DNO ASA - International Financial Reporting Standards (IFRS)

As previously announced, DNO has analysed the consequences that a transition from N Gaap to IFRS will have on the company's financial statements. The project work has included a transition of the opening balance at 1 January 2004 from N Gaap to IFRS (the IFRS opening balance sheet) and transition of interim results for 2004.
The analysis of accounting consequences from transition to IFRS is described in the attached DNO IFRS Transition Report. The IFRS Transition Report can also be downloaded from DNO's website.
The analysis must be regarded as preliminary as the IFRS accounting figures have not been audited, there is still uncertainty as to how the IFRS standards should be interpreted and implemented and IFRS' reporting standards for oil and gas companies have not yet been completed (ED6).  
The analysis shows that the group's equity at January 1 2004 according to IFRS is higher than previously reported under N Gaap (increases by NOK 162 million from NOK 923 million to NOK 1,085 million). This increase is mainly contributed by the change in accounting treatment of decommissioning liabilities for the Heather field (sold to Lundin Petroleum AB in 2004)
Net accumulated third quarter results for 2004 for the continued operations more or less equal those previously reported under N Gaap (the loss is NOK 5 million lower). Net gain from sale of operations (Lundin transaction) is under IFRS reduced from NOK 310 million to NOK 122 million contributed by the change in accounting treatment of decommissioning liabilities for the Heather field. Net accumulated loss as of September 30 2004 on discontinued operations is reduced by NOK 28 million to NOK - 35 million under IFRS due to retrospective application of IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations). The group's net profit for the interim period is reduced from NOK 187 million to NOK 32 million.
The group's equity at September 30 2004 according to IFRS is estimated at NOK 846 million. The corresponding N Gaap equity was NOK 839 million.
None of the above adjustments impacts the group's liquidity.

After the distribution of the Offshore and Services business area as dividend (cf. general meeting held on December 1), DNO's IFRS financial statements will be affected by the development in accounting standards for oil and gas companies (ED6), including whether or not US accounting principles (US Gaap) for oil and gas activities will be normative also for IASB's work.
Until a new IFRS standard is introduced for oil and gas companies, DNO will to the extent possible continue its current accounting practice according to N Gaap. Tax paid in kind to the authorities in Yemen (Production Sharing Agreements) will continue to be classified as tax expense and not as revenue reduction.

DNO plans to provide information about group financial statements according to IFRS for the year 2004 in connection with the reporting of its fourth quarter results for 2004 in February 2005.
December 13 2004
Helge Eide
Man. Dir.
Haakon Sandborg
Chief Financial Officer
Phone: (+47) 55 22 47 00 / (+47) 23 23 84 80
IFRS Transition Report can be downloaded from the following link: