DNO ASA — Investor Presentation 2016

Nov 10, 2016

Interim Presentation Third Quarter 2016

Corporate overview and operational highlights

Corporate overview

• Third consecutive quarter of operating profits underscores DNO's financial recovery
• Stepped up investments in Kurdistan in 2016 with drilling of four wells at flagship Tawke field, adding 10,000 barrels of oil per day (bopd) of new production
• At 118,000 bopd, Tawke currently exceeds the combined production of fields operated by all other international oil companies in Kurdistan
• Recent export payments by Kurdistan Regional Government for Tawke have been irregular and delayed; notwithstanding, Tawke payments year-to-date (YTD) have totaled USD 255 million, of which USD 184 million net to DNO
• DNO continues to respond to challenging oil market environment by focusing on low-risk, low-cost drilling and further rationalization of portfolio by shedding non-core assets

Q3 2016 operational highlights

• Operated production in Q3 averaged 114,500 barrels of oil equivalent per day (boepd)
• Of which Tawke represented 109,200 bopd
• Tawke production periodically constrained by pipeline closures in Turkey
• Average wellhead sales price for Tawke crude of USD 34 per barrel in Q3 2016, unchanged from previous quarter
• Oman production averaged 5,300 boepd during the quarter
• Total Q3 Company Working Interest (CWI) production averaged 70,300 boepd

Q3 2016 financial highlights

• Q3 2016 revenues of USD 49 million
• Q3 operating profit of USD 9 million, resulting in YTD operating profit of USD 33 million
• Projected 2016 capital investments of USD 70 million, funded by cash from operations, against previous guidance of USD 100 million
• Continue to strengthen our balance sheet
• Exited the quarter with cash of USD 266 million, up from USD 238 million at end-2015

Tawke drilling activity

• Four production wells completed YTD 2016 utilizing two rigs
• Tawke-31 Cretaceous well completed at cost of USD 7 million and currently producing 4,000 bopd
• Encouraging results from Tawke shallow Jeribe wells; quick-drill (10 days), low-cost (USD 2 million) wells have together added 6,000 bopd of new production
• Spudded Peshkabir-2 well in early October to appraise Jurassic reservoir and explore Cretaceous horizon on previous discovery west of main Tawke field; drilling ahead at 2,000 meters and expected to reach target depth of 3,500 meters in January 2017
• First half 2017 drilling of Tawke-35 and Tawke-36 Cretaceous wells and currently firming up plans for Tawke-41 Cretaceous well and Tawke-38 and Tawke-39 Jeribe wells
• Engagement of a third drilling rig at Tawke license in 2017 contingent on export payments and drawdown of receivables from the Kurdistan Regional Government

12-month drilling program

Firm Contingent

Gulf Keystone revisit

• July 2016 proposal to acquire Gulf Keystone at USD 300 million in cash and shares has expired as certain conditions to the financial restructuring set by Gulf Keystone itself appear not to have been met
• Given uncertainties about Gulf Keystone's asset, commercial outlook and future rights and obligations at Shaikan field, and following a careful review of the company's latest reserves report, DNO prepared to consider all cash transaction but at meaningful discount to previous USD 300 million cash-and-shares offer
• Approval from Kurdistan Regional Government still required
• Clear operational synergies and efficiencies in a DNO-Gulf Keystone combination in Kurdistan

Financial review

DNO financial results – key figures

Operating profit USD million

• Q3 revenues below entitlement due to Kurdistan payment delay
• Strong operational cash flow

Kurdistan payment update

• Since resumption of export payments in September 2015, 12 monthly payments received from KRG totaling USD 345 million (USD 249 million net to DNO)
• In Q3, payments totaling USD 67 million (USD 50 million net to DNO) received for Tawke exports
• Gross payment of USD 31 million (USD 22 million net to DNO) for August exports not received until Q4 2016

Entitlement Payment towards booked receivable

Financial summary

USD million	Q3 2016	Q2 2016	Q3 2015	YTD 2016	YTD 2015
Sales	48.8	61.2	52.1	159.6	132.9
Cost of goods sold	-29.1	-32.0	-42.8	-91.8	-170.3
Gross profit	19.8	29.2	9.3	67.9	-37.4
Expensed exploration	0.6	-16.1	-4.7	-19.0	-19.4
Administrative expenses	-6.9	-7.9	-3.9	-21.6	-12.9
Other operating income/expenses	-2.3	4.9	-0.8	2.1	-9.8
Impairment of oil and gas assets	-2.0	6.0	0.0	4.0	-13.2
Profit/loss from operating activities	9.1	16.2	-0.1	33.3	-92.6
Net finance	-11.5	-11.1	-14.8	-34.8	-34.7
Profit/loss before income tax	-2.4	5.1	-14.9	-1.6	-127.3
Income tax expense	-0.8	-1.0	0.1	-2.5	-1.7
Net profit/loss	-3.2	4.0	-14.9	-4.1	-129.0

• Improved YTD financials on back of higher revenues and lower costs
• Increase in YTD operating profit to USD 33.3 million, compared with operating loss of USD 92.6 million during same period in 2015

Investment program

Capex and capitalized exploration USD million

Kurdistan Oman Yemen UAE Tunisia Other

• Revised capex forecast of USD 70 million for 2016 following review of drilling plans

• USD 29.9 million spent YTD, of which USD 11.8 million was expensed in Q2 following dry well in Oman

Q3 2016 cash flow

• Strong Q3 operational cash flow of USD 30.2 million
• Limited working capital changes
• Tawke booked local sales receivable reduced by USD 4.2 million during Q3

Capital structure

Equity ratio Percent

• Cash balance up to USD 266 million
• Net interest bearing debt stands at USD 134 million
• Solid balance sheet with low leverage

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The Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or industry and markets in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. Any forward-looking statements and other information contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts based on the current expectations, estimates and projections of the Company or assumptions based on information currently available to the Company, which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development.

Although the Company believes that its expectations and the Presentation are based upon reasonable assumptions, neither the Company, nor any of its subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking information and statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forwardlooking statements or to conform these forward-looking statements to our actual results.

Any investment involves risks, and several factors could cause the actual results, performance or achievements of the Company as described herein to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in this Presentation, including, among others, risks or uncertainties associated with the Company's business, segments, development, growth management, financing, market acceptance and relations with customers. More generally an investment will involve risks related to general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors. Should one or more of such risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Presentation.

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The Presentation speaks and reflects prevailing conditions and views as of 10 November 2016. It may be subject to corrections and change at any time without notice except as required by law. The delivery of this Presentation - or any further discussions of the Company with any recipient - shall not, under any circumstances, create any implication that the Company assumes any obligation to update or correct the information herein, nor any implication that there has been no change in the affairs of the Company since such date.