DNO ASA — Investor Presentation 2017

Aug 24, 2017

Presentation Half-Year 2017 Interim Results

Corporate overview and operational highlights

Corporate overview

• DNO steps up its engagement in Kurdistan on back of strong H1 2017 results
• Drilling 15 new wells in Kurdistan in 2017, more than all international operators combined
• Operated production averaging 114,000 barrels of oil equivalent per day (boepd), up 4 percent from H1 2016
• Generated USD 230 million in cash from operations in H1 2017, up nearly six-fold from H1 2016
• Free cash flow of USD 157 million in H1 2017 (USD 36 million in H1 2016)
• Strengthened balance sheet, exiting H1 2017 with cash balance of USD 381 million (USD 261 million at year-end 2016) and USD 43 million in treasury shares and marketable securities
• Net debt down to USD 19 million at end-H1 2017
• Planned 2017 capex of USD 130 million, up from USD 36 million in full-year 2016

H1 2017 operational highlights

• Of H1 2017 operated production of 114,000 boepd, Kurdistan represented 109,700 barrels of oil per day (bopd) and Oman 4,300 boepd
• Company Working Interest (CWI) production averaged 70,200 boepd during H1 2017
• In Oman offshore Block 8, West Bukha-5B well drilled to 4,500 meters and tested up to 2,000 bopd, but would not flow naturally, was shut in and artificial lift studies ongoing
• Also offshore Oman, Bukha-1 well umbilical replacement and production reinstatement nearly complete
• Hawler-1A well will spud in October to appraise Benenan heavy oil field in Kurdistan's Erbil license
• In Tunisia, planning exploration well at Sfax Offshore Exploration Permit during first part of 2018

H1 2017 financial highlights

• Received Kurdistan export payments totaling USD 181 million net to DNO in H1 2017, of which USD 32 million toward past receivables
• H1 2017 revenues of USD 158 million, up 43 percent from H1 2016
• Lowered Tawke booked receivables to USD 58 million at end-H1 2017
• Resumed share buybacks in March 2017, raising treasury shareholding at end-H1 2017 to 32.6 million (3 percent of shares outstanding)
• Average acquisition cost of all treasury shares held is NOK 7.03 per share

Stepped up Tawke drilling

• Reached milestone of 200 million barrels cumulative production at Tawke field in May
• Three drilling rigs currently operating in Kurdistan, of which two at Tawke and one at Peshkabir
• 2017 Tawke drilling program includes 10 production wells, of which six are deep Cretaceous and four shallow Jeribe wells
• New Tawke wells help stabilize field production at around 110,000 bopd
• Additional well workovers and facilities upgrades ongoing

Peshkabir update

• Peshkabir-2 well producing from Cretaceous reservoir at steady rate of 4,700 bopd of 28◦ API crude oil since June
• Well producing with zero water cut, gas-oil ratio is stable (550 scf/bbl) and flowing wellhead pressure has decreased only 6 psi since startup
• Indications well connected to sizable resource; further drilling and testing required to determine volume
• Peshkabir-2 well also capable of producing additional 2,500 bopd of 24◦ API crude oil from Jurassic reservoir
• Peshkabir-3 well spud in July and drilling at 2,400 meters with target depth of 4,000 meters to test the northern extension of the Cretaceous reservoir
• Early production facility acquired for installation at field
• Two Peshkabir wells expected on production by year-end and two more wells planned in 2018

North Sea update

• Holds stakes in 11 exploration and appraisal licenses, of which seven on Norwegian Continental Shelf (NCS) and four on UK Continental Shelf (UKCS)
• Actively pursuing additional stakes on NCS, including acquisition of producing assets
• Will participate in Norway's two upcoming licensing rounds in H2 2017
• Goal to be among most active explorers on NCS, targeting participation in five exploration wells per year
• Val d'Isere prospect on UKCS (22.5 percent working interest) to be spud by end-2017 and cost of USD 12 million net to DNO

2017 Kurdistan drilling schedule

Financial review

DNO financial results – key figures

Operating profit USD million

• H1 2017 revenues increased by 43 percent compared to H1 2016
• H1 2017 netback more than doubled compared to same period last year

Kurdistan YTD 2017 payments

• During H1 2017, export payments net to DNO totaled USD 181 million, of which USD 32 million toward booked receivables

• Two export payments in Q3 2017 totaling USD 57 million net to DNO, of which USD 9 million toward booked receivables

Financial summary

USD million	Q2 2017	Q1 2017	Q2 2016	H1 2017	H1 2016
Revenue	81.7	76.7	61.2	158.4	110.8
Cost of goods sold	-35.7	-30.0	-32.0	-65.7	-62.7
Gross profit	45.9	46.7	29.2	92.6	48.1
Expensed exploration	-1.5	-1.6	-16.1	-3.0	-19.6
Administrative expenses	-6.9	-5.0	-7.9	-11.9	-14.7
Other operating income/expenses	-1.6	-1.7	4.9	-3.3	4.4
Impairment of oil and gas assets	-37.2	-10.6	6.0	-47.8	6.0
Profit/loss from operating activities	-1.2	27.8	16.2	26.6	24.1
Net finance	-11.9	-12.1	-11.1	-24.0	-23.4
Profit/loss before income tax	-13.2	15.7	5.1	2.5	0.8
Income tax expense	0.3	-1.0	-1.0	-0.7	-1.7
Net profit/loss	-12.9	14.7	4.0	1.8	-0.9

• Increasing revenues and stable operating costs
• H1 2017 gross profit nearly doubled from H1 2016

Investment program

Capex Expex Lifting

• Projected operational spend in 2017 to increase more than 70 percent compared with 2016 levels
• Planned capex for 2017 increased to USD 130 million, up from earlier guidance of USD 100 million

H1 2017 cash flow

USD million

• Strong H1 2017 operational cash flow of USD 230 million (USD 41 million in H1 2016)
• Cash balance increase of USD 119 million since end-2016

Capital structure

• Solid balance sheet with low leverage
• Net debt reduced to USD 19 million
• Increase in value of treasury shares and marketable securities to USD 43 million

Important notice

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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 24 August 2017. 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.