DNO ASA — Investor Presentation 2016

Aug 18, 2016

Interim Presentation Second Quarter 2016

Corporate overview and operational highlights

Corporate overview

• Second consecutive quarter of operating profits on back of higher revenues and lower costs
• Commencing active drilling program following completion of workover campaign at flagship Tawke field in Kurdistan
• Five Tawke production wells planned in second half of 2016 to boost capacity from current 120,000 barrels of oil per day (bopd) to 135,000 bopd
• Resumption of regular export payments underpin new investments at Tawke
• In expectation of sustained Kurdistan payments to all operators, launched conditional offer to acquire Gulf Keystone Petroleum
• Taking further steps to rationalize and high grade portfolio and pursue growth opportunities, including outside of Kurdistan

Q2 2016 operational highlights

• Operated production in Q2 2016 climbed 27 percent to 122,900 barrels of oil equivalent per day (boepd), up from 97,000 boepd in Q1 2016
• Of which Tawke represented 117,000 bopd (115,400 bopd delivered for pipeline export through Turkey)
• Exports continue to be impacted by periodic pipeline closures in Turkey, including in June, July and August
• Average sales price of Tawke exports of USD 34 per barrel in Q2 2016, up from USD 21 in previous quarter
• Five workover wells completed at Tawke in Q2 2016 (three in Q1 2016) to reverse natural field decline and sustain production
• Oman production averaged 5,900 boepd during Q2 2016

Q2 2016 financial highlights

• Q2 2016 revenues of USD 61 million, of which Kurdistan share was USD 56 million
• Fifth consecutive quarter in which DNO revenues totaled USD 50 million or higher
• Q2 2016 operating profit of USD 16 million, up from USD 8 million in Q1 2016
• Projected 2016 capital investments of 100 million funded by cash from operations
• Exited the quarter with cash balance of USD 249 million

Stepping up drilling in Kurdistan, Oman

• In Kurdistan, two rigs currently active with third rig to be mobilized in September
• Five new production wells planned in Tawke include three deep Cretaceous and two shallow Jeribe wells
• First Cretaceous well, Tawke-31, drilling ahead at 1,650 meters with expected completion by end-September
• Drop in drilling costs to USD 9 million on average for Cretaceous wells and USD 3 million for Jeribe wells
• Average cost of USD 500,000 per well for eight Tawke workovers completed in first half of 2016
• Appraisal well at Peshkabir discovery on Tawke license will spud in October
• In Oman, plan to re-drill and restore oil production at West Bukha-5 well in December

2016 drilling program

Well	2016
	July	August	September	October	November	December
Tawke-31 (Cretaceous producer)
Tawke-35 (Cretaceous producer)
Tawke-36 (Cretaceous producer)
Tawke-32 (Jeribe water disposal)
Tawke-33 (Jeribe producer)
Tawke-34 (Jeribe producer)
Peshkabir-2 (appraisal)
West Bukha-5 (re-drill)

Seeking stronger Kurdistan platform with Gulf Keystone offer

• Tawke and Shaikan fields represent gross production capacity of 160,000 bopd or one-third of Kurdistan's total
• Combined, DNO and Gulf Keystone place first among European independent E&P companies in 2P reserves
• At current production and oil prices, Gulf Keystone's share of Shaikan monthly revenues cannot sustain corporate running costs and support new investments to materially increase capacity nor maintain reserves levels
• DNO's track record of low cost drilling and other operational synergies offer critical efficiencies
• Gulf Keystone investors to receive 20 percent premium to current valuation set by management and keep exposure to Shaikan supplemented by DNO's wider portfolio of assets, higher market capitalization, more robust cash flow, stronger balance sheet and proven capabilities
• Offer conditional upon completion of Gulf Keystone financial restructuring; timely and irrevocable undertaking of support by largest noteholders and bondholders and approvals from the Kurdistan Regional Government

Financial review

DNO financial results – key figures

Operating profit USD million

• Q2 revenues up 23 percent on higher Tawke exports
• YTD operating profit of USD 24 million, reversing 2015 losses

Financial summary

USD million	Q2 2016	Q1 2016	Q2 2015	YTD 2016	YTD 2015
Sales	61.2	49.6	54.8	110.8	80.8
Cost of goods sold	-32.0	-30.7	-65.7	-62.7	-127.5
Gross profit	29.2	18.9	-10.9	48.1	-46.7
Expensed exploration	-16.1	-3.5	-5.4	-19.6	-14.7
Administrative expenses	-7.9	-6.8	-4.7	-14.7	-9.0
Other operating income/expenses	4.9	-0.6	-2.3	4.3	-8.9
Impairment of oil and gas assets	6.0	--	--	6.0	-13.2
Profit/loss from operating activities	16.2	8.0	-23.3	24.1	-92.5
Net finance	-11.1	-12.2	-15.9	-23.3	-19.8
Profit/loss before income tax	5.1	-4.3	-39.2	0.8	-112.4
Income tax expense	-1.0	-0.7	-0.7	-1.7	-1.7
Net profit/loss	4.0	-4.9	-39.9	-0.9	-114.1

• Cost of goods sold halved year-on-year on lower lifting costs and DD&A
• Expensed exploration in Q2 reflects dry well costs at Block 36 in Oman

Investment program

Capex and capitalized exploration USD million

Kurdistan Oman Yemen UAE Tunisia Other

• Limited capex spending YTD, forecasting capex of USD 80 million during second half of 2016, mainly on extensive drilling in Kurdistan
• USD 18.8 million spent YTD, of which USD 13.5 million was expensed during Q2 following dry well in Oman

Q2 2016 cash flow

• Q2 operational cash flow of USD 7.7 million
• Working capital changes of USD -27.1 million
• Tawke booked local sales receivable reduced by USD 8.5 million

Capital structure

Equity ratio Percent

• Solid balance sheet with low leverage
• Net interest bearing debt stands at USD 151 million
• Increase in financial asset value to USD 25 million

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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 18 August 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.