DNO’s New Statement of Oil Reserves

DNO has today presented its Annual Statement of Reserves (“ASR”) as of 31.12.2010.

The total remaining P50 reserves for DNO as of 31.12.2010 are estimated at 194.2 million barrels of oil equivalents, on a working interest (WI) basis, which represent the commercial reserves, class 1-3, under Norwegian Petroleum Directorate classification. This is an increase of 30% from the 149.4 million barrels reported the year before. The increase in the reserves is due to an upward revision of the ultimate recoverable reserves in the Tawke field in the Kurdistan Region of Iraq.

DNO has contracted BeicipFranlab (BF) to undertake an independent expert evaluation of the Tawke reserves, and it has been decided to use the BF revised estimates as the basis for the 2010 reserves. The new estimate undertaken by BF shows revised oil in place (STOOIP) of 1,439 million barrels compared to 1,353 million barrels the year before. The recovery factor has now been increased from 16.6% to 21.3% primarily based on updated geological and reservoir technical evaluations and thereby improved reservoir properties. This has resulted in an increase of the gross ultimate P50 reserves class 1-3 for Tawke to 306 million barrels, up from 230 million. Based on this, DNO’s WI share of the commercial reserves class 1-3 for Tawke has increased to 183.4 million barrels at the end of 2010, compared to 139.5 million barrels the year before. The net WI increase of 43.9 million barrels to DNO is after production of 3.9 million barrels in 2010, and upwards revisions of 47.8 million barrels.

DNO’s own revised reserve estimates for the Tawke field deviate from the figures presented by BF, and is discussed in section 3.5.2 of the ASR. DNO has taken into account more recent production information in addition to improved geological and reservoir technical information in the updated reservoir model. In addition, DNO has implemented more proactive reservoir management measures in the model, particularly with respect to future recompletions of wells and shut-off of water producing zones in the oil producing wells. The combined efforts suggest a higher recovery factor than predicted by the BF study. DNO’s revised estimates show that the gross ultimate P50 reserves are 387 million barrels for the Tawke field, compared to 306 million barrels estimated by BF.

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