DNO (DNO) Q2 2024 earnings summary

Executive summary

• Net profit doubled to $35 million in Q2 2024, driven by increased production in Kurdistan and the North Sea, with stable performance in West Africa and net production up 6% to 79,400 boepd.

• Completed the Arran acquisition and signed the Norne area deal, strengthening the North Sea portfolio, and celebrated the 20th anniversary of the Tawke PSC in Kurdistan.

• Issued a new $400 million, 5-year bond at a 9.25% coupon, with a concurrent $50 million buyback, enhancing financial flexibility.

• Board approved a 25% increase in the dividend, the first since 2021, reflecting confidence in sustainable cash flows.

• Cash deposits rose to $943 million, with net cash at $158 million at quarter-end.

Financial highlights

• Q2 2024 revenues dropped to $137 million, mainly due to lower North Sea sales volumes, underlift, and reduced Kurdistan entitlement production.

• Operating loss of $3.2 million, impacted by lower North Sea revenue, higher exploration costs, and goodwill impairment from the Arran acquisition, offset by deferred tax asset recognition.

• Net profit was $34.5 million, reversing a loss in Q2 2023, benefiting from a $62 million deferred tax asset and a $41 million goodwill impairment, netting a $20 million positive impact.

• Operational cash flow rose to $139 million in Q2, up from $100 million in Q1, with free cash flow at $76 million (excluding Arran acquisition).

• Dividend of $23 million (NOK 0.25/share) paid in Q2 2024.

Outlook and guidance

• North Sea production expected to increase into 2025, supported by recent acquisitions, new field start-ups, and delayed project startups.

• Kurdistan production optimization ongoing, with rig mobilization planned for a new well and continued local sales due to export pipeline closure.

• Tawke operated production guidance maintained at 80,000 barrels per day for 2024, with H1 slightly below and H2 expected to be above this level.

• Exploration spend for 2024 reduced to $150 million, with some North Sea wells postponed to 2025.

• Continued focus on sustainable dividend policy, not reliant on potential debt recovery from Kurdistan sales.