Interim Presentation 18 May 2015
Important notice This presentation (the Presentation ) has been prepared and delivered by DNO ASA ( DNO or the Company ). The Presentation and its contents are strictly confidential and may not be reproduced or redistributed, in whole or in part, to any person other than the intended recipient. The Presentation is prepared for discussion purposes only. It does not constitute, and should not be construed as, any offer or invitation or recommendation to buy or sell any of the securities mentioned or described herein. 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. Neither the Company, nor any of its subsidiary or any such person s advisors, 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 its 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, the risk factors mentioned in the Appendix to this Presentation, and risks or uncertainties associated with the Company s business, segments, development, growth management, financing, areas of operation, market acceptance and relations with stakeholders. 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 materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Presentation. Please refer to the summary of risk factors as set out in the Appendix to this Presentation. This Presentation has not been reviewed or registered with any public authority, stock exchange or regulated market place. The distribution of this Presentation and any offering, subscription, purchase or sale of securities issued by the Company in certain jurisdictions is restricted by law, including (but not limited to) USA, Canada, Japan, Australia and Hong Kong. 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Accordingly, this Presentation has not been approved as a prospectus by the UK Financial Services Authority ( FSA ) under Section 87A of FSMA and has not been filed with the FSA pursuant to the UK Prospectus Rules nor has it been approved by a person authorized under FSMA. Bondholders may be subject to purchase or transfer restrictions with regard to the bonds, as applicable from time to time under local laws to which a bondholder may be subject (due e.g. to its nationality, its residency, its registered address, its place(s) for doing business). Each bondholder must ensure compliance with local laws and regulations applicable at its own cost and expense. The information contained in this Presentation has been prepared by the Company to assist interested parties in making their own evaluation of the Company and its creditworthiness and does not purport to be all-inclusive or to contain all information that prospective investors may desire or that may be required in order to properly evaluate the business, prospects or value of the Company. The managers for the bond issue (the Managers ) have not independently verified any of the information contained herein through due diligence procedures or other investigations, and neither the Managers, nor any of their respective advisors, employees or officers or any of their affiliates makes any representation or warranty (whether expressed or implied) as to the accuracy or completeness of this Presentation or any information, statements, estimates or projections contained herein, or the legality of any prospective investor s investment in the bonds issued by the Company. Neither the Managers, nor any of their advisors, employees or officers, or any of their affiliates has any liability for the recipient s use of this Presentation or any other oral, written or other communications transmitted to the recipient in the course of its evaluation of the bonds or the Company. The contents of this Presentation are not to be construed as legal, credit, business or tax advice. Each prospective investor should therefore consult with its own legal, credit, business or tax advisor as to legal, credit, business and tax advice. By receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and the relevant securities and that you will conduct your own investigation, due diligence and analysis of the Company and the data set forth in this Presentation and be solely responsible for forming your own view of the potential future performance of any relevant investments. This Presentation contains information which has been sourced from third parties believed to be reliable, but without independent verification. Neither DNO nor any of its advisors, officers or employees makes any undertaking, representation or warranty (express or implied) as to the accuracy or completeness of the information (whether written or oral and whether or not included in this Presentation) concerning the matters described herein. Neither DNO, nor any of its subsidiaries or any such person s advisors, affiliates, officers or employees accepts any liability whatsoever as to any errors, omissions or misstatements contained herein and, accordingly, no such person accepts any liability whatsoever arising directly or indirectly from the use of this Presentation or the information included herein. The Presentation speaks to and reflects prevailing conditions and views as of 28 May 2015. It may be subject to corrections and change at any time without notice. DNO does not intend to, and neither the delivery of this Presentation nor any further discussions of the Company with any recipient shall, 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. This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of Norwegian courts. Page 2 28 May 2015 DNO ASA Corporate Presentation May 2015
Bond issue Summary of terms Issuer: Issue Amount: Use of Proceeds: Tenor: Status of the Bond: Issue Price: Coupon: Call Options (American): DNO ASA USD [400-500] million The net proceeds from the bond issue shall be applied to refinance the two outstanding bond issues DNO13 and DNO14, field development costs and for other general corporate purposes 5 years Senior unsecured [ ]% of par value [ ]% p.a., semi-annual interest payments NC2, @ 105.0% after 24 months, @ 103.0% after 36 months, @ 101.5% after 48 months and @ 100.5% of par last 6 months Settlement Date: Expected to be on or about [ ] June 2015 Final Maturity Date: Issuer Special Undertakings: Financial Covenants: Mandatory Prepayment: Listing: [ ] June 2020 (5 years after the Settlement Date) Standard covenants including inter alia: - Dividend restrictions and disposal of asset restrictions - Financial indebtedness restrictions, negative pledge and financial support restrictions - Maintenance of listing of DNO shares and reporting requirements - Tawke PSC cancellation event Minimum liquidity of USD 40 million Minimum book equity ratio of 30% Change of control: Investor put at 101% Trustee: Governing Law: Joint Lead Managers and Bookrunners: If ownership interest in Tawke PSC is reduced below 40% in a single or a series of transactions with total net cash proceeds exceeding USD 100 million The Issuer will apply for the bonds to be listed on Oslo Stock Exchange Nordic Trustee ASA Norwegian Law ABG Sundal Collier, DNB Markets (a part of DNB Bank ASA), Fearnley Securities, and Pareto Securities AS Page 3 28 May 2015 DNO ASA Corporate Presentation May 2015
Agenda Credit fundamentals Asset overview Financials Summary Summary of risk factors Appendix Page 4 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals Page 5 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals DNO Credit fundamentals Uniquely positioned in the MENA region Diversified portfolio of producing assets and exploration blocks across six countries First Western company to enter Kurdistan in 2004; 55 percent operatorship of world class Tawke field Q1 2015 company working interest (CWI) production of 72,873 barrels of oil equivalent per day (boepd) CWI 2P reserves of 484 million barrels of oil equivalent Significant oil production with large upside in Kurdistan Completion of Tawke 200,000 barrels of oil per day (bopd) capacity expansion in early May 2015 Record Tawke production level of 170,000 bopd reached in late May 2015, representing 5 percent of Iraq s total production Erbil license contains over two billion barrels of oil-in-place DNO has the most favorable PSC terms in Kurdistan and has received around USD 1.2 billion in oil revenues since 2007 Industry leading F&D costs and low lifting costs Industry leading finding and development (F&D) cost of USD 1.8 per bbl for Tawke field 2014 average lifting cost in Kurdistan of only USD 3.1 per bbl Significant competitive advantage in a challenging oil price environment Flexible capex with limited commitments Robust balance sheet and conservative financing strategy Raised ~USD 125 million in gross proceeds from equity private placement in March 2015 Cash reserves of USD 204 million with an additional USD 27 million in financial assets (Q1 2015) OSE listed with market capitalization of USD 1.5 billion as of 28 May 2015 Page 6 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals DNO Leading independent E&P company 2P reserves (mmboe) * 2014 production (boepd) ** 500 450 400 350 300 250 200 150 100 50 0 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 *Annual statement of reserves as of 31/12/2014 **2014 company working interest production Page 7 28 May 2015 DNO ASA Corporate Presentation May 2015
boepd Credit fundamentals Continued production growth 80,000 70,000 60,000 Kurdistan local sales and Tawke refinery Kurdistan deliveries at Fish Khabur for pipeline export Oman Yemen 68,958 2,705 7,839 72,873 1,571 5,766 50,000 40,000 30,000 17,381 39,965 4,999 38,354 39,170 4,143 3,907 5,745 10,736 31,552 55,906 20,000 27,960 12,776 6,720 10,000 10,661 7,006 15,690 24,527 26,862 0 2010 2011 2012 2013 2014 9,630 Q1 2015 Page 8 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals Supported by substantial reserves Solid reserves base to sustain long-term production ~19 years reserve life based on average 2014 production 2014 decrease in CWI 2P reserves reflects shift away from appraisal drilling to expansion of capacity at Tawke as well as a record 33 million barrels of gross production Lower oil prices and operational results led to downward revisions at other fields 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 Substantial resource potential in excess of two billion barrels of oil-in-place at Benenan heavy oil field in Erbil license 600 500 400 300 200 100 0 149 CWI 2P reserves million barrels of oil equivalent 194 372 520 542 484 484 2009 2010 2011 2012 2013 2014 Page 9 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals DNO has industry leading cost position DNO has the lowest average finding and development costs of any oil company, anywhere* Along with low lifting costs in the Kurdistan region, this gives DNO a significant competitive advantage in a challenging oil price environment DNO is positioned to perform well under any prevailing oil price given the combination of cost recovery terms in its PSCs and its low cost structure 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 9.4 3.6 Tawke lifting cost USD per boe 2.1 2.9 5.3 3.1 0.0 2009 2010 2011 2012 2013 2014 *According to independent report by JS Herold for the period 2010-2012. DNO 2011-2013 average F&D cost of USD 2.5 per boe Page 10 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals Conservative financial strategy Net debt position of approximately zero at end of Q1 2015 Cash position of USD 204 million Low interest bearing debt DNO13 USD and DNO14 NOK maturing in April 2016 (USD 140 million + USD 68.7 million as of Q1 2015) In addition, DNO has financial assets of USD 27 million through ownership in RAK Petroleum shares, not included in net debt calculation 1,600 1,400 1,200 1,000 800 600 Capital structure as of Q1 2015 USD million 1,516 DNO aims to fund operations and investments primarily from cash flow 400 Committed capital expenditures limited after completing Tawke 200,000 bopd expansion Strengthened liquidity position in Q1 2015 through NOK 975 million equity issue ~USD 125 million equivalent 200 0 Market capitalization* * As of 28 May 2015 204 Cash 27 Financial assets 209 Interest bearing debt Page 11 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals Experienced Board of Directors Bijan Mossavar-Rahmani (Executive Chairman) Mr. Mossavar-Rahmani is also Executive Chairman of Oslo listed RAK Petroleum plc, DNO's largest shareholder. Serves concurrently as Chairman of Foxtrot International LDC. Founder and first CEO of Apache International, Inc. Mr. Mossavar-Rahmani is a graduate of Princeton and Harvard Universities. Lars Arne Takla (Deputy Chairman) Mr. Takla held a number of managerial positions from 1977-2003 with Phillips Petroleum and was appointed Commander of the Royal St. Olav in 2005 for his long and dedicated effort for the oil and gas industry in Norway. Mr. Takla holds a MSc degree in Chemical Engineering from NTNU in Trondheim. Elin Karfjell (Board Member) Ms. Karfjell is a former partner of Ernst & Young AS and Arthur Andersen, holding various managing positions within the areas of advisory and audit. She has experience across a broad range of industries and is also a board member of Aker Philadelphia Shipyard, North Energy ASA and Contesto AS. Ms. Karfjell is a state authorized public accountant. Shelley Watson (Board Member) Ms. Watson has extensive industry experience from Esso Australia, Novus Petroleum and Indago Petroleum where she held commercial management roles. Ms. Watson joined RAK Petroleum in 2007 and served as General Manager until the summer of 2014. Ms. Watson holds a First Class Honours degree in chemical engineering and a Bachelor of Commerce degree from the University of Melbourne. Gunnar Hirsti (Board Member) Mr. Hirsti has many years of experience in the oil industry and currently holds various managerial and board positions. Elected to the Board of Directors in 2007, Mr. Hirsti holds a degree in Drilling Engineering from Tønsberg Maritime Høyskole in Norway. Page 12 28 May 2015 DNO ASA Corporate Presentation May 2015
Credit fundamentals and Executive Management Bjørn Dale (President / Managing Director) Mr. Dale joined DNO in 2011. He has extensive experience in managing corporate development projects, including crossborder transactions and corporate restructuring. Mr. Dale holds a Master of Law degree from the University of Oslo and an Executive MBA from the Stockholm School of Economics. Haakon Sandborg (CFO) Mr. Sandborg joined DNO in 2001. In addition to his oil and gas experience, He has a background in banking, including positions at DNB Bank. Mr. Sandborg holds a Master of Business Administration from the Norwegian School of Business Administration. Jeroen Regtien (COO) Mr. Regtien joined DNO in January 2015 following a 30-year career with Royal Dutch Shell plc where he most recently served as Country Chairman and Managing Director for Shell Egypt. Earlier, he was Vice President for Hydrocarbon Recovery Technologies, Innovation Research and Development, based in the Netherlands. He holds a degree in experimental physics from the Groningen State University. Claes Åbyholm (General Counsel) Mr. Åbyholm joined DNO in 2014. He has extensive oil and gas and other legal experience from positions held in Statoil ASA, Norsk Hydro ASA, Wiersholm and Kværner ASA. He holds a Master of Law degree from the University of Oslo. Page 13 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Page 14 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview DNO MENA focused portfolio Producing block Appraisal/development block Exploration block Kurdistan region of Iraq 3 blocks 474 mmbbls CWI 2P reserves* 65,536 boepd CWI production** UAE, Oman, Yemen and Somaliland 10 blocks 9.4 mmbbls CWI 2P reserves* 7,337 boepd CWI production** Tunisia 3 blocks Multiple discoveries to be appraised Additional exploration potential *Annual statement of reserves 31/12/2014. CWI figures are net to DNO after royalty and include DNO s share of cost oil attributable to joint venture partners whose costs have been carried or advanced by DNO. **Q1 2015 reported production Page 15 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Kurdistan becoming a significant source of revenue for DNO Currently, 650,000 bopd is delivered by the Kurdistan Regional Government by pipeline to Ceyhan, Turkey for export With recent increases in production and prices, Kurdistan operators expect to receive outstanding receivables and forward payments based on full contractual entitlements DNO has received around USD 1.2 billion in revenues for exports by Baghdad and Erbil, and through local sales in Kurdistan, of which USD 952 million was for local sales and USD 236 million was for exports, broken down as follows: 2007-2009: Total of USD 117 million, all of which was for local sales 2010: Total of USD 79 million, all of which was for local sales 2011: Total of USD 195 million, of which USD 98 million was for exports and USD 97 million local sales 2012: Total of USD 333 million, of which USD 117 million was for exports and USD 216 million local sales 2013: Total of USD 266 million, all of which was for local sales 2014: Total of USD 198 million, of which USD 21 million was for exports and USD 177 million local sales Page 16 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Tawke 200,000 project completed Combined 12 & 24 pipelines with +300,000 bopd capacity Tie-in to export system Truck loading station Truck loading station Successfully completed Tawke 200,000 bopd project Doubled capacity in less than two years 10 new horizontal wells Installation of 44 kilometer 24 pipeline Construction of two new early production facilities with combined capacity of 80,000 bopd, supplementing the existing central processing facility capacity of 120,000 bopd Tawke-30, last well in expansion campaign, completed in March and currently producing 10,000 bopd Page 17 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview World-class facilities at Tawke Total investment to date at Tawke of USD 1 billion Tawke finding and development cost of only USD 1.82 per barrel with remaining 2P reserves of 680 million barrels as of year-end 2014 Since inception, field development program has included 30 wells, installation of 200,000 bopd of processing capacity, two pipelines with combined capacity in excess of 300,000 bopd, a major pipeline export hub at Fish Khabur and 125,000 bopd of road tanker loading capacity as an alternative to pipeline exports Tawke oil is 27 degree API Tawke field (55% WI, Operator) 2P Reserves Tawke, Gross 2P Reserves Tawke, CWI 2P Reserves Tawke, Net Entitlement Q1 2015 reported CWI production 680.3 mmbbls 421.8 mmbbls 128.7 mmbbls 65,536 bopd In addition, 2P reserves of 32.2, 20.0 and 5.5 mmbbl for Gross, CWI and Net Entitlement respectively is booked for the Peshkabir discovery. Page 18 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Tawke production and reserves growth Tawke production is driving exports and local sales Further reserves growth potential in Tawke license Peshkabir-2 well to be drilled in 2016 to appraise Jurassic oil discovery and to prove additional resources in Cretaceous Peshkabir estimated to contain 225 mmbbls of gross unrisked prospective resources 120 100 80 60 40 20 0 800 700 600 500 12 Tawke average production mbopd 52 45 2010 2011 2012 2013 2014 Q1'15 39 Tawke 2P reserves* mmbbls 91 105 400 300 200 100 207 204 199 264 502 722 746 713 0 2007 2008 2009 2010 2011 2012 2013 2014 *Tawke PSC includes reserves booked for the Peshkabir discovery Page 19 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Three routes to market in Kurdistan Export pipeline Export by tanker Local sales Tawke connected directly to export pipeline at Fish Khabur at the Iraq-Turkey border KRG pipeline is complete and currently exporting ~650,000 bopd Delivering bulk of Tawke production at Fish Khabur for onward pipeline transport to Ceyhan, Turkey Given export pipeline connection, historically DNO has not directly exported oil by road tanker But export by road tanker remains an option Tawke also supplies oil to local buyers Typical sales contract is pre-paid for a set volume which is transferred to buyers at the Tawke or Fish Khabur facilities At its peak DNO has delivered in excess of 110,000 bopd to the local market Page 20 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Erbil and Dohuk licenses Current facilities capacity 130,000 bopd Planned increase to 200,000 bopd Erbil license The Benenan discovery is estimated to contain in excess of two billion barrels of oil-in-place Benenan-4 well tested moveable Najmeh oil deeper than in any well previously drilled in the field and proved much deeper oil water contact, indicating higher volumes of oil-in-place Further testing of the Najmeh interval planned at Benenan-4 and Erbil-2 wells to optimize commercial production and delivery of heavy oil from the Erbil license to the local market Dohuk license Summail gas development project completed in 2014 but with production below initial expectations, the field is shut in pending further evaluation Two heavy oil discoveries in the license Erbil PSC (40% WI, Operator) 2P Reserves, Gross 2P Reserves, CWI 2P Reserves, Net Entitlement Dohuk PSC (40% WI, Operator) Truck loading station 69.9 mmbbls 32.5 mmbbls 16.3 mmbbls No reserves currently booked Page 21 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Oman and Yemen Oman Evaluating new drilling targets at offshore Block 8 to increase oil and gas output from West Bukha field Onshore, completed new 1,000 km 2D seismic acquisition program at Block 36 with first exploration well to be drilled in 2016 Yemen Production from Block 32 and Block 43 suspended in March 2015 due the continuing deterioration of security conditions Producing block Appraisal/development block Exploration block Oman: 2 blocks (50 75% WI, 2 operated) 2P Reserves, Gross 12.8 mmboe 2P Reserves, CWI 6.4 mmboe 2P Reserves, Net Entitlement Q1 2015 reported CWI production 3.5 mmboe 5,766 boepd Yemen: 4 blocks (40 59.5% WI, 4 operated) 2P Reserves, Gross 2P Reserves, CWI 2P Reserves, Net Entitlement Q1 2015 reported CWI production 6.2 mmbbls 3.0 mmbbls 2.1 mmbbls 1,571 bopd Page 22 28 May 2015 DNO ASA Corporate Presentation May 2015
Asset overview Other assets UAE (3 blocks, 70 100% WI, 3 operated) Saleh field continues to produce small volumes of gas and liquids on an intermittent basis Reprocessing seismic data at RAK Onshore exploration license Tunisia (3 blocks, 30-87.5% WI, 2 operated) Completed 1,000 sq. km 3D seismic acquisition at Sfax Offshore Exploration Permit At Sfax, Jawhara-3 well completed and subsequently plugged and abandoned; further analysis of logging and testing results being performed to re-evaluate Jawhara field oil-in-place estimates Block SL-18 in Somaliland (50% WI, Operator) Entered the onshore block in April 2013 covering an area of 12,000 sq. km The government is in the process of implementing an Oil Protection Unit to support seismic acquisitions by DNO and other international oil companies operating in Somaliland Producing block Appraisal/development block Exploration block Page 23 28 May 2015 DNO ASA Corporate Presentation May 2015
Financials Page 24 28 May 2015 DNO ASA Corporate Presentation May 2015
Financials Key financial figures 600 Revenues USD million 400 EBITDA USD million 350 Netback USD million 500 350 300 400 300 200 100 138 207 369 525 503 452 300 250 200 150 100 50 88 78 253 361 348 254 250 200 150 100 50 63 236 327 286 204 0 2009 2010 2011 2012 2013 2014 0 2009 2010 2011 2012 2013 2014 0 5 2009 2010 2011 2012 2013 2014 Solid revenues from Tawke production combined with low operating costs provide a healthy netback to DNO Revenues do not include DNO share of revenues from Tawke exports Page 25 28 May 2015 DNO ASA Corporate Presentation May 2015
Financials Capex program focused on development 300 Acquisition and development costs USD million Kurdistan Oman Yemen UAE Tunisia Other 300 Exploration costs expensed USD million Kurdistan Oman Yemen UAE Tunisia Other 250 250 200 200 150 150 100 100 50 50 0 2010 2011 2012 2013 2014 0 2010 2011 2012 2013 2014 Significant investments in 2014 related to Tawke capacity expansion and field development Capex reduction in 2015 to a projected USD 100 million of which USD 35 million spent in Q1 2015 Flexibility to ramp up spending with increased revenues Page 26 28 May 2015 DNO ASA Corporate Presentation May 2015
Financials Capital structure 250 Cash deposits USD million 120 Financial assets USD million 70% Equity ratio 200 100 60% 150 80 50% 40% 100 50 242 195 166 114 204 60 40 20 95 104 97 63 28 30% 20% 10% 57% 59% 57% 48% 50% 0 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 0 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 0% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Solid balance sheet with low leverage Further increase in unrealized FX gain on NOK bond issue Page 27 28 May 2015 DNO ASA Corporate Presentation May 2015
Financials Financial summary USD million Q1 2015 Q4 2014 Q1 2014 2014 2013 Sales 26.0 80.1 112.8 452.0 503.0 Cost of goods sold -61.8-81.6-71.1-316.5-208.3 Gross profit -35.8-1.6 41.7 135.5 294.7 Expensed exploration -7.0-27.5-5.3-50.6-10.3 Administrative/other operating expenses -26.4-257.7-6.7-328.1-216.5 Profit/loss from operating activities -69.2-286.8 29.7-243.2 67.9 Net finance -3.9 2.4-3.5-8.7-9.7 Profit/loss before income tax -73.2-284.4 26.2-251.9 58.2 Income tax expense -1.0 31.9-2.5 25.8-31.3 Net profit/loss -74.2-252.5 23.7-226.1 27.0 Q1 revenues reduced by USD 24 million as a result of lower local sales and realized prices in Kurdistan, plus no export revenue recognition since the USD 21 million payment received in Q4 2014 Yemen write-downs of USD 27 million Page 28 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary Page 29 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary DNO Credit fundamentals Uniquely positioned in the MENA region Diversified portfolio of producing assets and exploration blocks across six countries First Western company to enter Kurdistan in 2004; 55 percent operatorship of world class Tawke field Q1 2015 company working interest (CWI) production of 72,873 barrels of oil equivalent per day (boepd) CWI 2P reserves of 484 million barrels of oil equivalent Significant oil production with large upside in Kurdistan Completion of Tawke 200,000 barrels of oil per day (bopd) capacity expansion in early May 2015 Record Tawke production level of 170,000 bopd reached in late May 2015, representing 5 percent of Iraq s total production Erbil license contains over two billion barrels of oil-in-place DNO has the most favorable PSC terms in Kurdistan and has received around USD 1.2 billion in oil revenues since 2007 Industry leading F&D costs and low lifting costs Industry leading finding and development (F&D) cost of USD 1.8 per bbl for Tawke field 2014 average lifting cost in Kurdistan of only USD 3.1 per bbl Significant competitive advantage in a challenging oil price environment Flexible capex with limited commitments Robust balance sheet and conservative financing strategy Raised ~USD 125 million in gross proceeds from equity private placement in March 2015 Cash reserves of USD 204 million with an additional USD 27 million in financial assets (Q1 2015) OSE listed with market capitalization of USD 1.5 billion as of 28 May 2015 Page 30 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary of risk factors Page 31 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary of risk factors Risk factors Investing in the bonds involves inherent risks. Before making an investment decision, prospective investors should carefully consider the information provided, and in particular, the risk factors set out below. An investment is suitable only for investors who understand the risks associated with this type of investment and who can afford a loss of all or part of the investment. The risks described below are not the only ones facing the Company and its subsidiaries (together the DNO Group ). Additional risks not presently known to the Company, or which the Company currently deems immaterial, may also materially impair the Company s business operations and adversely affect the value of the Company s securities. The order in which the risks are presented is not intended to provide an indication of the likelihood of their occurrence or the magnitude of their potential impact on the Company. If any of the following risks materialize, individually or together with other circumstances, the Company s business, financial position and operating results could be materially and adversely affected. Risks relating to the oil and gas industry A substantial or extended decline or extreme volatility in the prices of hydrocarbons may adversely affect the DNO Group's business, results of operations, financial condition, reserves and prospects; Continued volatility in global financial markets and other macroeconomic factors may adversely affect the DNO Group's business, results of operations, financial condition and prospects; Oil and gas exploration and production are inherently uncertain in their outcome and do not necessarily result in a return on investment, profits or recovery of cost; Exploration and production operations involve numerous operational risks and hazards which may result in material losses or additional expenditures; Exchange rate fluctuations and inflation may increase the DNO Group's operating costs; and The DNO Group operates in a competitive industry. Risks relating to the DNO Group's operations The DNO Group may be unable to obtain, retain or renew required drilling rights, licences, concessions, permits and other authorisations necessary for its operations and certain formalities in relation to agreements may not always be satisfied; The DNO Group may be unable to convert its exploration licences into production licences; Health, safety and environmental laws and regulations may expose the DNO Group to significant liabilities and increased compliance costs, litigation, interruptions to operations, unforeseen environmental remediation expenses and loss of reputation; The reserves and resource information of the DNO Group represents estimates that may turn out to be incorrect or inaccurate; The DNO Group may not be able to develop commercially its contingent and prospective resources; The DNO Group cannot accurately predict its future decommissioning liabilities; Future and current investigations, disputes and litigation could adversely affect the DNO Group's business, results of operations, financial condition and prospects; Oil and gas exploration and production are capital intensive and the DNO Group must make significant capital expenditures in order to increase its production levels and improve overall efficiency; Page 32 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary of risk factors Risk factors continued Risks relating to the DNO Group's operations (cont d) The DNO Group relies on the services of independent contractors, the quality and availability of which cannot be assured; The DNO Group could suffer unexpected costs or other losses if its partners and counterparties do not perform or comply with licence terms and applicable regulations; The DNO Group does not carry insurance in respect of every risk that could have a material impact on its operations; Difficulties in the marketing or exporting of the DNO Group's hydrocarbons could adversely affect the DNO Group's revenues; The DNO Group's ability to sell, produce, explore and develop hydrocarbons depends on access to infrastructure, services and transportation channels that are outside the control of the DNO Group; The DNO Group's operations and development projects could be adversely affected by shortages of key inputs; The DNO Group's success depends on its ability to appraise, acquire, explore and develop hydrocarbon reserves that are economically recoverable; The DNO Group's success is dependent upon its ability to attract and retain key personnel; The DNO Group must comply with various laws and regulations regarding anti-corruption and anti-bribery and with international sanctions regimes; The Company is exposed to credit and interest rate risk; Changes in law, regulations and fiscal regimes applicable to the DNO Group s operations could adversely affect its business, financial condition, results of operations and prospects; Acquired assets could expose the DNO Group to unknown liability, which could adversely affect its business, financial condition, results of operations and prospects; The DNO Group may face labour disruptions that could interfere with their operations and have a material and adverse effect on the business, results of operations, financial condition and prospects of the DNO Group; Changes in accounting rules, assumptions and/or judgments could materially and adversely affect the Group; A default and/or acceleration of repayment of debt under any credit facility agreements may have a material adverse effect on the DNO Group's business, results of operations, financial condition and prospects; Revenues and income for the DNO Group will be dependent on the performance of wells not currently in production. Future production performance and cash flow generation from such fields involves considerable uncertainty and there is no guarantee that the development costs or production performance of the fields will be in accordance with current estimates; and Project delays may postpone expected revenues from operations and may impose project cost over-runs which again could make a project uneconomic. Page 33 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary of risk factors Risk factors continued Risks relating to the DNO Group's operations in the Middle East and North Africa region (cont d) The MENA region is currently prone to political, social and economic instability; The DNO Group operates in jurisdictions, in particular Kurdistan and Yemen at present, where its operations could be compromised by criminal and terrorist actions; Kurdistan risks destabilisation as a result of general instability, e.g. from the threat of the Islamic State of Iraq and the Levant, or in the rest of Iraq which has a history of political and social instability. There can be no assurance that the DNO Group s operations in Kurdistan will not be materially impacted by civil unrest or cross-border military activities, or that the DNO Group will be able to obtain or maintain effective security arrangements for any of its assets or personnel in Kurdistan. The DNO Group operates in jurisdictions where it may be difficult to interpret the applicable laws and regulations, obtain or enforce court rulings and arbitration awards and enforce title to assets; The DNO Group may be unable to manage its relationships with local communities successfully; The DNO Group's assets may be nationalised or expropriated; The Federal Government of Iraq (FGI) has historically disputed the validity of the PSCs entered into by oil and gas companies with the KRG and there can be no assurance that the DNO Group can protect its interests in assets in Kurdistan; There can be no assurance that the DNO Group will receive payments for its hydrocarbon exports or recover costs and profits as provided in its PSCs in Kurdistan; The volume and prices of the DNO Group's oil exports from Kurdistan and sales to the local market are subject to guidance from the KRG's Ministry of Natural Resources; The DNO Group's costs are subject to audit and there is uncertainty relating to the outcome and impact of any such audit; Kurdistan could be negatively impacted by instability within Iraq or by cross-border military operations; The DNO Group is subject to political and legal uncertainty relating to Kurdistan's status within Iraq's federal state structure; The final determination of the DNO Group's tax liability may be materially different from what is reflected in the Company's income tax provisions and related balance sheet accounts and future changes in, or any new interpretation of, tax legislation applicable to DNO Group entities may have a material adverse effect on the DNO Group's business, results of operations, financial condition and prospects; The DNO Group may be subject to windfall taxes on its hydrocarbon revenues; The uncertainty of the tax system in Kurdistan may adversely impact taxation of the DNO Group, reducing net returns to Shareholders; and Norwegian tax audits/tax disputes. Page 34 28 May 2015 DNO ASA Corporate Presentation May 2015
Summary of risk factors Risk factors continued Risk relating to the bonds: The bonds may not be a suitable investment for all investors, and each potential investor should have sufficient knowledge and experience to make a meaningful evaluation of the bonds, the merits and risks of investing in the bonds; The DNO Group's ability to generate cash flow from operation and to make scheduled payments on and to repay its indebtedness, including the bonds, will depend on the future financial performance of the DNO Group; The future performance of the DNO Group will be affected by a range of economic, competitive, governmental, operating and other business factors, many of which cannot be controlled; There is no existing market for the bonds, and there can be no assurance given regarding the future development of a trading market for the bonds; The pricing of the bonds can be volatile. Potential investors should note that it may be difficult or even impossible to trade and sell the bonds in the secondary market; As the DNO Group is relying upon exemptions from registration under the U.S. Securities Act, applicable state securities laws, Canadian securities law and UK and EU securities laws in the placement of the bonds, the bonds may only be transferred in a transaction registered under or exempt from the registration or prospectus requirements of such legislation in the future. Therefore, investors may not be able to sell their bonds at their preferred time or price. The DNO Group cannot assure investors as to the future liquidity of the bonds; The trading price of the bonds may be volatile. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the bonds; The Issuer s subsidiaries own effectively all of the Issuer s assets and conduct all of its operations. Accordingly, repayment of the bonds, and other indebtedness, will be wholly dependent upon on the ability of the Issuer s subsidiaries to make such cash available to it, by dividend, debt repayment or otherwise; The bonds may be subject to optional redemption by the Issuer, which may have a material adverse effect on the value of the bonds. The terms and conditions of the bond agreement will provide that the bonds shall be subject to optional redemption by the Issuer at their outstanding principal amount, plus accrued and unpaid interest to the date of redemption, plus a premium calculated in accordance with the terms and conditions of the bond agreement. This is likely to limit the market value of the bonds. It may not be possible for bondholders to reinvest proceeds at an effective interest rate as high as the interest rate on the bonds; Prospective investors may not be able to recover in civil proceedings for U.S. securities laws violations; Mandatory prepayment events may lead to a prepayment of the bonds in circumstances where an investor may not be able to reinvest the prepayment proceeds at an equivalent rate of interest; The terms and conditions of the bond agreement will allow for modification of the bonds or waivers or authorizations of breaches and substitution of the Issuer which, in certain circumstances, may be affected without the consent of bondholders; and Upon the occurrence of a change of control event, each individual bondholder shall have a right of pre-payment of the bonds as set out in the bond agreement. However, it is possible that the Issuer may not have sufficient funds to make the required redemption of bonds, resulting in an event of default under the bonds. Page 35 28 May 2015 DNO ASA Corporate Presentation May 2015
Appendix Page 36 28 May 2015 DNO ASA Corporate Presentation May 2015
Appendix Tawke PSC terms applicable to DNO Production 100 % Net Production After Royalty 90 % Royalty (KRG) 10% Distribution Cost Oil vs. Profit Oil Maximum Cost Oil 45% Profit Oil 55% Distribution Profit Oil Contractor 16%-38% depending on r-factor Distribution to DNO DNO 75% DNO 55% Page 37 28 May 2015 DNO ASA Corporate Presentation May 2015
Appendix DNO ASA Legal Organization 2015 Dubai branch * DNO ASA DNO Iraq AS DNO Yemen AS DNO Tunisia AS DNO Somaliland AS DNO Oman AS DNO Invest AS DNO UK Ltd DNO Technical Services AS DNO MENA AS Erbil branch Tawke PSC Dohuk PSC Erbil PSC Sana a branch Block 32 Block 43 Block 47 Tunis branch Sfax and Ras El Besh Fkrine Hargeisa branch Muscat branch SL 18 Block 36 Dubai branch DNO Tunisia Ltd (GUE) Hammamet DNO OMAN Ltd (BER) DNO Al Khaleej Ltd (GUE) RAK Saleh Rak B RAK Onshore DNO OMAN BLOCK 8 Ltd (GUE) DNO OMAN BLOCK 30 Ltd (GUE) Block 8 *In the process of being dissolved Page 38 28 May 2015 DNO ASA Corporate Presentation May 2015