Norway’s DNO reported that it had implemented 2020 budget cuts of US$350 million or 35 percent across all spend categories as it looks to protect its personnel and operations in response to the devastating impact of the coronavirus pandemic.
DNO said that it exited the first quarter of 2020 with a cash balance of $543 million, up from $486 million at yearend 2019.
DNO reported revenues of $206 million largely driven by lower oil prices and a net loss of $40 million on the back of impairments of its North Sea assets, again driven by lower oil prices. DNO said that it delivered strong operational metrics with production split 80:20 between the Kurdistan region of Iraq and the North Sea.
“One of the first to hit the brakes, DNO is positioned to be one of the first to press down on the accelerator with signs of sustained market recovery, notably through short-cycle drilling in Kurdistan,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman. “Lifting costs below USD 5 per barrel in Kurdistan give DNO competitive advantage when oil prices are weak and strong cash flow when oil prices recover,” he added.
DNO’s Company Working Interest (CWI) production averaged 99,857 barrels of oil equivalent per day (boepd) in the quarter, of which Kurdistan contributed 81,221 barrels of oil per day (bopd) and the North Sea 18,636 boepd.
Gross production at the DNO-operated Tawke and Peshkabir fields averaged 61,493 barrels and 53,714 bopd, respectively, as DNO hit the brakes on spending. After completing five development wells in the license during the quarter, DNO released four drilling rigs in Kurdistan but continues to utilize the Company-operated workover rig to service production wells, some of which have been shut in given current oil prices and payment delays. A drilling rig has been cold stacked at each field and can quickly be mobilized if conditions warrant.
In Kurdistan, the Company has reported a discovery in its operated Baeshiqa-2 exploration well after flowing variable rates of light oil and sour gas to surface from three Triassic aged reservoirs. Evaluation of test results will determine next steps towards further appraisal and assessment of commerciality. Additionally, a third well on the license will spud mid-month, with its primary target a shallower Jurassic formation on a separate structure (Zartik).
Meanwhile, the Peshkabir-to-Tawke gas capture, transport and reinjection project to effectively end CO2 emissions at Peshkabir (and therefore in DNO’s Kurdistan operations) and boost oil recovery at Tawke is completed and undergoing commissioning.
DNO’s 2020 North Sea drilling campaign has been scaled back and wells deferred, but firm plans remain in place for wells in five licenses over the balance of the year, including two exploration, one appraisal, two infill and two development/geopilot wells.
Last month, DNO received $90 million for Kurdistan oil exports, not included in the end of first quarter cash balances. Entitlement and override payments for November 2019 through February 2020 (total $233 million) remain outstanding, which the Kurdistan Regional Government has proposed to defer together with override payments commencing March 2020, given the deterioration of its own fiscal position with the collapse in oil prices.