DNO (DNO) Q2 2024 earnings summary

Executive summary

• Net profit doubled to $35 million on revenue of $137 million in Q2 2024, with net production up 6% to 79,400 boepd, driven by Kurdistan, North Sea, and West Africa operations.

• Celebrated 20 years since the signing of the Tawke PSC, with 450 million barrels produced to date.

• Completed the Arran acquisition and signed the Norne area deal in the North Sea, enhancing the production outlook.

• Issued a new 5-year bond, upsized to $400 million at a 9.25% coupon, the lowest margin to market rates in company history.

• Increased the dividend by 25%, the first increase since its reintroduction in late 2021.

Financial highlights

• Q2 2024 revenue was $137 million, down from previous quarters due to underlift, lower North Sea prices, and reduced Kurdistan entitlement production.

• North Sea revenues fell by $43 million to $80 million; Kurdistan revenues declined by $3 million to $57 million.

• Operating loss of $3.2 million, impacted by goodwill impairment from the Arran acquisition, offset by deferred tax asset recognition.

• Net profit: $34.5 million, reversing a loss of $18.5 million in Q2 2023, with a $20 million positive tax effect.

• Operational cash flow increased to $139 million in Q2, up from $100 million in Q1.

• Free cash flow was $76 million (excluding Arran acquisition), with cash position rising to $943 million at quarter-end.

Outlook and guidance

• North Sea production expected to grow in 2025 with new acquisitions, Trym restart, Andvare start-up, and delayed projects coming online.

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

• Dividend increase deemed sustainable, not contingent on reopening of the Kurdistan export pipeline.

• Continued focus on debt recovery from KRG sales in 2022 and 2023.

• Exploration spend for 2024 reduced to $150 million.