DNO ASA — Interim / Quarterly Report 2017

May 4, 2017

Key figures

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Key financials
Revenues	76.7	49.6	201.8
Gross profit	46.7	18.9	73.1
Profit/-loss from operating activities	27.8	8.0	6.1
Net profit/-loss	14.7	-4.9	-35.3
EBITDA	55.4	23.6	95.4
Netback	55.1	26.2	93.4
Acquisition and development costs	32.3	5.6	54.0
Exploration costs expensed	1.6	3.5	20.3
Key performance indicators 1)
Lifting costs (USD/boe)	2.0	2.8	2.7
Netback (USD/boe)	8.6	4.9	3.7

1) Key performance indicators include exports from the Tawke field.

Corporate overview – Q1 2017 and year-to-date

• ⦁ Kicked off year with strong revenues, positive cash flow and net profit
• ⦁ Outstanding balance for 2016 Tawke oil exports received in Q1 2017
• ⦁ With regular payments, stepped up Kurdistan drilling program
• ⦁ Strengthened balance sheet, exiting the quarter with cash balance of USD 363 million
• ⦁ In April, exported 3,000 barrels of oil per day (bopd) from Peshkabir field during extended well testing program
• ⦁ Also in April, received USD 32 million net to DNO for January 2017 exports, including USD 5 million toward booked local sales receivable
• ⦁ In May, announced fast-track reentry into Norway with acquisition of privately-held Origo Exploration Holding AS

Q1 2017 operational highlights

• ⦁ Operated production in Q1 2017 averaged 115,900 barrels of oil equivalent per day (boepd), on par with Q4 2016 production (97,000 boepd in Q1 2016)
• ⦁ Of which Kurdistan represented 111,000 bopd and Oman 4,900 boepd
• ⦁ Company Working Interest (CWI) production averaged 71,300 boepd
• ⦁ Initiated drilling of three wells during Q1 2017, two at the Tawke field and one at Oman offshore Block 8
• ⦁ Relinquished two licenses in the United Arab Emirates and one in Oman, completing previously announced portfolio rationalization

Q1 2017 financial highlights

• ⦁ Q1 2017 revenues of USD 77 million, up from USD 42 million during previous quarter (USD 50 million in Q1 2016)
• ⦁ Represented highest quarterly revenues since Q4 2014
• ⦁ Received four Tawke export payments totaling USD 127 million gross, of which USD 89 million net to DNO, including USD 17 million toward booked local sales receivable
• ⦁ Returned to quarterly profitability, with net profit of USD 15 million
• ⦁ Purchased 3.5 million own shares at average price of NOK 6.97
• ⦁ Strong operational cash flow of USD 138 million

Operational review

Production

Quarterly production (boepd)

Company Working Interest (CWI) production during the first quarter averaged 71,267 boepd, compared to 71,373 boepd during the previous quarter.

In Kurdistan, CWI production averaged 68,809 boepd during the first quarter, compared to 68,963 boepd in the previous quarter.

In Oman, CWI production averaged 2,458 boepd during the first quarter, compared to 2,411boepd in the previous quarter.

Net entitlement production averaged 23, 814 boepd during the first quarter, compared to 25,899 boepd in the previous quarter.

Gross production

	Quarter	Full year
boepd	Q1 2017	Q1 2016	2016
Kurdistan	110,982	91,715	107,299
Oman	4,918	5,291	5,325
Yemen	-	-	-
Total	115,900	97,006	112,624

The table above reflects gross production from the company's fields. Kurdistan figures include both local sales and exported volumes.

Company Working Interest (CWI) production

	Quarter	Full year
boepd	Q1 2017	Q1 2016	2016
Kurdistan	68,809	56,863	66,525
Oman	2,458	2,645	2,663
Yemen	-	-	-
Total	71,267	59,508	69,188

The table above reflects the company's total working interest production. Kurdistan figures include both local sales and exported volumes.

Net entitlement production

	Quarter	Full year
boepd	Q1 2017	Q1 2016	2016
Kurdistan	22,228	23,738	25,746
Oman	1,586	1,401	1,630
Yemen	-	-	-
Total	23,814	25,139	27,376

The table above reflects the company's net entitlement production.

Net entitlement from past exports from the Tawke field has been estimated based on the PSC, but the company has not received payments for the full production.

Activity overview

Appraisal and field development

Kurdistan region of Iraq

Tawke license

Gross production from the Tawke field averaged 110,982 barrels of oil per day (bopd) during 2016, of which 110,561 bopd was delivered for pipeline export through Turkey and the balance was sold into the local market or processed in the Tawke refinery.

The company is mobilizing a third rig to drill four new Cretaceous wells at Tawke as part of an expanded drilling program. The revised 2017 Tawke drilling program includes six Cretaceous wells and two shallow Jeribe wells. DNO initiated Tawke-35 Cretaceous well production in late April, to be followed in the second quarter by Tawke-38 (Jeribe), Tawke-39 (Jeribe) and Tawke-42 (Cretaceous).

The company has commissioned a 400,000 barrel third-party storage facility to buffer production during export pipeline disruptions and avoid field shutdowns.

Following extended testing of the Jurassic horizon of the Peshkabir-2 well, the company is preparing the same in the shallower Cretaceous discovery. During the two-week Jurassic test in April, around 3,000 bopd was trucked to DNO's facility at Fish Khabur and exported. The company plans to spud the new Peshkabir-3 appraisal/production well in June and is finalizing a fast-track development plan involving an early production facility.

Erbil license

Estimates of oil-in-place at the Benenan heavy oil field stand at more than two billion barrels. The company plans to spud the Hawler-1A appraisal and production well during the fourth quarter 2017.

Oman

Offshore at Block 8, the Bukha and West Bukha fields produced an average of 4,918 boepd during the first quarter 2017, with output split equally between oil and gas.

The West Bukha-5B oil well was drilled to a planned depth of 4,500 meters, completed and is currently undergoing unloading and testing. Also at Block 8, the reinstatement of the Bukha-1 gas well is scheduled for August.

Yemen

Production start-up at the Yaalen field at Block 47, currently under force majeure, remains on hold.

Exploration

Oman

DNO has relinquished the Block 36 exploration license.

Tunisia

The company's exploration and appraisal program is continuing in Tunisia, with 3D seismic activity planned ahead of drilling a well at the Sfax Offshore Exploration Permit.

United Arab Emirates

DNO has relinquished the RAK Onshore and Saleh licenses.

Somaliland

At Block SL 18 onshore Somaliland, a field geological survey and an environmental impact assessment have been conducted, in addition to a gravity-magnetic survey. The government is in the process of creating an oil security force to support seismic acquisitions.

Financial review

Revenues, profits and cash flow

Revenues in the first quarter stood at USD 76.7 million, compared to USD 42.1 million in the previous quarter.

Kurdistan contributed revenues of USD 71.7 million, with Oman contributing USD 5.0 million. DNO reported an operating profit of USD 27.8 million during the first quarter, up from an operating loss of USD 27.1 million in the previous quarter.

The company ended the quarter with USD 362.9 million in cash and USD 22.8 million in marketable securities. This was up from USD 261.1 million in cash and USD 21.6 million in marketable securities at end-2016.

Cost of goods sold

In the first quarter, the cost of goods sold was USD 30.0 million compared to USD 36.9 million in the previous quarter.

Lifting costs

Lifting costs stood at USD 13.0 million in the first quarter, down from USD 27.5 million in the fourth quarter. In Kurdistan, the average lifting cost during the first quarter stood at USD 1.7 per barrel of oil equivalent (boe). In Oman, the average lifting cost during the first quarter stood at USD 11.8 per boe.

Lifting costs

	Quarter	Full
USD million		Q1 2017 Q1 2016	2016 year
Kurdistan	10.3	13.0	59.1
Oman	2.6	2.2	8.6
Other	0.1	0.0	1.0
Total	13.0	15.2	68.6

Including export volumes

	Quarter	Full
(USD/boe)		Q1 2017 Q1 2016	year 2016
Kurdistan	1.7	2.5	2.4
Oman	11.8	11.5	8.8
Other	-	-	-
Average	2.0	2.8	2.7

Depreciation, depletion and amortization (DD&A)

DD&A amounted to USD 16.1 million in the first quarter compared to USD 8.3 million in the previous quarter.

DD&A

	Quarter	Full
USD million		Q1 2017 Q1 2016	2016 year
Kurdistan	16.1	14.2	55.8
Oman	-	-	-
Yemen	-	-	-
Total	16.1	14.2	55.8

Including export volumes

	Quarter	Full
(USD/boe)		Q1 2017 Q1 2016	year 2016
Kurdistan	8.1	6.6	5.9
Oman	-	-	-
Yemen	-	-	-
Average	7.7	6.2	5.7

Exploration costs expensed

Expensed exploration costs of USD 1.6 million in the first quarter were related to activities in Oman and Tunisia.

Exploration costs expensed

	Quarter	Full
USD million	Q1 2017 Q1 2016		2016 year
Kurdistan	-	-	-
Oman	0.4	0.4	10.7
UAE	0.1	0.3	0.8
Tunisia	0.9	1.8	7.4
Other	0.2	1.1	1.4
Total	1.6	3.5	20.3

Acquisition and development costs

(including intangible assets)

Capital expenditures were USD 32.3 million in the first quarter.

Acquisition and development costs

	Quarter	Full
USD million		Q1 2017 Q1 2016	2016 year
Kurdistan	14.4	3.2	50.9
Oman	17.8	2.5	2.4
Other	-	-0.1	0.8
Total	32.3	5.6	54.0

Consolidated statements of comprehensive income

			Quarter	Full year
USD million	Note	Q1 2017	Q1 2016	2016
Revenues	2, 3	76.7	49.6	201.8
Cost of goods sold	4	-30.0	-30.7	-128.7
Gross profit		46.7	18.9	73.1
Other operating income		-	-	18.9
Administrative expenses		-5.0	-6.8	-31.0
Other operating expenses		-1.7	-0.6	-5.4
Impairment oil and gas assets	7	-10.6	-	-29.2
Exploration costs expensed	5	-1.6	-3.5	-20.3
Profit/-loss from operating activities		27.8	8.0	6.1
Financial income		3.3	0.5	17.4
Financial expenses		-15.4	-12.7	-56.8
Profit/-loss before income tax		15.7	-4.3	-33.3
Income tax expenses	6	-1.0	-0.7	-2.1
Net profit/-loss		14.7	-4.9	-35.3
Other comprehensive income
Currency conversion differences Revaluation/Reversal of impairment in available-for-sale financial assets		- -0.6	- 2.6	- 3.2
Other comprehensive income that may be reclassified to profit or loss in subsequent periods		-0.6	2.6	3.2
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods		-	-	-
Total other comprehensive income, net of tax	6	-0.6	2.6	3.2
Total comprehensive income, net of tax		14.1	-2.3	-32.1
Net profit/-loss attributable to:
Equity holders of the parent		14.7	-4.9	-35.3
Total comprehensive income attributable to:
Equity holders of the parent		14.1	-2.3	-32.1
Earnings per share, basic		0.01	0.00	-0.03
Earnings per share, diluted		0.01	0.00	-0.03

Condensed consolidated statements of financial position

ASSETS		At 31 Mar		At 31 Dec
USD million	Note	2017	2016	2016
Non-current assets
Other intangible assets	7	85.0	88.8	86.5
Property, plant and equipment	7	410.2	431.0	403.1
Available-for-sale investments	8	13.4	13.4	14.0
Other non-current assets	9	10.5	-	30.3
Total non-current assets		519.0	533.2	533.9
Current assets
Inventories	4	54.6	61.8	57.3
Trade and other receivables	9	105.7	155.8	117.4
Cash and cash equivalents		362.9	261.8	261.1
Total current assets		523.1	479.5	435.9
TOTAL ASSETS		1,042.2	1,012.6	969.8
EQUITY AND LIABILITIES		At 31 Mar		At 31 Dec
USD million	Note	2017	2016	2016
Equity
Share capital		35.7	35.8	35.8
Other reserves		283.6	286.5	286.4
Retained earnings		93.9	109.5	79.8
Total equity		413.2	431.8	401.9
Non-current liabilities
Interest-bearing liabilities	10	364.5	353.4	361.7
Deferred income tax liabilities	6	-	-	-
Provisions for other liabilities and charges	11	169.2	97.4	167.3
Total non-current liabilities		533.7	450.8	529.0
Current liabilities
Trade and other payables		81.2	49.2	33.1
Income taxes payable		0.7	3.4	0.4
Provisions for other liabilities and charges	11	13.5	77.4	5.3
Total current liabilities		95.3	130.0	38.8
TOTAL EQUITY AND LIABILITIES		1,042.2	1,012.6	969.8

Condensed consolidated cash flow statements

		Quarter	Full year
USD million	Note	Q1 2017	Q1 2016	2016
Operating activities
Profit/-loss before income tax		15.7	-4.3	-33.3
Adjustments to add (deduct) non-cash items:
+/- Net interest expense (-income)*		-	-	-
Previously capitalized exploration and evaluation expenses	5	-	-	-
Depreciation of PP&E	4	17.0	15.6	60.1
Impairment loss on oil and gas assets	7	9.7	-	29.2
Other		21.6	0.2	24.5
Changes in working capital:
- Inventories		2.8	-	10.1
- Trade and other receivables		11.8	12.3	13.6
- Trade and other payables		48.1	-3.3	-19.4
- Provisions for other liabilities and charges		10.9	10.3	13.9
Cash generated from operations		137.7	30.8	98.7
Income taxes paid		-0.7	0.9	-2.1
Interest paid		-	-	-35.4
Net cash from/- used in operating activities		136.9	31.7	61.2
Investing activities
Purchases of intangible assets	7	-	-2.3	-9.4
Purchases of tangible assets	7	-32.3	-3.3	-27.0
Interest received		-	0.1	0.8
Net cash from/- used in investing activities		-32.3	-5.5	-35.6
Financing activities
Proceeds from borrowing	10	-	-	-
Repayment of borrowings		-	-	-
Purchase of treasury shares, including options		-2.9	-2.1	-2.1
Proceeds from sale of treasury shares		-	-	-
Proceeds from issuance of shares, net		-	-	-
Net cash from/- used in financing activities		-2.9	-2.1	-2.1
Net increase/-decrease in cash and cash equivalents		101.8	24.1	23.5
Cash and cash equivalents at beginning of the period		261.1	237.6	237.6
Exchange gain/-losses on cash and cash equivalents		-	0.1	-0.1
Cash and cash equivalents at the end of the period		362.9	261.8	261.1

* Net interest expense (-income) is from 1 January 2017 presented net.

Condensed consolidated statement of changes in equity

USD million	Share capital	Other reserves	Retained earnings	Total equity
Balance at 1 January 2016	35.9	288.4	111.8	436.2
Fair value gains, net of tax:
- available-for-sale financial assets	-	-	2.6	2.6
Currency translation differences	-	-	-	-
Other comprehensive income/-loss	-	-	2.6	2.6
Profit/-Loss for the period	-	-	-4.9	-4.9
Total comprehensive income	-	-	-2.3	-2.3
Issue of share capital	-	-	-	-
Purchase of treasury shares	-0.1	-2.0	-	-2.1
Sale of treasury shares	-	-	-	-
	-0.1	-2.0	-	-2.1
Balance at 31 March 2016	35.8	286.4	109.6	431.8

USD million	Share capital	Other Retained reserves earnings		Total equity
Balance at 1 January 2017	35.8	286.4	79.8	401.9
Fair value gains, net of tax:
- available-for-sale financial assets	-	-	-0.6	-0.6
Currency translation differences	-	-	-	-
Other comprehensive income/-loss	-	-	-0.6	-0.6
Profit/-Loss for the period	-	-	14.7	14.7
Total comprehensive income	-	-	14.1	14.1
Issue of share capital	-	-	-	-
Purchase of treasury shares	-0.1	-2.8	-	-2.9
Sale of treasury shares	-	-	-	-
	-0.1	-2.8	-	-2.9
Balance at 31 March 2017	35.7	283.6	93.9	413.2

In first quarter 2017, DNO ASA has purchased 3,500,000 own shares at an average price of NOK 6.9741 per share. Following the transactions, DNO ASA held 11,200,000 own shares at 31 March 2017.

The purchases are part of the share buyback program approved at the AGM in 2016. For further details, refer to Note 14 in the 2016 Annual Report.

Notes to the interim condensed consolidated financial accounts

Note 1 | Basis of preparation and accounting policies

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting and IFRS standards issued and effective at date of reporting as adopted by the EU. The interim report has also been prepared in accordance with Oslo Stock Exchange regulations.

The interim condensed consolidated financial statements do not include all of the information and disclosures required in the annual financial statements and should be read in conjunction with the group's annual financial statements as of 31 December 2016. The interim financial information for 2017 and 2016 is unaudited.

The condensed consolidated financial statements have been prepared on a historical cost basis, with the following exception:

All financial assets and liabilities held for trading, all liabilities related to share-based payments and all financial assets classified as available-for-sale are recognized at fair value.

A detailed description of the accounting policies applied is included in the DNO annual financial statements for 2016. The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the group's annual financial statements for the year ending on 31 December 2016. Due to a change in payment procedures, local sales in Kurdistan for 2016 are accounted for using the cash principle (see Note 3).

Note 2 | Segment information

DNO is reporting five operating segments; Kurdistan (KUR), Oman (OMAN), Yemen (YEM), Ras Al Khaimah (UAE) and Tunisia (TUN). The operating segments are the same as the reportable segments.

Three months ending 31 March 2017 USD million	Note	KUR	OMAN	YEM	UAE	TUN	Other	Total reporting segment	Unallocated/ eliminated	GROUP
Income statement information
External sales	3	71.7	5.0	-	-	-	-	76.7	-	76.7
Inter-segment sales		-	-	-	-	-	-	-	-	-
Cost of goods sold	4	-26.4	-2.6	-	-0.1	-0.1	-	-29.2	-0.8	-30.0
Gross profit		45.3	2.3	-	-0.1	-0.1	-	47.5	-0.8	46.7
Segment operating result		44.9	-9.6	0.1	-0.1	-0.9	-1.6	32.8	-5.0	27.8
Financial - net										-12.1
Gain/-loss on sale of shares										-
Income tax expense		-	-0.8	-	-	-	-	-0.8	-0.2	-1.0
Net profit/-loss										14.7
Segment assets		622.8	29.1	3.7	0.3	19.2	1.6	676.7	365.4	1,042.2

Note 2 | Segment information (continued)

Three months ending 31 March 2016 USD million	Note	KUR	OMAN	YEM	UAE	TUN	Other	Total reporting segment	Unallocated/ eliminated	GROUP
Income statement information
External sales	3	46.4	3.3	-	-	-	-	49.6	-	49.6
Inter-segment sales		0.4	0.9	-	-	0.1	-	1.4	-1.4	-
Cost of goods sold	4	-27.3	-2.2	-	0.1	-0.1	-	-29.5	-1.2	-30.7
Gross profit		19.5	1.9	-	0.1	0.0	-	21.6	-2.6	18.9
Segment operating result		20.0	1.2	-1.1	-0.2	-2.0	-1.0	17.0	-9.1	8.0
Financial - net										-12.2
Gain/-loss on sale of shares										-
Income tax expense		-	-0.7	-	-	-	-	-0.7	-	-0.7
Net profit/-loss										-4.9
Segment assets		677.8	23.0	2.0	2.4	25.4	0.7	731.3	281.4	1,012.6

Note 3 | Revenues

DNO presents its operations governed by PSCs according to the net entitlement method when there are observable market prices and the risk related to sale and distribution is minimal. To the extent that the entitlement method cannot be applied, revenue is recognized when the sale criteria in IAS 18 are fulfilled. Kurdistan export sales and local sales are recognized as revenue upon cash receipt.

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Sale of petroleum products	76.7	49.6	201.8
Total sales	76.7	49.6	201.8

During the first quarter of 2017, DNO received four payments from the Kurdistan Regional Government for Tawke deliveries totalling USD 126.5 million, of which USD 89.4 million was net to DNO. Of the net, USD 71.9 million is recognized as revenue and USD 17.5 million as a reduction in the booked underlift receivable.

Following a change in local sales procedures in 2016, the same payment mechanism applies to both local and export sales, with local sales revenue also recognized upon receipt of cash payment.

Note 4 | Cost of goods sold/inventory

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Lifting costs*	-13.0	-15.2	-68.6
Depreciation, depletion and amortization	-17.0	-15.6	-60.1
Total cost of goods sold	-30.0	-30.7	-128.7

* Lifting costs consist of expenses related to the production of oil and gas, including operation and maintenance of installations, well intervention workover activities, insurances, CO² taxes, royalties to the state and internal costs.

	At 31 Mar		At 31 Dec
USD million	2017	2016	2016
Spare parts	53.6	54.8	54.8
Other inventory	1.0	7.0	2.5
Total inventory	54.6	61.8	57.3

Of the total inventory of USD 54.6 million, USD 50.5 million is related to Kurdistan, USD 1.0 million is related to Oman and USD 3.1 million is related to Tunisia.

Note 5 | Exploration expenses

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Exploration expenses (G&G and field surveys)	-0.5	-2.2	-5.5
Exploration costs capitalized this year carried to cost	-	-	-7.6
Other exploration cost expensed	-1.0	-1.3	-7.3
Total exploration cost expensed*	-1.6	-3.5	-20.3

* For details on geographic spread of exploration costs expensed, see the Financial review section.

Note 6 | Income taxes

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Income tax expenses	-1.0	-0.7	-2.1
Total income tax expense	-1.0	-0.7	-2.1

The interim period income tax expense relates mainly to the Oman operations and is calculated by applying the tax rate applicable to the expected total annual earnings.

According to the net entitlement method, income taxes payable related to PSCs consist of the corporate tax rate applicable under the agreements. No tax is applicable to the operations in the Kurdistan region of Iraq as there is currently no established tax regime.

There are no tax consequences attached to items recorded in other comprehensive income.

Note 7 | Property, plant and equipment/intangible assets

		Quarter
USD million	Q1 2017	Q1 2016	Full year 2016
Acquisitions of PP&E *	32.3	3.3	44.8
Acquisitions of Intangible assets **	-	2.3	9.2
Net book amount PP&E at end of reporting date	410.2	431.0	403.1
Net book amount Intangible assets at end of reporting date	85.0	88.8	86.5
Impairment of PP&E (YTD)	-10.6	-	-29.2

* Acquisitions related to development assets, assets in operation and other PP&E ** Acquisitions related to capitalized exploration costs and license interests.

In 2017, the total impairment charge of USD 10.6 million was related to Block 8 in Oman.

In 2016, the total impairment charge of USD 29.2 million was related to operations in Kurdistan (USD 26.7 million), Oman (USD 5.8 million) and the United Arab Emirates (USD 2.8 million). A reversal of impairment (USD 6.0 million) recognized in the same year was related to equipment and spare parts booked under the Dohuk license in Kurdistan.

Note 7 | Property, plant and equipment/intangible assets (continued)

Impairments

Impairment tests of individual cash-generating units are performed when impairment triggers are identified. During 2016, insurance proceeds covering a re-drill of the WB-5B well in Oman was recognized as other income, while the expenditures related to the re-drill were accounted for separately as PP&E during Q1 2017. Separate accounting treatment combined with development in the business case for the license triggered an impairment testing. The recoverable amount was below carrying amount for the Block 8 license and an impairment charge was recognized.

	Quarter Q1 2017	At 31 Mar 2017 Recoverable/	Full year 2016	At 31 Dec 2016 Recoverable/
USD million	Impairment/ reversal	carrying amount	Impairment/ reversal	carrying amount
Erbil, Kurdistan	-	74.8	-26.7	74.7
Dohuk, Kurdistan	-	-	6.0	-
Block 8, Oman	-10.6	11.5	-	4.9
Oman Ltd, Oman	-	0.1	-1.2	0.1
Block 36, Oman	-	-	-4.4	-
Block, 47 Oman	-	-	-0.2	-
Sfax Offshore Exploaration Permit, Tunisia	-	3.5	-	3.6
Assets in United Arab Emirates	0.1	-	-2.8	-
Total	-10.6	90.0	-29.2	83.3

The table shows the recoverable/carrying amount for the cash generating units which have been impaired in 2016 and 2017. At first quarter 2016, no impairment charges were recognized.

For explanations of impairment, see previous table.

Note 8 | Available-for-sale financial assets

Available-for-sale financial assets are recorded at fair value (market price, where available) at the end of each period. Changes in fair value are included in other comprehensive income and are presented as valuation reserve under equity. Impairments will be charged to profit or loss, while reversal of impairments will be taken through other comprehensive income.

	Quarter		Full year
USD million	Q1 2017	Q1 2016	2016
Beginning of the period	14.0	10.8	10.8
Revaluation transferred to other comprehensive income/-loss/reversal of impairment of available-for-sale assets	-0.6	2.6	3.2
End of the period 1)	13.4	13.4	14.0
Non-current portion	13.4	13.4	14.0
Current portion	-	-	-

1) Available-for-sale financial assets include the following:

	At 31 Mar		At 31 Dec
USD million	2017	2016	2016
Listed securities:
- RAK Petroleum plc	13.4	13.4	14.0
Total available-for-sale financial assets	13.4	13.4	14.0

DNO has a total of 15,849,737 shares in RAK Petroleum plc. All shares have been acquired in open market transactions. RAK Petroleum plc is listed on the Oslo Stock Exchange.

Note 9 | Trade and other short-term receivables

		At 31 Mar	At 31 Dec
USD million	2017	2016	2016
Underlift, entitlement method	63.9	123.6	66.5
Other short-term receivables	41.8	32.2	50.9
Total trade and other short-term receivables	105.7	155.8	117.4

The booked underlift receivable mainly relates to the arrangement for local sales in Kurdistan put into place in 2014 under which the PSC terms for the contractor entitlement were not followed. In 2015, this temporary arrangement was revised to more closely align with the PSC terms. With effect from 1 January 2016, the interim payment arrangements for local sales were abolished and replaced by Tawke PSC contractual entitlement based payments, including payments toward outstanding entitlements.

During the first quarter of 2017, USD 17.5 million was received in cash payments. At the same time USD 17.7 million was reclassified from long term receivable to short term receivable.

As of 31 March 2017, all trade debtors are less than 30 days past the due date.

Other short-term receivables include mainly the receivable related to the farm down in Tunisia (Sfax Offshore Exploration Permit) and working capital in oil and gas licenses.

Note 10 | Interest-bearing liabilities

		At 31 Mar
USD million	2017	2016	2016
Non-current
Bonds	400.0	400.0	400.0
Capitalized borrowing issue costs	-35.5	-46.6	-38.3
Total non-current interest-bearing liabilities	364.5	353.4	361.7
Current
Current portion of bonds	-		-
Total current interest-bearing liabilities	-		-
Total interest-bearing liabilities	364.5	353.4	361.7

Interest-bearing liabilities:

USD million	Currency	Amount	Interest	Maturity	At 31 Mar 2017 2016		At 31 Dec 2016
Non-current
Bond loan (ISIN NO0010606197)	USD	400.0	8.75%	18.06.20	400.0	400.0	400.0
Borrowing issue costs					-35.5	-46.6	-38.3
Total interest-bearing liabilities					364.5	353.4	361.7

Note 11 | Provisions for other liabilities and charges

USD million	At 31 Mar		At 31 Dec 2017
	2017	2016
Non-current
Asset retirement obligations	21.2	4.6	23.2
Other long-term provision and charges	148.0	92.8	144.1
Total non-current provisions for other liabilities and charges	169.2	97.4	167.3
Current
Other provisions and charges	13.5	77.4	5.3
Total current provisions for other liabilities and charges	13.5	77.4	5.3
Total provisions for other liabilities and charges	182.6	174.9	172.6

Provisions for a water purification capacity building project in the Kurdistan region of Iraq are included in other long-term provision and charges for the Tawke license. The water purification project (WPP) is capitalized and depreciated over the life of the Tawke field. The WPP liability is not currently payable and actual payments will be contingent on defined gross revenue levels and will be fully recoverable through cost oil.

Changes in the timing of these payments will change the net present value of the liability and the calculated interest. The WPP liability is recorded at net present value, where the unwinding of interest is charged to profit or loss.

Provision for production bonuses for the Tawke and Erbil licenses in the Kurdistan region of Iraq is also included in provision for other liabilities and charges. Production bonuses relate to payments based on different production levels. The liabilities are classified as long-term.

Note 12 | Events after the reporting period

The company reported on 11 April 2017 receipt of USD 46.15 million from the Kurdistan Regional Government as payment towards January 2017 crude oil deliveries to the export market from the Tawke field. The funds, shared pro-rata by DNO and partner Genel Energy plc, include USD 38.70 million toward the monthly entitlement for January 2017 deliveries and USD 7.44 million toward recovery of outstanding receivables for past deliveries.

Alternative performance measures

DNO ASA discloses alternative performance measures as a supplement to the financial statements prepared in accordance with IFRS. Such performance measures are frequently used by securities analysts, investors and other interested parties and are meant to provide insight into the operation, financing and future prospects of the company.

EBITDA

USD million	Q1 2017	Q1 2016	2016
Revenues	76.7	49.6	201.8
Lifting costs	-13.0	-15.2	-68.6
Tariffs and transportation	-	-	-
Exploration expenses	-1.6	-3.5	-20.3
Administrative expenses	-5.0	-6.8	-31.0
Other operating income/expenses	-1.7	-0.6	13.6
EBITDA	55.4	23.6	95.4

Netback

USD million	Q1 2017	Q1 2016	2016
EBITDA	55.4	23.6	95.4
Paid taxes	-0.3	0.9	-2.1
Netback	55.1	24.5	93.4

	Q1 2017	Q1 2016	2016
Netback (USD million)	55.1	24.5	93.4
Company Working Interest production (MMboe)	6.4	5.4	25.3
Netback (USD/boe)	8.6	4.6	3.7

Lifting costs

	Q1 2017	Q1 2016	2016
Lifting costs (USD million)	-13.0	-15.2	-68.6
Company Working Interest production (MMboe)	6.4	5.4	25.3
Lifting costs (USD/boe)	2.0	2.8	2.7

Operational spend
-------------------

USD million	Q1 2017	Q1 2016	2016
Lifting costs	-13.0	-15.2	-68.6
Exploration expenses	-1.6	-3.5	-20.3
Tariffs and transportation	-	-	-
Capital expenditures	-31.8	-5.6	-36.4
Operational spend	-46.3	-24.3	-125.4

Equity ratio

USD	Q1 2017	Q1 2016	2016
Equity	413.2	431.8	401.9
Total assets	1,042.2	1,012.6	969.8
Equity ratio	39.6%	42.6%	41.4%
Reserve Life Index (R/P)
	Q1 2017	Q1 2016	2016

Annualized company Working Interest production (MMboe)	25.7	21.7	25.3
1P Reserves	217.7	243.9	217.7
2P Reserves	368.3	391.5	368.3
2P + 2C Reserves	529.6	523.1	529.6
1P Reserve Life Index (R/P in years)	8.5	11.3	8.6
2P Reserve Life Index (R/P in years)	14.4	18.2	14.5
2P + 2C Reserve Life Index (R/P in years)	20.6	24.2	20.9

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