DNO ASA, the Norwegian oil and gas operator, today reported operating profit of USD 66 million in the first quarter of 2021, following four quarters of losses triggered by market perturbations from the global Covid pandemic. The turnaround was driven by solid production, cost optimization, higher oil prices and regularization of payments from Kurdistan.
The Company stepped up spend early in the year with drilling of new wells and workovers of existing ones in its flagship Tawke license to sustain gross operated production from the Tawke and Peshkabir fields at 112,000 barrels of oil per day (bopd) in the first quarter, up from 110,000 bopd in the previous quarter. Net production attributable to the Company's interest across the portfolio, including from DNO's North Sea oil and gas assets, stood just shy of 100,000 barrels of oil equivalent per day (boepd).
In another positive development during the quarter, Kurdistan initiated principal payments towards Tawke license 2019 and 2020 withheld entitlement and override amounts, reducing the outstanding balance due DNO from USD 259 million to USD 239 million. If oil prices and license production remain around current levels through 2021, some two-thirds of the remaining arrears will be recovered by the end of the year.
"DNO, like our peers, is positioned for strong cash flow in 2021 with the firming up of oil demand and prices," said DNO's Executive Chairman Bijan Mossavar-Rahmani. "Barring another pandemic derailing of global economic activity, we will repair our balance sheet, regroup in person and then fly like a bat out of hell in pursuit of opportunity," he added.
DNO exited the first quarter with a cash balance of USD 477 million and as a first step towards shoring up its balance sheet, the Company yesterday announced it would retire USD 100 million in bond debt on 1 June 2021 by exercising a call option on the USD 400 million DNO02 bond.
The Company has budgeted full year operational spend of USD 700 million, including 12 Tawke license wells of which nine in Tawke and three in Peshkabir. Gross operated Tawke license full-year 2021 production guidance has accordingly been increased to 110,000 bopd. DNO operates and has a 75 percent stake in the Tawke license, with partner Genel Energy plc holding the balance.
DNO will participate in an active drilling program in the North Sea with five exploration and eight development wells during the balance of 2021.