DNO continued to deliver strong operational results for the first quarter of 2006. The Company's oil production was 16.893 BOPD (Working Interest) in the first quarter, an increased of 20 % compared to the first quarter last year. The Company also reports a reserve growth of nearly 40 % to 100.3 mmboe, with a Finding, Development and Acquisition ("FD&A") cost of USD 1.8 in the first quarter. Both metrics are strong indicators of the Company's ability to add new reserves at low costs.
Another major milestone was achieved when DNO completed its first exploration well in Northern Iraq. Oil was discovered in five individual reservoir layers and it has been decided that several well tests will be performed. The results of the well tests are vital in order to evaluate the hydrocarbon prospectivity and potential commerciality of the Tawke prospect, and the Company is targeting first test production in first quarter 2007.
On the NCS, the successful drilling of the third well within the Goliat area increased the estimated total recoverable oil reserves to 250 million barrels (2P), giving a reserves increase net to DNO of 30 million barrels. Further drilling will be carried out, starting in the fourth quarter this year.
Another exploration success was achieved by DNO in Yemen through the new Godah oil discovery, adjacent to the producing Tasour field in Block 32.
DNO, in a consortium with several other NCS operators, signed a three-year contract for the semi-submersible drilling rig Bredford Dolphin. DNO has committed to 340 rig days, which will allow the drilling of 6 to 8 wells on its NCS operated licenses, starting in the fourth quarter 2006.
During the first quarter, DNO continued to expand its portfolio of petroleum licenses, with new licenses in both Yemen and on the Norwegian Continental Shelf.
Financial Highlights - Net entitlement
Sales in the quarter were positively affected by high production and favourable achieved oil prices, increasing to NOK 415.1 million (NOK 157.8 million). As previous oil price hedging contracts expired at year-end 2005, DNO is now gaining the full value of its production.
The financial results were adversely affected by unsuccessful exploration results from the wells on the Jaguar and Hummer prospects leading to an EBIT of NOK 65.3 million (NOK 70.7 million) and a loss before income tax expenses of NOK -1.3 million (NOK 126.0 million).
Net income for the first quarter of the financial year was NOK -29.1 million (NOK 150.9 million).
Commenting on the results, Helge Eide, Managing Director of DNO said:
" We are very pleased with the results from our producing assets combined with strong organic reserve growth during the first quarter of 2006. We are looking forward to receive test results from the Tawke-1 well in Northern Iraq, which will serve as important input to the company's future plans within this very prospective area.
2006 will be an exciting and demanding year where DNO will maintain its focus on increasing its reserves at low cost and maximise production from its current core assets."
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