DNO ASA Corporate Presentation and Update Haakon Sandborg, CFO Swedbank Nordic Energy Summit 19 March 2015 Oslo, Norway
DNO at a glance Norwegian oil and gas operator focused on the Middle East and North Africa with assets in the Kurdistan region of Iraq, Yemen, Oman, the United Arab Emirates, Tunisia and Somaliland DNO ranks fifth in market capitalization among European listed exploration and production companies and second in proved and probable reserves Gross production averaged close to 120,000 barrels of oil equivalent per day (boepd) in 2014, of which around three quarters was in Kurdistan and the remainder in Oman and Yemen Low lifting cost of USD 4.8 per barrel of oil equivalent also gives DNO a significant competitive advantage in a weak oil price environment Page 2
2014 DNO highlights Record output achieved in 2014 with gross production up 66 percent from 2013 to 117,482 boepd and company working interest (CWI) production up 76 percent to 68,958 boepd Gross production at flagship Tawke field in Kurdistan rose 131 percent year-on-year to 91,255 barrels of oil per day (bopd) in 2014 Operating revenue of USD 452 million in 2014 with operating cash flow of USD 181 million Ended the year with a cash balance of USD 114 million and an additional USD 63 million in marketable securities In December received first payment totaling USD 21 million net to DNO in respect of independent exports by Kurdistan Regional Government from Tawke Page 3
2015 DNO preview In Kurdistan, on track to increase Tawke field production and processing capacity to 200,000 bopd in first part of 2015 Decline in oil prices is prompting all oil and gas companies, including DNO, to cut capex and opex 2015 capex projected at USD 100 million Headcount reductions, some from completion of expansion projects, leading to an annual saving of USD 20 million from mid-2015 Priority is to align our spending with our earning, with revenues from Kurdistan local sales driving this year s capital program Expect to realize our share of export revenues from Kurdistan consistent with our contractual terms Page 4
boepd DNO CWI production 80,000 70,000 Kurdistan local sales Kurdistan volumes delivered at Fish Khabur for transport to Ceyhan Oman Yemen 68,958 60,000 2,705 7,839 50,000 40,000 39,965 4,999 38,354 4,143 39,170 3,907 31,552 30,000 5,745 10,736 21,512 17,381 27,960 12,776 20,000 7,749 6,720 26,862 24,527 10,000 9,226 15,690 10,661 7,006 4,537 0 2009 2010 2011 2012 2013 2014 Page 5
Flagship Tawke field New 24 pipeline Current facilities capacity 125,000 bopd Planned increase to 200,000 bopd Tie-in to KRG export system Tie-in to federal export system Truck loading station Pumping station Storage facilities On track to reach 200,000 bopd capacity target in first part of 2015 Tawke-30, last well in current drilling campaign, completed and preparing for testing To transport the increased output, a new 24-inch pipeline connecting the central processing facility to Fish Khabur installed at end-2014, bringing overall pipeline capacity to 300,000 bopd Processing 3D seismic data over Peshkabir field ahead of drilling Peshkabir-2 well Page 6
Ramping up local sales Tawke produced gross average of 91,255 bopd in 2014, nearly half of which went to the local market Sharp decline in local sales in Q4 2014 and Q1 2015, with higher volumes exported by Kurdistan Regional Government through Turkey DNO ramping up local sales to continue through 2015, generating ongoing revenues to the company Higher volumes in Q2 2015 with increase in field production and conclusion of additional contracts Tawke local sales currently in range of USD 30-35 per barrel Terms include 50/50 split with Kurdistan Regional Government and upfront payment by buyers Page 7
Solid reserves base Solid reserves base to sustain long-term production DNO focus in 2014 on investments to double production capacity at Tawke to 200,000 bopd Exploration across portfolio and appraisal drilling in Tawke license scaled down in latter part of 2014 due to weak oil price environment Tawke produced 33 million barrels last year and hit 100 million barrels of cumulative production in February 2015 Kurdistan to continue to generate meaningful additions to reserves once drilling picks up Peshkabir estimated to contain 225 million barrels in gross unrisked prospective resources Benenan heavy oil field in Erbil license estimated to contain more than two billion barrels of oil-in-place 600 500 400 300 200 100 0 149 CWI 2P reserves million barrels of oil equivalent 194 372 520 542 2009 2010 2011 2012 2013 Page 8 19 March 2015 Swedbank Nordic Energy Summit
Building on a successful MENA franchise Rationalizing and diversifying portfolio through farm-ins and farm-outs Early stage exploration at onshore Block 36 in Oman and new development well under consideration at offshore Block 8 to increase West Bukha oil and gas output Reprocessing seismic across portfolio to prepare for stepped up drilling in 2016 Exploration and appraisal program launched in Tunisia Yemen development activity and production increasingly hampered by deterioration in security conditions Page 9 19 March 2015 Swedbank Nordic Energy Summit
Successful completion of equity raise Transaction Details Raised NOK 975 million in equity offering initiated on 9 March and completed following day More than three times oversubscribed Allocated 73,584,906 shares at offer price of NOK 13.25 per share, including 60,534,906 new shares Sold 13,050,000 treasury shares, previously purchased in the market at average price of NOK 8.10 per share Benefits to DNO Net proceeds strengthen company s liquidity, financial flexibility and long-term financing Balance sheet and cash position strengthened, with minimal dilution Provides extra headroom given uncertainty about timing of export payments in Kurdistan Improves company s capacity to refinance bonds maturing in April 2016 Page 10
DNO financial results key figures Revenues* USD million Netback* USD million Operating profit* USD million 600 600 270 244 500 400 300 200 207 369 525 503 452 500 400 300 200 236 327 286 206 230 190 150 110 70 30-10 -50-90 26 117 68 2010 2011 2012 2013 2014 100 100 63-130 -170 0 2010 2011 2012 2013 2014 * Average exchange rate for 2010-2012 used for conversions 0 2010 2011 2012 2013 2014-210 -250-243 2014 operating loss of USD 243 million, including one-off impairment charges of USD 297 million in Kurdistan, Oman, United Arab Emirates and Yemen; excluding impairments, operating profit of USD 53 million Gross export deliveries from Tawke of 18.6 million barrels in 2014; DNO s contractual share of exports not reflected in key figures Page 11
Investment program Capex and capitalized exploration USD million Kurdistan Oman Yemen UAE Tunisia Other 2015 Projected 300 288 297 250 200 197 150 100 50 75 100 0 2011 2012 2013 2014 2015 Significant investments in 2013 and 2014 for capacity expansion and field development in Kurdistan, now completed Capex reduction in 2015 to a projected USD 100 million, with continuing focus on Kurdistan Page 12
Important notice This presentation (the Presentation ) has been prepared and delivered by DNO ASA ( DNO or the Company ). Copyright of all published material including photographs, drawings and images in this document remains vested in DNO and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction. The Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or industry and markets in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets, and similar expressions. Any forward-looking statements and other information contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts based on the current expectations, estimates and projections of the Company or assumptions based on information currently available to the Company, which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Although the Company believes that its expectations and the Presentation are based upon reasonable assumptions, neither the Company, nor any of its subsidiary undertakings or any such person s officers or employees provides any assurance that the assumptions underlying such forward-looking information and statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results. Any investment involves risks, and several factors could cause the actual results, performance or achievements of the Company as described herein to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in this Presentation, including, among others, risks or uncertainties associated with the Company s business, segments, development, growth management, financing, market acceptance and relations with customers. More generally an investment will involve risks related to general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors. Should one or more of such risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Presentation. DNO is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither DNO nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. The Presentation speaks and reflects prevailing conditions and views as of 19 March 2015. It may be subject to corrections and change at any time without notice except as required by law. The delivery of this Presentation - or any further discussions of the Company with any recipient - shall not, under any circumstances, create any implication that the Company assumes any obligation to update or correct the information herein, nor any implication that there has been no change in the affairs of the Company since such date. Page 13