DNO Q2 2010 Presentation[1]

8/8/2019 DNO Q2 2010 Presentation[1]

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Q2 2010 Presentation

Helge EideManaging Director


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Agenda

1. Welcome

Tom Bratlie, Communication Director

2. Highlights from Q2 and key priorities going forwardHelge Eide, Managing Director

3. Q2 FinancialsHaakon Sandborg, CFO

4. Q&AFor participants being present and by e-mail

Q2 2010 Presentation 2


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Highlights from Q2 2010

Significant increase in production volumes

Good cost control in operations

Improved financial results from operations

Net profit negatively affected by

NOK 199 million in impairment loss,mainly related to lower share pricein Det norske oljeselskap

Management focus on upcomingexploration and drilling activities



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0

5 000

10 000

15 000

20 000

25 000

Jan Feb Mar Apr May June

7 7197 371 7 213 7 058 7 027 6 332

5 4294 440 5 091 5 420

4 404

17 145

Tawke

Yemen

Q2 production summary

Kurdistan region of Iraq

Significant increase in deliveries from Tawke in June New short term local sales contracts for crude oil entered into in June Stable high deliveries from Tawke refinery

Yemen

Somewhat lower production in Q2 compared with Q1 Decrease in production mainly due to workover on the Tasour field

and a 12 days shut in of one producer at the Nabrajah field

Q2 2010 Presentation 413 148 11 811 12 304 12 478 11 431 23 477

Working interest production

bopd

Q2 10

(15 748)


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Continued satisfactory HSE performance

0

0,5

1

1,5

2

2,5

3

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Lost time incidents

Total recordable incidents

Vehicle incidents


Incidents per million working hours

2009 2010


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Increase in production volumes

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010Yemen production 7925 7878 7542 7655 7437 6808

Kurdistan production 2861 3438 5871 5926 5005 8940

2 861 3 438

5 871 5 9265 005

8 940

7 9257 878

7 542 7 655

7 437

6 808

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000


Workinginterestproduction

Ibarrelsperday

Total working interest production up from 12,442 bopd in Q1 to 15,748 bopd in Q2

Total 10786 11316 13413 13581 12442 15748


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Positive trend in financial performance

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010Sales 183,8 223,9 235,5 225,9 258,6 284,7

EBITDA 5,5 79,5 45,6 -8,7 155,6 171,2

Netback -5,6 62,8 16,7 -44,2 138,7 140,6

183,8

223,9235,5

225,9

258,6284,7

5,5

79,5

45,6

-8,7

155,6 171,2

-5,6

62,8

16,7

-44,2

138,7140,6

-50

0

50

100

150

200

250

300


N

OKmillion

Sales and EBITDA up around 10% from Q1 to Q2

Sales

EBITDA

Netback


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Lower lifting costs

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Lifting cost 16,58 16,31 10,27 9,98 11,35 9,57

16,5816,31

10,27 9,98

11,35

9,57

5

7

9

11

13

15

17


Avera

geliftingcostinUSD/bbl

Lifting cost per barrel down by more than 15% from Q1 to Q2


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Average sales price down in Q2

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Achieved sales price 39,34 48,65 49,15 51,44 61,55 51,88

39,34

48,6549,15 51,44

61,55

51,88

20

25

30

35

40

45

50

55

60

65


Achievedsalesprice(USD/bbl),netentitlement

*)DNOs production in Yemen is sold in the regular international oil market whilst

production in Kurdistan is sold solely to the local market at discounted prices.

Increased share of the production delivered to the local Kurdistan market at discounted prices Price for Yemen production close to Brent market price


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Continued improved cash position

End Q1 2009 End Q2 2009 End Q3 2009 End Q4 2009 End Q1 2010 End Q2 2010

Cash 142,7 210,0 282,1 303,4 671,1 821,6

142,7

210,0

282,1303,4

671,1

821,6

20

120

220

320

420

520

620

720

820

920


NOKmillion

Tight capital discipline Sound financial platform for new investments


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License activities

11


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Yaalen / Sharnah - preliminary key figures

Recoverable resources 10 Million bbls

Capex per barrel USD 12

Opex per barrel USD 8

First oil December 2011

Yemen Block 47

Yaalen / Sharnah Fast Track Development

Yaalen-3 well proved up the total field reserves

by two successful tests

Combined estimated production potential closeto 10,000 bopd

Notice of Commercial Oil Well submitted to the

Ministry on 15 June

Yaalen is planned to be the hub with the totalwell-stream to be transported through pipelinesfrom Yaalen to the Nabrajah CPF in Block 43

Final crude oil processing and water injection atNabrajah

This will also extend the lifetime of the Nabrajahfield

12Q2 2010 Presentation


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Exploration program

DNO is planning to drill at least 5

exploration wells within thenext 12 months

3 wells in Kurdistan

1 well in Yemen

1 well in Mozambique



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Exploration in Kurdistan

3 exploration wells to be drilled

Commencing in Q4 2010


Peshkabir

Tawke

Dohuk

Erbil-2

Hawler-1


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Yemen BL 72 Basement Prospect

The Basement Prospect in Block 72 will be drilled in

the second half of 2010 This well will test the same play as the producing

Kharir and Bayoot fields within the same basin

Total, the operator for the Kharir basement field,has recently farmed-in to Block 72

BL 72 prospect BL 10 Kharir Field BL 53 Bayoot Field

Masila Basin schematic cross section of basement structures

SW NE

NE

SW

15Q2 2010 Presentation


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Exploration in Mozambique

New exploration plays to be tested in the Urema graben

Highgrading of prospects ongoing

Exploraton well to be spudded in Q4 2010

Farm-ins: Harmattan (5%) and New Age (41%)

DNO retains 54% and operatorship



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Key priorities going forward

Increase production from a strong, developed

reserve base Utilize our production capacity of 40,000 50,000

bopd, net to DNO, without further investments

Bring additional production from new fast track/lowcost field developments

Increased exploration efforts with the potential toadd significant reserves and resources at low costs

Grow the asset base through continued newventure activities in the Middle-East and EastAfrica regions



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FINANCIALS

Haakon SandborgCFO


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Key figures

Q2 2010 Q2 2009 YTD 2010 YTD 2009

Operatingrevenues

284.7 223.9 543.2 407.6

Operating profit 99.0 1.9 193.5 -75.3

EBITDA 171.2 79.5 326.8 85.0

Netback 140.6 62.8 279.3 57.2



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Improved financial results from operations

Quarterly key financials

-75

-25

25

75

125

175

225

275

325

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

Revenues

Operating Profit

Higher revenues and operating profit

Increase in Kurdistan production Low exploration cost expensed

Cash increase

Solid cash flow from operations

Cash position strengthened through cash flow

Investment levels as guided

Impairment

Non-cash impairment loss on financial assets(mainly DETNOR) of NOK 199 million



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0

2000

4000

6000

8000

10000

12000

2006 2007 2008 2009 YTDQ2'10

BOP

D

0

200

400

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1200

1400

1600

2006 2007 2008 2009 YTDQ2'10

NOK

million

COGS Exploration Other

Achieved oil price

0

20

40

60

80

100

120

2006 2007 2008 2009 YTDQ2'10

US

D/bbl

DNO Brent

Operating profit drivers

Production net entitlement Operational costs



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Netback Q2 2010 vs Q2 2009 Netback YTD 2010 vs YTD 2009

0

20

40

60

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100

120

140

160

180

Q22009

Production

Price FX

OPEX

Taxespaid

Q22010

NOKmillion

Netback up on increase in production and oil prices

0

50

100

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350

YTD2009

Production

Price F

X

OPEX

Taxespaid

YTD2010

NOKm

illion


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EBITDAX

Key financial indicators

EBITDAX margin Netback


0

20

40

60

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100

120

140

160

180

200

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

-100

-50

0

50

100

150

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

45 % 45 %

3 %

67 %64 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

*EBITDAX in % of revenues *EBITDA before exploration expenses *EBITDA less paid tax


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EBITDAX

Key financial indicators - net of arbitration costs

EBITDAX margin Netback


0

20

40

60

80

100

120

140

160

180

200

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

0

20

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100

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Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

45 %

53 %

56 %

67 %64 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

*EBITDAX in % of revenues *EBITDA before exploration expenses *EBITDA less paid tax


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Condensed income statement

NOK million Q2 2010 Q1 2010 Q2 2009 YTD 2010 YTD 2009

Sales 284.7 258.6 223.9 543.2 407.6

Cost of goods sold -155.6 -133.3 -184.0 -288.9 -374.2

Gross profit 129.0 125.3 39.9 254.4 33.4

Dry well cost expensed -11.0 - -4.5 -11.0 -13.4

Seismic and other exploration expensed - -16.5 -17.5 -16.5 -66.8

Other -19.0 -14.3 -16.0 -33.3 -28.4

Profit/(loss) from operating activities 99.0 94.5 1.9 193.5 -75.3

Share of profit/(loss) associates - - -18.2 - -16.4

Net finance 1.4 -44.0 150 -42.7 363.2

Impairment financial assets -198.8 - - -198.8 -8.7

Profit/(loss) before income tax -98.4 50.5 133.6 -47.9 262.8

Income tax expense -22.7 -35.6 -18.4 -58.3 -9.7

Net profit/(loss) -121.1 14.9 115.2 -106.3 253.1

Net profit before impairment 77.6 14.9 115.2 92.5 261.8



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Cost of goods sold

Lifting cost per barrel

DD&A per barrel


Lifting cost

DD&A

0

1020

30

40

50

60

70

80

90

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

Yemen Kurdistan

0

20

40

60

80

100

120

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

NOKmillion

Yemen Kurdistan

0

2

4

6

8

10

12

14

16

18

20

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

USD/barrel

Yemen Kurdistan

0

5

10

15

20

25

Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

USD/barrel

Yemen Kurdistan


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Cash flow statement


NOK million Q2 2010 Q1 2010 Q2 2009 YTD 2010 YTD 2009

Profit from operations before exploration 110.1 111.1 23.9 221.2 5.0

Exploration expenses -11.1 -16.6 -22.0 -27.7 -80.2

Taxes paid, DDA, other 83.6 -29.0 80.1 54.6 36.5

Net cash from operations 182.6 65.5 82.1 248.1 -38.7

Net cash used in investing activities -28.7 -67.3 -27.4 -96.0 149.5

Net cash from financing activities - 365.8 25.0 365.8 -59.1

Cash at the beginning of the period 671.1 303.4 142.7 303.4 176.1

Net increase/decrease in cash + FX 150.5 367.7 67.3 518.2 34.3

Cash at the end of the period 821.6 671.1 210.0 821.6 210.4


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Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Cash flow coverage of investments

Netback coverage

-50,0

0,0

50,0

100,0

150,0

200,0

Sources Uses Sources Uses Sources Uses Sources Uses Sources Uses

Netback before exploration CAPEX Exploration

Cash flow funding

The cash flow coverage ratioincreased to 3.2x i Q2 2010

Increase in netback

Reduced investment levels

Increase in investments plannedfor Q3/Q4 2010

New exploration wells

Field development


Capex Q3 2009 shown net of water purificatiion project liability of NOK 537 million


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Capital structure

Assets

0

1000

2000

3000

4000

5000

6000

30.06.2009 30.06.2010

NOKMillion

Non-current assets Other current assets Cash and cash equivalents

Equity and liabilities

0

1000

2000

3000

4000

5000

6000

30.06.2009 30.06.2010

NOKMillion

Shareholders equity Non-current l iabilities Current l iabilities


Cash:NOK 822 million

Financial assets:NOK 288 million

Net debt tocapitalization:29 per cent

Equity ratio:38 per cent

*Net interest bearing debt/capitalization


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Outlook

Oil Production

Preliminary figures for July show a WI production of about27,000 bopd

Deliveries to the local market in Kurdistan may continue toshow significant fluctuations

Some reduction in Yemen production until completion ofYaalen/Sharnah development

Lifting costs expected at USD 4-8 per barrel in Kurdistanand USD 15-20 per barrel in Yemen

Investments

Planned investments for the second half of 2010 areestimated at NOK 250-300 million, bringing the 2010 FYinvestments to approximately NOK 380440 million



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THIRD QUARTER 2010: 11 NOVEMBER 2010

WELCOME BACK


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DISCLAIMER

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risksand uncertainties that could cause actual results to differ. These statements and this Presentation are based on current

expectations, estimates and projections about global economic conditions, the economic conditions of the regions andindustries that are major markets for DNO International ASA and DNO International ASAs (including subsidiaries and

affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containingwords such as expects, believes, estimates or similar expressions. Important factors that could cause actual results to

differ materially from those expectations include, among others, economic and market conditions in the geographic areas andindustries that are or will be major markets for DNOs businesses, oil prices, market acceptance of new products and

services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factorsas may be discussed from time to time in the Presentation. Although DNO International ASA believes that its expectationsand the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be

achieved or that the actual results will be as set out in the Presentation. DNO International ASA is making no representationor warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither DNOInternational ASA nor any of its directors, officers or employees will have any liability to you or any other persons resultingfrom your use.

This presentation was prepared for the Second Quarter 2010 results announcement 18 August, 2010. Information containedwithin will not be updated. The following slides should be read and considered in connection with the information given orallyduring the presentation.


Documents

DNO Q2 2010 Presentation[1]