, 2P reserves at 64 MMboe and 3P reserves at 96 MMboe. The Company’s North Sea 2C resources totaled 120 MMboe.

At yearend 2020 and on a gross basis, at the Baeshiqa license in Kurdistan containing two large structures with multiple independent stacked target reservoirs, 2C resources stood at 43 MMbbls, following successful drilling and testing of the exploration Baeshiqa-2 and Zartik-1 wells. No reserves were recorded at the Baeshiqa license at yearend 2020 pending conclusion of the ongoing appraisal activities to determine commerciality.

“All things considered, from a reserves replacement perspective DNO had a stellar year in 2020 notwithstanding the sharp cuts in our spend and the challenges of keeping operations going in the face of Covid restrictions in movement of our people, contractors and supplies,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman.

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

(Source: DNO)

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DNO Buys Exxon’s Stake in Iraqi Oilfield

DNO ASA, the Norwegian oil and gas operator, has announced the acquisition of ExxonMobil‘s 32 percent interest in the Baeshiqa license in the Kurdistan region of Iraq, doubling DNO’s operated stake to 64 percent (80 percent paying interest), pending government approval.

The Company plans to continue an exploration and appraisal program on the license while fast tracking early production from existing wells in 2021.

DNO has already demonstrated proof of concept of producing through temporary test facilities, having delivered 15,000 barrels of 40o API oil and 22o API oil for export from the Baeshiqa-2 and Zartik-1 wells, respectively.

In November 2019 DNO issued a notice of discovery on the Baeshiqa license after flowing hydrocarbons from several Jurassic and Triassic zones to surface in the 3,204 meters (2,549 meters TVDSS) Baeshiqa-2 exploration well. Following acid stimulation, the zone flowed variable rates of light oil and sour gas.

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. Subsequent analyses on surface samples collected during testing confirm that the Triassic reservoirs contain saturated oil with a gas cap.

An exploration well was completed in 2020 on a second structure (Zartik) some 15 kilometers southeast of the Baeshiqa-2 discovery well. The 3,021 meters (2,322 meters TVDSS) well tested hydrocarbons to surface from several Jurassic zones, with the uppermost zone flowing naturally at rates averaging over 2,000 bopd of medium gravity oil.

The Company currently estimates gross license contingent recoverable resources from three of the tested zones in the two wells ranging from 12 million barrels of oil (mmbbls) (1C) to 156 mmbbls (3C), with a 2C volume of 43 mmbbls.

“By increasing our stake in the Baeshiqa license now, we demonstrate our belief in its ultimate potential,” said Bijan Mossavar-Rahmani (pictured), DNO’s Executive Chairman. “Following the stabilization of oil prices and export payments in Kurdistan, DNO is stepping up spending on new opportunities,” he added.

DNO acquired its first 32 percent interest from ExxonMobil and assumed operatorship of the Baeshiqa license in 2018.

The 324 square kilometer license is situated 60 kilometers west of Erbil and 20 kilometers east of Mosul. The license contains two large structures, Baeshiqa and Zartik, which have multiple independent stacked target reservoir systems, including in the Cretaceous, Jurassic and Triassic. The remaining partners in the license include TEC [Turkish Energy Company] with a 20 percent paying (16 percent net) interest and the Kurdistan Regional Government with a 20 percent carried interest.

In addition to the Baeshiqa license, DNO also operates the Tawke license containing the Tawke and Peshkabir fields in Kurdistan. Gross operated production from the Tawke license averaged 110,300 bopd in 2020.

(Source: DNO)

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DNO announces 2020 Interim Results

DNO ASA, the Norwegian oil and gas operator, today reported interim 2020 revenues of USD 615 million, down a third from a year earlier in the wake of weak oil prices triggered by the pandemic and global economic contraction.

Net production totaled 95,100 barrels of oil equivalent per day (boepd), down nine percent, as the Company cut spending to preserve cash.

For the full year, DNO reported a net loss of USD 286 million driven by the lower revenues and pre-tax asset impairments of USD 276 million, most of which were reported in the third quarter.

With solid cash flow from operations of USD 236 million and North Sea tax refunds of another USD 236 million, DNO exited 2020 with a cash balance of USD 477 million, essentially unchanged from the start of the year, following repayment of USD 161 million in bond debt.

The Company drilled six exploration wells last year leading to three likely commercial discoveries, including Røver Nord and Bergknapp in Norway and Zartik in Kurdistan’s Baeshiqa license. The discoveries will be considered for fast-track development and tie-in to existing offshore or onshore infrastructure.

DNO will drill two potentially high impact exploration wells this year, notably the much anticipated Edinburgh prospect that straddles the Norway-United Kingdom border in which the Company holds a 45 percent stake and the Gomez prospect offshore Norway in which the Company holds an 85 percent stake.

The total 2021 well count, including development wells, will increase to 27 from 17 last year.

Temporary Norwegian petroleum tax incentives are driving other stepped-up investments. The Company is proceeding to concept selection for the operated Brasse field, accelerating infill drilling at Ula, Tambar and Brage fields in 2021 and evaluating the Iris/Hades, Røver Nord, Alve Gjøk, Orion/Syrah and Trym South discoveries for project sanction in 2022.

DNO projects operational spend of USD 700 million this year, up from USD 511 million in 2020.

The Company achieved a net 2P reserve replacement ratio of 64 percent in 2020, notwithstanding limited activity, ending the year with 332 million barrels of oil equivalent (mmboe) of proven and probable reserves, down 13 mmboe from yearend 2019, according to preliminary figures.

More here:

(Source: DNO)

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DNO boosts Kurdistan Oil Output in Q3

DNO ASA, the Norwegian oil and gas operator, today reported boosting Kurdistan output to 113,700 barrels of oil per day (bopd) in the third quarter, reversing declines triggered by oil market convulsions in the wake of Covid-19.

Production from the DNO-operated Tawke and Peshkabir fields was up 12 percent from the prior quarter following a campaign of quick turnaround, low cost well interventions and the startup of the Kurdistan region of Iraq’s first enhanced oil recovery project.

Both fields have outperformed expectations and DNO projects replacement of a significant share of its reserves produced this year in Kurdistan, even as the Company scaled back drilling of new wells to meet a one-third budget reduction in response to lower oil prices and a four-month payment hiatus in Kurdistan.

The Peshkabir-to-Tawke gas capture and reinjection project, in operation since mid-year, is continuing to cut gas flaring and greenhouse emissions by half at Peshkabir to 7 kilograms CO2 equivalent for each barrel of oil equivalent produced, while unlocking additional oil at Tawke. To date, two billion cubic feet of otherwise flared gas have been reinjected with positive reservoir response, adding up to 5,000 bopd.

“Starting in June, our Kurdistan teams took up the challenge of doing more with less,  launching creative solutions they called Operation Throttle-Up and Operation Afterburner, which delivered the stellar operational results we report today,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman. “Once again, at DNO the oil we produce is conventional; how we do it is not.”

Across the portfolio, third quarter 2020 Company Working Interest (CWI) production increased nine percent from the second quarter to 97,900 barrels of oil equivalent per day (boepd), of which Kurdistan contributed 80,200 bopd and the North Sea 17,700 boepd.

DNO expects to exit the year with Kurdistan and North Sea production at third quarter levels.

Revenues more than doubled to USD 163 million in the third quarter on the back of improved oil prices and higher cargo liftings of previously produced oil in the North Sea. EBITDA climbed to USD 76 million in the third quarter up from USD 13 million in the previous quarter on higher revenues.

However, North Sea non-cash impairments of USD 202 million pre-tax (USD 118 million post-tax) related principally to the South East Tor and Iris/Hades assets led to an operating loss of USD 208 million.

In July 2020, the Company completed the drilling of Zartik-1, the third exploration well on the Baeshiqa license on a separate structure around 15 kilometers southeast of the Baeshiqa-2 discovery well. Testing of the Zartik-1 Upper Jurassic reservoirs continued through the third quarter. Evaluation of the results of the previously reported discoveries in the Baeshiqa-2 well is ongoing to determine commerciality.

Temporary Norwegian petroleum tax incentives are driving investment plans, with the Company maturing development options for the Brasse field (2021 PDO) and evaluating the Iris/Hades, Fogelberg and Trym South discoveries (2022 PDOs). Appraisal of the Bergknapp discovery (DNO 30 percent), among Norway’s largest discoveries this year, is scheduled for 2021.

Two exploration wells are scheduled in the fourth quarter with Polmak already drilling in the Barents Sea (DNO 20 percent) and Røver Nord to spud shortly in the Northern North Sea (DNO 20 percent). These wells will be followed by an active exploration program in 2021 including wildcat wells at Gomez in the Southern North Sea (DNO 85 percent) and Edinburgh cross-border (UK-Norway) in the North Sea (DNO 45 percent).

Following the latest UK licensing round, DNO was awarded four licenses (two operated) all with previous discoveries.

(Source: DNO)

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