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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
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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
Q2 2010 Presentation 5
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
Q2 2010 Presentation 6
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
Q2 2010 Presentation 7
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
Q2 2010 Presentation 8
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
Q2 2010 Presentation 9
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
Q2 2010 Presentation 10
NOKmillion
Tight capital discipline Sound financial platform for new investments
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License activities
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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
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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
Q2 2010 Presentation 14
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
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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
600
800
1000
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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Q2 2010 Presentation 22
Netback Q2 2010 vs Q2 2009 Netback YTD 2010 vs YTD 2009
0
20
40
60
80
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
150
200
250
300
350
YTD2009
Production
Price F
X
OPEX
Taxespaid
YTD2010
NOKm
illion
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EBITDAX
Key financial indicators
EBITDAX margin Netback
Q2 2010 Presentation 23
0
20
40
60
80
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
Q2 2010 Presentation 24
0
20
40
60
80
100
120
140
160
180
200
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
NOKmillion
0
20
40
60
80
100
120
140
160
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
Q2 2010 Presentation 26
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
Q2 2010 Presentation 27
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
Q2 2010 Presentation 28
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
Q2 2010 Presentation 29
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.
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