Content
Highlights
3
Key figures
4
Board of Directors
5
Board of Directors’ report
6
Introduction
6
Operations review
7
Business development
8
Financial performance
8
Corporate governance
9
Enterprise risk management
12
HSSE performance
13
Organization and personnel
14
Parent company
17
Main events since yearend
17
Responsibility statement
18
Consolidated accounts
21
Parent company accounts
72
Country-by-Country report
85
Auditor’s report
86
EU Taxonomy
92
Alternative performance measures
94
Glossary and definitions
97
Annual Report and Accounts 2023
DNO
3
Highlights
Highlights
In a year marked by North Sea exploration success and Kurdistan export shutdown, DNO
recorded 2023 revenues of USD 668 million and operating profit of USD 218 million. Across the
portfolio net production averaged 52,600 barrels of oil equivalent per day (boepd), of which
Kurdistan contributed 34,900 boepd, North Sea 14,200 boepd and West Africa 3,500 boepd.
The North Sea business delivered a string of discoveries last year including Carmen (DNO 30
percent), Norma (30 percent), Heisenberg (49 percent) and Røver Sør (20 percent). Successful
2023 appraisal moved previous discoveries Bergknapp (30 percent) and Ofelia (10 percent) closer
to development, as DNO pushes for early commercialization of its discovered resources.
At yearend, gross production from the DNO operated Tawke license (75 percent) in Kurdistan had
largely recovered from the March 2023 export pipeline shutdown and was averaging 80,000
boepd. Post pipeline shutdown, the Company’s net entitlement share has been sold at prices in the
low-to-mid USD 30s per barrel on a cash and carry basis and transported by traders by road tanker
or pipeline to local refineries. Concurrently, Tawke license operational spend was cut by some 65
percent from pre-pipeline shutdown levels as drilling activity was curtailed and staffing levels
reduced.
The balance sheet remains strong with a yearend equity ratio of 47 percent as the Company exited
2023 with cash deposits of USD 719 million and net cash of USD 153 million. The Company
continues to engage in discussions related to recovery of arrears for past deliveries to the
Kurdistan Regional Government (KRG) and payment terms and conditions for any future oil
exports, which in turn will drive investments.
DNO remains stubbornly resilient in its second semi-centennium and will take new challenges
head on. We will continue to grow a bold and nimble international oil and gas company with
prioritization of shareholders who ultimately rank highest among our stakeholders. Last year, the
Company returned USD 92 million to shareholders in the form of dividends and another USD 51
million through share buybacks. Furthermore, DNO has kept a flawless bond track record for more
than 20 years with no waivers, no amendments and early repayments.
In sum, DNO continues to be a company characterized by low-cost production, successful
exploration, attractive growth prospects and a robust balance sheet.
1
“DNO”, “Company” and “Group” may be used for convenience where reference is made to those companies. Likewise, the words “we”,
“us”, “our” and “ourselves” may be used with respect to the companies of the DNO Group.
4
DNO
Key figures
Key figures
Key financials (USD million)
2023
2022
Revenues
667.5
1,377.0
EBITDAX
431.5
1,116.0
EBITDA
383.8
1,019.5
Operating profit/-loss
218.3
431.4
Net profit/-loss
18.6
384.9
Free cash flow
-81.8
618.8
Operational spend
561.9
741.4
Net cash/-debt
152.7
388.2
Lifting costs (USD/boe)
10.7
6.5
Key operational data
2023
2022
Gross operated production (boepd)
46,500
107,637
Net production (boepd)*
52,566
97,310
Sales volume (boepd)
28,885
38,444
Net 2P reserves (MMboe)*
290.1
292.1
* Net production in 2022 and net 2P reserves at yearend 2022 include West Africa segment (equity accounted investment),
For reconciliation and more information about key figures, see the section on alternative performance measures.
Board of Directors
Annual Report and Accounts 2023
DNO
5
Board of Directors
BIJAN MOSSAVAR-RAHMANI
Executive Chairman
Bijan Mossavar-Rahmani has served as DNO’s Executive Chairman of the Board of Directors since 2011
and is a member of the nomination and remuneration committees.
Mr. Mossavar-Rahmani’s full-time role encompasses strategic, managerial and operational responsibilities at DNO,
of which he is the largest shareholder. An experienced industry executive, he has served as Chairman of the Board
of RAK Petroleum plc between 2013-2022, co-founder and Chairman of Foxtrot International LDC since 1998 and
founder and first Chief Executive Officer of Apache International Inc. between 1988-1992. In addition to his industry
positions, he is active in philanthropy, education and the arts. He is a Trustee of the New York Metropolitan
Museum of Art where he chairs the Audit Committee and the Visiting Committee on Islamic Art and is a member of
the Executive Committee and the Finance Committee, a Director of the Persepolis Foundation and a member of
Harvard University’s Global Advisory Council and of Princeton University’s Nassau Hall Society. He has published
more than ten books on global energy markets and was decorated Commandeur de l’Ordre National de la Côte
d’Ivoire for services to the energy sector of that country. Mr. Mossavar-Rahmani is a graduate of Princeton (AB) and
Harvard Universities (MPA).
GUNNAR HIRSTI
Deputy Chairman
Gunnar Hirsti was elected to DNO’s Board of Directors in 2007, chairs the audit committee and is a member
of the remuneration committee.
Mr. Hirsti has extensive experience from various managerial, executive and board positions in the oil and gas
industry as well as the information technology industry in Norway. He was Chief Executive Officer of DSND Subsea
ASA (now Subsea 7 S.A.) for a period of six years. He also served as Executive Chairman of the Board of Blom
ASA for eight years. Mr. Hirsti holds a degree in drilling engineering from Tønsberg Maritime Høyskole in Norway.
ELIN KARFJELL
Director
Elin Karfjell was elected to DNO’s Board of Directors in 2015 and is a member of the audit committee.
Ms. Karfjell is Director Property Management and Development of Statsbygg and has held various management
positions across a broad range of industries, including Managing Partner of Atelika AS and Chief Executive Officer
of Fabi Group, Chief Financial Officer of Atea AS and partner of Ernst & Young AS and Arthur Andersen. Current
directorships include Philly Shipyard ASA, North Energy ASA and Contesto AS. Ms. Karfjell is a state authorized
public accountant with a Bachelor of Science in Accounting from Oslo and Met and a Higher Auditing degree from
the Norwegian School of Economics and Business Administration.
ANITA MARIE HJERKINN AARNÆS
Director
Anita Marie Hjerkinn Aarnæs was elected to DNO’s Board of Directors in 2022 and is a member of the HSSE
committee.
Ms. Hjerkinn Aarnæs is Managing Partner Nordics at The Board Practice. She has extensive international
experience with strategy development, governance and organizational effectiveness across industries and in
particular within the energy sector. She held the position as Director of Human Resources in the Company from
2012 to 2015, prior to which she had served as Managing Partner at Heidrick & Struggles and as Management
Consultant with PA Consulting Group. Ms. Hjerkinn Aarnæs was a member of the Board of Directors of Norwegian
Finans Holding ASA from its inception. She is a certified EFQM assessor. She holds a degree in Public Law and is
a graduate of the University of Oslo (Cand Mag) and Harvard University (MPA).
NAJMEDIN MESHKATI
Director
Najmedin Meshkati was elected to DNO's Board of Directors in 2023 and chairs the HSSE committee.
Dr. Najmedin Meshkati is a Professor of Civil/Environmental Engineering; Industrial & Systems Engineering and
International Relations at the University of Southern California. As a global leader and expert in human performance and
safety culture, Dr. Meshkati has served on numerous boards, councils and panels, including the United States panel
analyzing the causes of the Deepwater Horizon explosion. Dr. Meshkati holds a BS in Industrial Engineering and a
BA in Political Science from Sharif (Arya-Mehr) University of Technology and Shahid Beheshti University (National
University of Iran), respectively. He holds a MS in Engineering Management and a PhD in Industrial and Systems
Engineering from the University of Southern California. He is a Certified Professional Ergonomist.
Board of Directors’ report
6
DNO
Board of Directors’ report
Introduction
2023 full-year results highlights
●
million in 2022;
●
million) and North Sea revenues totaled USD 414 million
(2022: USD 557 million);
●
million);
●
million in 2022;
●
million in net cash (USD 954.3 million in cash and USD 388.2
million in net cash yearend 2022)
●
containing the Tawke and Peshkabir fields, averaged 46,276
barrels of oil per day (bopd) compared to 107,101 bopd in
2022;
●
97,310 boepd in 2022;
●
2022) contributed 3,513 boepd of net production from equity
accounted investment; and
●
of oil equivalent (MMboe), compared to 292 MMboe at
yearend 2022.
For a detailed financial review, see section on financial
performance.
Our vision and strategic priorities
DNO is a Norwegian oil and gas operator active in the Middle
East, the North Sea and West Africa. DNO’s vision is to remain
a leading, growth-oriented exploration and production company
seeking to deliver attractive returns to shareholders by finding
and producing oil and gas at low cost and at an acceptable
level of risk in a socially responsible and environmentally
sensitive manner. To achieve this vision, our strategic priorities
include:
●
existing reserves base;
●
exploration and appraisal drilling;
●
efficient allocation of capital in line with DNO’s full-cycle
business model to deliver growth at a low unit cost;
●
best talent in the industry;
●
●
commitments and managing risks to the business;
●
best practices in our areas of operation; and
●
resources and control emissions.
Production strength and capacity
DNO reported gross operated production 2023 of 46,500 bopd,
down from 107,637 bopd in 2022, negatively impacted by the
shutdown of the Iraq-Türkiye Pipeline (ITP) export route since
late March 2023. DNO’s net production averaged 52,566 boepd
in 2023, down from 97,310 boepd in 2022. With net 2P reserves
totaling 290.1 MMboe across its portfolio, DNO has the asset
base to sustain material levels of production over the long term.
Organic reserves and resource growth
Done in a structured manner, successful exploration can be one
of the most cost-efficient methods of delivering significant
reserves growth and associated value creation. At DNO, we
focus our efforts on areas where we have in-depth knowledge
of the subsurface, playing to our technical and operational
strengths. We also benchmark each prospect so that capital
deployed to exploration is only allocated to those opportunities
that meet our technical, financial and strategic requirements.
Looking ahead, we will continue to actively pursue opportunities
in the North Sea, potentially complemented by selected targets
in high potential basins across the Middle East and West Africa
with the goal of transforming resources into reserves at a low
unit cost.
Operational control and financial flexibility
We operate our most significant oil and gas assets and have
the experienced team and operational capabilities to efficiently
deliver our work programs. To maintain the financial strength
and flexibility to fund growth opportunities, we will look to
internally generated funds and, when necessary, to
international capital markets to strengthen the Company’s
balance sheet.
Encouraging an entrepreneurial culture
DNO’s growth and success revolve around the quality and
commitment of our people. We are an entrepreneurial company
with a flat organizational structure which means we can make
decisions quickly and execute flexibly. Our employment
practices and policies help our staff realize their full potential.
We are committed to developing local talent in each of our
areas of operations.
Mergers and acquisitions
In addition to organic growth, we continuously evaluate new
assets and take an opportunistic approach to potential
acquisitions.
Corporate governance and managing risk
One of our priorities is to ensure that DNO is a responsible and
transparent enterprise. We are committed to the highest
standards of corporate governance, business conduct and
corporate social responsibility. Recognizing that the success of
an oil and gas company is directly linked to how well risks are
managed, we seek to improve our systems designed to identify
and effectively manage risks. We respect fundamental human
rights, provide decent working conditions and are committed to
the health, safety and security of our employees, contractors
and the communities in which we operate. The Norwegian
Transparency Act requires the Company to report on how it
promotes and addresses fundamental human rights and decent
working conditions in its operations, in its supply chain and with
its business partners. Accordingly, the Company has published
the 2022 Transparency Act Statement on its website
(https://www.dno.no/en/about-dno/governance/) and will publish
its 2023 statement by 30 June 2024. In addition, the Company
is continuously working to reduce the environmental impact of
our activities including with respect to greenhouse gas (GHG)
emissions. Please refer to the Company’s latest Corporate
Social Responsibility (CSR) Report, available on the
Company’s website, for more information.
Board of Directors’ report
Annual Report and Accounts 2023
DNO
7
Operations review
Annual Statement of Reserves and
Resources
The Company’s Annual Statement of Reserves and Resources
(ASRR) has been prepared in accordance with the Oslo Stock
Exchange listing and disclosure requirements Circular No.
1/2013. International petroleum consultants DeGolyer and
MacNaughton (D&M) carried out an independent assessment of
the Tawke license (containing the Tawke and Peshkabir fields)
and the Baeshiqa license (containing the Baeshiqa and Zartik
structures) in Kurdistan. International petroleum consultants
RPS Energy Consultants (RPS) carried out an independent
assessment of DNO reserves in Norway and the United
Kingdom (UK). Contingent resources in Norway are reported
based on numbers published by Norwegian Offshore
Directorate (NOD). DNO had no contingent resources in the UK
at yearend 2023. The International petroleum consultants
Beicip-Franlab carried out an independent assessment of
DNO's licenses (held through its indirect 33.33 percent interest
in the operating entity) in Côte d’Ivoire. The Company internally
assessed volumes reported for its Block 47 in Yemen.
At yearend 2023, DNO’s net proven (1P) reserves stood at
206.4 MMboe, compared to 220.3 MMboe at yearend 2022,
after adjusting for production during the year and upward
technical revisions. On a 2P reserves basis, DNO’s net
reserves stood at 290.1 MMboe, compared to 292.1 MMboe at
yearend 2022. On a proven, probable and possible (3P)
reserves basis, DNO’s net reserves were 360.5 MMboe,
compared to 386.7 MMboe at yearend 2022. DNO’s net
contingent (2C) resources were 204.6 MMboe, up from 152.5
MMboe at yearend 2022.
DNO’s net production in 2023 totaled 19.1 MMboe (of which
12.7 million barrels of oil (MMbbls) were in Kurdistan, 5.1
MMboe in Norway, 1.3 MMboe in Côte d’Ivoire and the balance
in the UK), compared to 35.4 MMboe in 2022 (of which 29.3
MMbbls in Kurdistan, 4.8 MMboe in Norway, 1.2 MMboe in
Côte d’Ivoire and the balance in the UK).
The Company’s net yearend 2023 Reserve Life Index (R/P)
stood at 10.8 years on a 1P reserves basis, 15.2 years on a 2P
reserves basis and 18.8 years on a 3P reserves basis.
The ASRR report for 2023 is available on the Company’s
website.
Kurdistan
Tawke license
Gross production from the DNO operated Tawke license,
containing the Tawke and Peshkabir fields, averaged 46,276
bopd during 2023 (107,101 bopd in 2022). The Tawke field
contributed 26,577 bopd (45,065 bopd in 2022) and the
Peshkabir field contributed 19,699 bopd (62,037 bopd in 2022).
The production decline from 2022 was due to the closure of the
ITP export route from 25 March 2023, which led to the shut-in of
both fields. Production was resumed at the Tawke field in July
2023, followed by the Peshkabir field in October 2023.
At yearend, gross production had largely recovered and was
averaging 80,000 boepd. The Company’s net entitlement share
of production in the second half of 2023 was sold at prices in
the low-to-mid USD 30s per barrel on a cash and carry basis
and transported by traders by road tanker or pipeline to local
refineries. In response to the closure of the ITP, DNO cut
operational spend by some 65 percent from pre-pipeline
shutdown levels as drilling activity was curtailed and staffing
levels reduced.
DNO holds a 75 percent operated interest in the Tawke license
with partner Genel Energy International Limited holding the
remaining 25 percent.
Baeshiqa license
Gross operated production at the Baeshiqa license averaged
224 bopd (536 bopd in 2022). Due to the closure of the export
pipeline, there was no production from the license in the second
half of 2023.
DNO holds a 64 percent operated interest in the Baeshiqa
license (80 percent paying interest) with partners being Turkish
Energy Company Limited (TEC) with a 16 percent interest (20
percent paying interest) and Kurdistan Regional Government
(KRG) with a 20 percent carried interest.
RESERVES
On a net basis at yearend 2023, 1P reserves in the Company’s
Kurdistan portfolio totaled 175.1 MMbbls (190.9 MMbbls at
yearend 2022), 2P reserves totaled 244.5 MMbbls (245.3
MMbbls at yearend 2022) and 3P reserves totaled 298.0
MMbbls (316.0 MMbbls at yearend 2022). Net 2C resources
were 59.5 MMbbls, compared to 62.4 MMbbls at yearend 2022.
The Company’s Kurdistan reserves relate entirely to the Tawke
license. Out of the net 2C contingent resources in the Kurdistan
portfolio, the Baeshiqa license represented 39.1 MMbbls (38.1
MMbbls at yearend 2022). Baeshiqa license volumes were
recorded as contingent resources pending drilling of an
additional well (which is planned for early 2024).
North Sea
In 2023, DNO had diversified production across 12 fields in the
North Sea of which 10 were in Norway and two in the UK.
During 2023, the Norwegian Fenja field came onstream,
contributing to a North Sea net production average of 14,203
boepd (13,314 boepd in 2022). Of the total, 13,926 boepd were
attributable to Norway and 277 to the UK (13,035 boepd and
279 boepd, respectively, in 2022).
In 2023, Norwegian development projects Andvare (32 percent)
and Berling (30 percent) received government approval. These
projects are expected to come on stream in 2024 and 2028,
respectively. The DNO-operated Trym field was readied for
recommissioning in early 2024. In addition, DNO was working
to mature previous discoveries such as Brasse (39 percent) for
project sanction.
During the course of the year, DNO drilled six North Sea
exploration wells resulting in four discoveries. In addition,
successful appraisal drilling moved previous discoveries
Bergknapp (30 percent) and Ofelia (10 percent) closer to
development. The Ofelia appraisal operation also led to a new
gas discovery in the overlying Kyrre formation.
RESERVES
At yearend 2023, DNO held 73 licenses in Norway in various
stages of exploration, development and production (68 licenses
at yearend 2022). Across its Norway portfolio and on a net
basis, DNO’s 1P reserves totaled 23.7 MMboe, 2P reserves
Board of Directors’ report
8
DNO
stood at 34.8 MMboe, 3P reserves totaled 49.0 MMboe and 2C
resources stood at 131.6 MMboe. The comparable yearend
2022 figures were 1P reserves of 24.6 MMboe, 2P reserves of
35.6 MMboe, 3P reserves of 48.1 MMboe and 2C resources of
80 MMboe.
In 2023, DNO had a successful exploration and appraisal
program in Norway resulting in Røver South, Heisenberg,
Carmen, Norma and Kyrre discoveries and confirming the
Ofelia and Bergknapp discoveries.
In the UK, DNO held four licenses at yearend 2023 (seven
licenses at yearend 2022). On a net basis, 1P reserves totaled
0.1 MMboe, 2P reserves stood at 0.3 MMboe, 3P reserves
totaled 0.4 MMboe. No 2C resources were booked for DNO’s
licenses in the UK at yearend 2023. The comparable yearend
2022 figures were 1P reserves of 0.4 MMboe, 2P reserves of
0.9 MMboe, 3P reserves of 1.3 MMboe and no 2C resources,
all on a net basis.
West Africa
DNO has an indirect 33.33 percent interest in privately held
Foxtrot International LDC (Foxtrot International) which has
stakes in two offshore licenses in Côte d’Ivoire. Foxtrot
International holds a 27.27 percent interest in and operatorship
of the producing Block CI-27, which contains the Foxtrot gas
field, the Mahi gas field, the Marlin oil and gas field and the
Manta gas field. Foxtrot International also operates the
exploration Block CI-12, in which it holds a 24 percent interest.
At the time of reporting, a two-well exploration program is
ongoing on this exploration block.
RESERVES
At the producing license CI-27, at yearend 2023 gross 1P
reserves stood at 83.1 MMboe (48.2 MMboe at yearend 2022),
gross 2P reserves stood at 115.6 MMboe (113.6 MMboe at
yearend 2022), gross 3P reserves stood at 144.9 MMboe
(234.6 MMboe at yearend 2022) and gross 2C resources stood
at 55.2 MMboe (17.9 MMboe at yearend 2022). Gross
production totaled 14.1 MMboe in 2023 (13.4 MMboe in 2022).
At the exploration license CI-12, at yearend 2023 gross 2C
resources stood at 45.3 MMboe, unchanged from yearend
2022.
Yemen
Production start-up at the Yaalen field at Block 47 in Yemen,
currently under force majeure, remains on hold. At yearend
2023, gross 2C resources at Block 47 stood at 6.2 MMbbls (4.8
MMbbls on a net basis), unchanged from yearend 2022.
Business development
In early 2023, DNO brought in OKEA ASA as the new 50/50
partner in its Brasse development project to undertake a fast-
track, low-cost review of a potential tieback of the discovery in
license PL740 offshore Norway to the OKEA-operated Brage
platform (DNO 14.2 percent). In August, the Company
announced that such a development concept had indeed been
agreed, upon which the operatorship of PL740 was transferred
to OKEA to maximize synergies with Brage and lower costs. To
further align interests across Brasse and Brage, DNO and
OKEA have since lowered their stakes in Brasse to 39.3
percent each by bringing Brage partners Lime Petroleum and M
Vest Energy into PL740. Final investment decision for the
Brasse project is expected in first half of 2024.
In the North Sea, DNO carried on high grading its portfolio in
2023 through a combination of licensing round awards, license
transactions and relinquishment of licenses deemed
unattractive following evaluation.
Across the portfolio, the Company continues to develop a
pipeline of new business opportunities to supplement its current
position in the Middle East, the North Sea and West Africa. It
actively pursues growth opportunities across the exploration
and production lifecycle, including exploration, development
and production, both organically as well as through potential
mergers and acquisitions.
Shortly after the end of the year, DNO announced an
agreement to acquire a 25 percent interest in the Arran field on
the UK Continental Shelf from ONE-Dyas E&P Limited. The
transaction is expected to add some four million barrels of oil
equivalent net to DNO, of which 90 percent gas, with projected
net 2024 production of 2,000-2,500 boepd. The acquisition
reflects DNO’s strategy of acquiring bolt-on producing assets as
the Company develops its discoveries elsewhere in the North
Sea. The cash consideration is USD 70 million plus a
contingent consideration of up to USD 5 million if certain
operational targets are met. The Company expects financial
synergies between Arran and DNO’s existing position in the UK.
Financial performance
Revenues, operating profit and cash
Total revenues in 2023 stood at USD 667.5 million, down from
USD 1,377 million in 2022. Kurdistan revenues stood at USD
253.2 million (USD 820.1 million in 2022), while the North Sea
generated revenues of USD 414.4 million (USD 556.9 million in
2022). The reported 2023 revenues were negatively impacted
by the March 2023 ITP shutdown in Kurdistan resulting in
reduced Kurdistan production with volumes sold in local market
at lower realized oil prices than previously achieved through
export. Lower realized oil and gas prices in the North Sea also
contributed to the decrease in 2023 revenues.
The Group reported an operating profit of USD 218.3 million,
down from USD 431.4 million in 2022. The lower operating
profit in 2023 compared to last year was driven by lower
revenues, partially offset by lower depreciation and
impairments.
The Group ended the year with USD 718.8 million in cash and
USD 152.7 million in net cash (USD 954.3 million in cash and
USD 388.2 million in net cash at yearend 2022).
Net cash flows from operating activities for the year was USD
194.1 million, down from USD 1,056.3 million in 2022. The
significant decrease in net cash flows from operating activities
was mainly due to lower revenues from Kurdistan and higher
North Sea net tax payments, partly offset by higher earned
interests. The difference between the cash generated from
operations from the cash flow statement and the operating profit
relates mainly to depreciation and impairment charges.
Board of Directors’ report
Annual Report and Accounts 2023
DNO
9
Investing activities of USD 281 million (USD 415 million in
2022) consist of USD 283.3 million in asset investments and
USD 17.9 million in decommissioning, partly offset by USD 20.2
million cash inflow from equity accounted investments (West
Africa).
Net cash outflows from financing activities of USD 147 million
(USD 419.1 million in 2022) was mainly related to distribution of
dividends and share buyback of USD 142.7 million in total
during 2023.
Cost of goods sold
In 2023, the total cost of goods sold was USD 364.8 million,
compared to USD 460.9 million in 2022. The decrease in cost
of goods sold was mainly driven by lower Kurdistan net
entitlement production following the ITP shutdown which
resulted in lower depreciation and lower production costs.
Depreciation charge from the North Sea was also significantly
lower compared to 2022 because book values of the Ula area
CGU were fully impaired at yearend 2022.
Impairment charges
The Group’s total impairment charges stood at USD 24.9 million
in 2023 and was entirely related to the North Sea (USD 371.3
million in 2022).
Exploration costs expensed
Total expensed exploration costs for the year were USD 47.7
million, down from USD 96.5 million in 2022, mainly driven by
the string of North Sea discoveries in 2023, which led to a
higher proportion of exploration cost being capitalized.
Capital expenditures
Total capital expenditures for the year were USD 278.3 million
in 2023 (USD 374.8 million in 2022), of which USD 73 million
were in Kurdistan and USD 204.4 million in the North Sea (USD
212.2 million and USD 161.1 million in 2022, respectively). Of
the total, USD 114.5 million (USD 74.6 million) were related to
exploration drilling activities. The reduction in Kurdistan capital
expenditures was a result of the Company’s cost reduction
measures, following the ITP shutdown in March 2023.
Assets, liabilities and equity
At yearend 2023, total assets stood at USD 2,638.3 million,
compared to USD 2,803 million at yearend 2022. The decrease
in total assets compared to last year was mainly due to
decrease in cash balance, partly offset by higher capitalized
North Sea exploration cost (see above). Total property, plant
and equipment (PP&E), intangible assets and goodwill
increased from USD 1,262 million at yearend 2022 to USD
1,378.5 at yearend 2023.
Total liabilities were USD 1,403.5 million, compared to USD
1,433.6 million at yearend 2022. The equity ratio stood at 46.8
percent at yearend 2022 (48.9 percent at yearend 2022).
Going concern
The Company regularly evaluates its financial position, cash
flow forecasts and its compliance with financial covenants by
considering multiple combinations of oil and gas prices,
production volumes, and operational spend scenarios.
As required under the Norwegian Accounting Act, the
Company’s Board of Directors conducted a review of the going
concern assumption considering all relevant information
available up to the date the DNO ASA consolidated and
Company accounts are issued and taking into account all
available information about the future covering at least 12
months from the end of the reporting period. The Board of
Directors’ review included, in particular, assessment of the
Group’s projected cash reserves and access to financing
arrangements, considering debt maturities and its operational
outlook and work programs, while maintaining appropriate
headroom in respect of sound equity, liquidity and financial
covenant compliance throughout the assessment period.
Following its review, the Board of Directors confirmed, pursuant
to the Norwegian Accounting Act section 3-3a, that the
requirements of the going concern assumption are met and that
these financial statements have been prepared on that basis.
Corporate governance
DNO’s corporate governance policy is based on the
recommendations of the Norwegian Code of Practice for
Corporate Governance.
The Articles of Association and the Norwegian Public Limited
Liability Companies Act form the corporate legal framework for
DNO’s business activities. In addition, DNO is subject to, and
complies with, the requirements of Norwegian securities
legislation.
The Group regularly reports on its strategy and the status of its
business activities through annual reports, half-year and full-
year results and other market presentations and releases.
Equity and dividends
SHAREHOLDERS’ EQUITY
It is DNO’s policy to maintain a strong credit profile and robust
capital ratios. We therefore monitor capital on the basis of our
equity ratio, with a policy that this ratio should be 30 percent or
higher. As of 31 December 2023, this ratio was 47 percent.
DIVIDEND POLICY
The Board of Directors assesses on an annual basis whether
dividend payments should be proposed for approval at the
Annual General Meeting (AGM). Assessment is based on
planned operational spend, cash flow projections and DNO’s
objective of maintaining a strong credit profile and robust capital
ratios. The Board also assesses dividend capacity prior to each
resolution on dividend payment.
At the 2022 AGM, 99.9 percent of the votes cast approved the
resolution to authorize the Board of Directors to approve total
dividend distributions of up to NOK 1 per share from the date of
the 2022 AGM until the date of the 2023 AGM. Following this,
the Board of Directors decided to distribute quarterly dividends
of NOK 0.25 in August and November 2022, as well as in
February and May 2023.
At the 2023 AGM, 99.3 percent of the votes cast approved of
the resolution to authorize the Board of Directors to approve
dividend distributions at its own discretion from the date of the
2023 AGM until the date of the 2024 AGM. Following this, the
Board of Directors decided to distribute quarterly dividends of
NOK 0.25 in August and November 2023, as well as in
February 2024.
Board of Directors’ report
10
DNO
OTHER AUTHORIZATIONS TO THE BOARD OF
DIRECTORS
At the 2022 AGM, the Board of Directors was given the
authority to acquire treasury shares with a total nominal value of
up to NOK 24,385,818 which corresponds to 97,543,373
shares. The maximum amount to be paid per share was NOK
100 and the minimum amount was NOK 1. The authorization
was time-limited until the 2023 AGM, and not beyond 30 June
2023.
Based upon this authorization, DNO in December 2022
announced the initiation of a share buyback program through
which the Company would repurchase up to 53,107,326 shares,
representing approximately five percent of total shares
outstanding, for a maximum total consideration of USD 80
million. On 21 March 2023, the Company announced the
completion of this program.
At the 2023 AGM, 99.3 percent of the votes cast approved of
the proposal to reduce the Company’s share capital by
cancelling the 53,107,326 treasury shares acquired under the
buyback program as well as 26,269,183 treasury shares held
prior to the program. Following this, the Company’s share
capital is NOK 243,750,000 divided into 975,000,000 shares,
each with a nominal value of NOK 0.25.
A new authorization to acquire treasury shares was approved
by the 2023 AGM, as the Board of Directors was given the
authority to acquire treasury shares with a total nominal value of
up to NOK 24,375,000 which corresponds to 97,500,000
shares. The maximum amount that can be paid for each share
is NOK 100 and the minimum is NOK 1. The acquisition and
sale of treasury shares may take place in any way the Board
may find appropriate other than by subscription of shares. The
authorization is valid until the 2024 AGM, but not beyond 30
June 2024.
The 2023 AGM also authorized the Board of Directors to
increase the Company’s share capital by up to NOK 24,375,000
which corresponds to 97,500,000 new shares. The
authorization is time-limited until the 2024 AGM, and not
beyond 30 June 2024.
In addition, the Board of Directors was given the authority to
raise convertible bonds with an aggregate principal amount of
up to USD 300,000,000. Upon conversion of bonds issued
pursuant to this authorization, the Company’s share capital may
be increased by up to NOK 24,375,000. The authorization is
valid until the 2024 AGM, but not beyond 30 June 2024.
Equal treatment of shareholders and
transactions with related parties
The Company has one class of shares and each share
represents one vote. We are committed to treating all
shareholders equally.
All transactions between the Company and related parties shall
be on arm’s length terms. Members of the Board of Directors
and executive management are required to notify the Board if
they have any direct or indirect material interest in any
transaction entered into by the Company.
Freely negotiable shares
The Company’s shares are listed on the Oslo Stock Exchange
and are freely negotiable.
General meetings
The AGM, usually held in the end of May or early June each
year, is the highest authority of the Company. The minutes of
the meetings are available on the Company’s website.
AGMs are convened by written notice to all shareholders with a
known address and published on the Company’s website
together with all appendices, including the recommendations of
the nomination committee. The notice is sent and published no
later than 21 days prior to the date of the meeting. Any person
who is a shareholder at the time of the AGM can attend and
vote, provided that they have been registered as a shareholder
no later than the fifth working day before the meeting.
Shareholders unable to attend a general meeting may vote
through a proxy.
In accordance with the Norwegian Public Limited Liability
Companies Act, the auditor of DNO, or shareholders
representing at least five percent of the share capital, may
request an extraordinary general meeting to deal with specific
matters. The Board of Directors must ensure that the meeting is
held within one month after the request has been submitted.
Board of Directors’ composition and
independence
The Company’s Articles of Association require that the Board of
Directors consist of three to seven members. All members,
including the Executive Chairman, are elected with an election
period until the 2025 AGM.
As of 31 December 2023, the Board of Directors consisted of
five members, all of whom have relevant and broad experience.
There are two women on the Board. The majority of the
members are independent of the Company’s executive
management and material business contacts.
The board members’ shareholdings are specified in the notes to
the consolidated accounts.
The Board of Directors’ work
The role of the Board of Directors is to supervise the
Company’s executive management and strategic development
in accordance with the long-term interests of the Company’s
shareholders and other stakeholders.
The Board of Directors is subject to a set of procedural rules
that, among other things, defines its responsibilities and the
matters to be discussed at board level. The Board of Directors
also regularly establishes work directives for the Managing
Director.
Directors’ and officers’ insurance
The Company has directors’ and officers’ liability insurance
which covers the cost of compensation claims made against the
Company’s directors and key managers (officers) for alleged
wrongful acts.
The Board of Directors’ committees
AUDIT COMMITTEE
The audit committee consists of two members: Mr. Gunnar
Hirsti (chair) and Ms. Elin Karfjell. The audit committee shall
evaluate the financial accounting and reporting process and its
Board of Directors’ report
Annual Report and Accounts 2023
DNO
11
responsibilities by law include monitoring the systems for
internal control and risk management including the Company’s
internal audit function, as well as reviewing and monitoring the
appointment, independence, and performance of the external
auditor.
HSSE COMMITTEE
The HSSE (health, safety, security and environment) committee
consists of Mr Najmedin Meshkati (chair) and Ms. Anita Marie
Hjerkinn Aarnæs. Its mandate is to review the Company’s
management of operational HSSE risks and performance.
REMUNERATION COMMITTEE
The remuneration committee consists of two members: Mr.
Bijan Mossavar-Rahmani and Mr. Gunnar Hirsti. Its mandate is
to consider matters relating to the compensation of executive
management.
NOMINATION COMMITTEE
The Company’s nomination committee consists of Mr. Bijan
Mossavar-Rahmani and two external members, Mr. Ferris J.
Hussein and Mr. Kåre Tjønneland. Its mandate is to propose
candidates for the Board of Directors and its various
committees to the AGM. It also proposes the level of
remuneration for the Board of Directors.
It is the Company’s assessment that it is in the interest of DNO
and its shareholders that the largest shareholder is represented
on the nomination committee. To ensure the independence of
the nomination committee, it also consists of two additional
members who are both considered independent of the Board of
Directors and the Company’s main shareholders.
REMUNERATION OF DIRECTORS
The remuneration of the Board of Directors and its committees
is decided by the AGM based on a recommendation from the
nomination committee. Fees reflect the Board of Directors’
responsibility, competence, workload and the complexity of the
business and are determined separately for the Executive
Chairman, the Deputy Chairman and other members. Additional
fees are applied on a uniform basis for each director’s
participation in the committees. Further information about the
Board of Directors’ remuneration is presented in the parent
company accounts (see Note 3).
Remuneration of executive management
The remuneration of the Company’s executive management,
including the Managing Director, is subject to the evaluation
and recommendation of the remuneration committee. The
remuneration of the Company’s Managing Director is evaluated
annually and approved by the Board of Directors.
The remuneration of executive management is presented in the
parent company financial statements (see Note 3).
Responsibility for risk management and
internal control
Risk management is integral to all of the Group’s activities.
Each member of executive management is responsible for
continuously monitoring and managing risk within the relevant
business areas. Every material decision is preceded by an
evaluation of applicable business risks.
Reports on the Group’s risk exposure and reviews of its risk
management are regularly undertaken and presented to the
executive management and the Board of Directors through the
audit committee. The Company has an internal audit function
and a compliance function whose responsibilities include
ensuring regulatory requirements and internal policies are
followed.
Information and communication
Our policy is to provide material information to all shareholders
in a timely manner.
DNO’s consolidated financial statements are prepared in
accordance with IFRS Accounting Standards as adopted by the
EU and additional disclosure requirements in the Norwegian
Accounting Act. Interim reports and other relevant information
are published on DNO’s website and through the Oslo Stock
Exchange.
DNO also publish an annual financial calendar setting out key
dates and events, such as regular market presentations. The
DNO investor relations’ policy encourages open communication
with capital markets and shareholders. In addition to scheduled
quarterly presentations, we regularly hold presentations for
investors and analysts.
Takeover
The Board of Directors has a responsibility to ensure that, in the
event of a takeover bid, business activities are not disrupted
unnecessarily. The Board of Directors also has a responsibility
to ensure that shareholders have sufficient information and time
to assess any such bid. Should a takeover situation arise, the
Board of Directors would undertake an evaluation of the
proposed bid terms and provide a recommendation to the
shareholders as to whether or not to accept the proposal. The
recommendation statement would clearly state whether the
Board of Directors’ evaluation is unanimous and the reasons for
any dissent.
Auditor
DNO’s external auditor is elected at the AGM, which also
approves the auditor’s fees for the parent company. The auditor
annually presents an audit plan to the audit committee and
participates in audit committee meetings to review the Group’s
internal control and risk management systems. The auditor also
participates in board meetings when considered appropriate,
with and without executive management present.
Information about the auditor’s fees, including a breakdown of
audit related fees and fees for other services, is included in the
notes to the financial statements in accordance with the
Norwegian Accounting Act.
DNO’s external auditor is Ernst & Young AS.
Board of Directors’ report
12
DNO
Enterprise risk management
The objective of DNO’s risk management is to identify potential
exposures that may impact the Group and to manage identified
risks within strict guidelines while pursuing our business
objectives. We continuously review our risk profile,
incorporating industry-recognized risk identification and
quantification processes. The Board of Directors and its
committees also regularly monitor the Group’s risk
management systems and internal controls.
Financial risk
Risks related to oil and gas prices, interest rates and currency
exchange rates, liquidity risk, concentration risk and credit risk
constitute financial risks for the Group. Financial risks are
managed by the Group finance function based on guidelines set
by the Board of Directors. For more information about how we
manage financial risk, see Note 22 in the consolidated
accounts.
Entitlement risk
DNO has interests in two licenses in Kurdistan through
Production Sharing Contracts (PSCs) and has based its
entitlement calculations on the terms of these PSCs.
The Company notes from public reports that on 15 February
2022, the Federal Supreme Court of Iraq (FSCI) ruled on a
matter stemming back to 2012 along with another related
matter dating back to 2019. Reportedly, the FSCI found
amongst other things that the Kurdistan Oil and Gas Law No.
27/2007 (KOGL) is unconstitutional, that the KRG is to hand
over all oil production from areas located in the Kurdistan region
of Iraq (KRI) to the Federal Government of Iraq (FGI) and that
the FGI has the right to pursue the nullity of the oil contracts
concluded by the KRG. DNO was not a party to the legal
proceedings. DNO has learned via media reports that on 4 July
2022, a commercial court in Baghdad ruled that PSCs signed
between the KRG and four international oil companies including
DNO should be voided. Likewise, DNO notes from media
reports that on 21 August 2022, the KRG filed third party
objections to the reported 4 July 2022 Baghdad court rulings
including those understood to concern DNO. These cases,
along with other similar cases against international oil
companies, are reported to be still pending. Furthermore and
importantly, the KRG has issued repeated reassurances that
the PSCs remain valid. There have been several rulings in Erbil
courts affirming the validity of the PSCs. DNO notes from public
reports that there is dialogue between the KRG and the FGI on
oil related matters, including on possible amendments of the
new 2023-2025 Federal Iraqi Budget Law FGI’s 2023 to 2025
Budget Law (Budget Law). It is unclear how and when the KRG
and the FGI will permanently address these matters. To date,
DNO continues its operations in Kurdistan, and developments
are closely monitored.
Due to disagreements between the FGI and the KRG,
economic conditions in Kurdistan and limited oil export
channels, DNO has historically faced constraints in fully
monetizing the oil it produces in Kurdistan. There is no
guarantee that oil can be exported or sold locally in sufficient
quantities or at prices required to sustain DNO’s operations and
investment plans or that the Group will promptly receive its full
entitlement payments for the oil it delivers for export. Export
sales have not always followed the PSC terms and there has
been uncertainty related to receipt of payments but
notwithstanding sometimes lengthy delays, payments have
ultimately been received by DNO.
In 2014, the FGI initiated an arbitration case against the
Government of Türkiye and its state-owned pipeline operator
BOTAS relating to the ITP. Following an arbitration ruling which
became publicly known on or around 24 March 2023, and which
were in parts in favor of Iraq, the ITP was closed for export of
Kurdish oil on 25 March 2023. Consequently, DNO announced
an orderly shutdown of its production in Kurdistan on 29 March
2023. As of the reporting date, the ITP remains closed. Despite
Türkiye’s announcement in October 2023 that the ITP is ready
to resume operations. There are media reports that indicate that
the ongoing discussions between the FGI and the KRG about
the Budget Law amendments can be linked to the delay of the
restart of export of Kurdish oil through the ITP.
At yearend 2023, the Company was owed a total of USD 315
million, excluding any interest, by the KRG mainly related to
export oil sales to the KRG for the months October 2022
through March 2023. These receivables are past due (see Note
14). The KRG has repeatedly stated that it is and remains
committed to its PSCs. Timing of export resumption and
payments for previous oil sales by the KRG is uncertain.
Consequently, DNO initiated cost reduction measures in
Kurdistan and commenced local sales on a cash and carry
basis, where the oil is transported by traders by road tanker or
pipelined to local refineries. The contractor entities’ entitlement
is sold by DNO. Varying by contract, local selling prices were in
the low-to-mid USD 30s per barrel during 2023, significantly
lower than the international prices previously achieved through
pipeline export. However, all local deliveries are prepaid by the
buyers directly to DNO, eliminating counterparty credit risk. The
Company continues to engage with the KRG regarding
recovery of the arrears and payment terms and conditions for
any future oil exports.
The FGI’s 2023 to 2025 Budget Law entered into force in June
2023. Under the Budget Law, the KRG will be allocated a share
of the federal budget plus compensation for oil production and
transportation costs which, according to the Budget Law, shall
be based on an average cost of production of certain, undefined
Iraqi fields. The conditions for KRG receiving a share of the FGI
budget include a requirement for the KRG to handover 400,000
bopd of oil produced from fields in Kurdistan to Iraq’s State Oil
Marketing Organization (SOMO), for marketing and sale. The
details of FGI-KRG budget allocations, implementation of the
Budget Law and the monetary size of the budget transfers to
the KRG are not clear to DNO and are reportedly still under
negotiation between the KRG and the FGI.
Operational risk
DNO is exposed to operational risks across its portfolio.
Operational risk applies to all stages of upstream operations,
including exploration, development and production. Failure to
manage operations efficiently can manifest itself in project
delays, cost overruns, higher-than-estimated operating costs
and lower-than-expected oil and gas production and/or
reserves. Exploration activities are capital intensive and involve
a high degree of geological risk. Sustained exploration failure
can affect the future growth and upside potential of DNO. Our
ability to effectively manage and deliver value from our
exploration, development and production activities is dependent
on the quality of our staff and contractors. Inefficiency or
interruption to our supply chain or the unwillingness of service
contractors to engage in our areas of operation may also
negatively affect operations.
Board of Directors’ report
Annual Report and Accounts 2023
DNO
13
DNO seeks to mitigate its operational risk through diligent
follow-up and management of both operated and partner-
operated assets. Defined targets and milestones are set for all
exploration and development projects, against which progress
is continuously monitored, allowing for early identification of
complications and timely remedial action. Risks of inefficiency
or interruption in the value chain are managed through close
monitoring of operational progress, efforts to eliminate the
probability of occurrence, as well as plans to mitigate adverse
consequences of such incidents should they occur.
Environmental risk
Oil and gas exploration and production, by its nature, involves
exposure to potentially hazardous materials. The loss of
containment of hydrocarbons or other dangerous substances
could represent material risks. Through our operational
controls, environmental impact assessments, asset integrity
protocols and management systems related to health, safety
and the environment, we mitigate environmental hazards and
related risks to our personnel, assets, profitability and
reputation.
Climate-related risk
Climate change concerns may prompt environmental action to
limit the use of fossil fuels, thereby affecting future demand and
supply for oil and gas and the pricing of these commodities.
In parallel, investor appetite for oil and gas investments both
within equity and debt markets may be reduced, inhibiting the
Group’s ability to obtain funding. Increasing concerns about
adverse climate impact could also reduce the attractiveness of
oil and gas sector companies (including DNO) as employers.
In the North Sea, carbon prices have been rising through CO
2
taxes, emissions trading schemes and carbon price floors.
Policies requiring electrification of offshore oil and gas
production may also increase North Sea operational costs.
In Kurdistan, the Government in 2021 introduced a requirement
that oil and gas companies curb associated gas flaring and thus
reduce emissions. While the Group is a pioneer in flaring
reduction measures in Kurdistan, having built the first
associated gas capture and injection facilities in the region at
the Tawke license, stricter policies or sanctions may increase
the Group’s operational cost or preclude development of oil
fields with high gas-oil-ratios.
In preparing these financial statements, management has
considered the impact of climate-related risks by assessing the
potential effects of stricter climate policies on its oil and gas
portfolio. To assess the robustness of its oil and gas assets, the
Company has run sensitivities with the oil and gas price
assumptions described by scenarios outlined by the
International Energy Agency (IEA), namely the Stated Policies
Scenario, Announced Pledges Scenario and the Net Zero
Emissions by 2050 Scenario (see Note 11).
In addition to the financial aspects mentioned above, climate
change may represent a physical risk to personnel and facilities
in the form of increased frequency and severity of extreme
weather events.
Security risk
Although some of our operations are in regions with security
risks, we continuously work to manage these risks through
clearly defined protocols and practices. Nevertheless, we are
often dependent on the quality of the security and protection
provided by authorities in host countries.
Compliance risk
DNO has a policy of zero tolerance for bribery, corruption, fraud
and any other illegal business conduct. Violations of compliance
laws and contractual obligations can result in fines and a
deterioration in the Group’s ability to effectively execute its
business. DNO adheres to a strict and comprehensive conflict
of interest policy, trade sanctions and other policies focused on
the Group’s Code of Conduct to ensure regulatory and
company expectations are met. The Company encourages its
personnel to raise concerns about unethical or illegal behavior
and breaches of DNO’s Code of Conduct or other Company
policies. The Company also has a confidential channel for those
who wish to raise such matters in strict privacy or even
anonymously.
Political risk
Our portfolio is located in some countries where political, social
and economic instability may adversely impact our business.
Relevant political developments on both the federal and
regional level in Iraq and otherwise in the Middle East are
closely monitored by the Group, although our operations to date
have been minimally impacted.
The Company notes the implications for commodity prices and
potential interruptions of supply chains and third-party services
from the ongoing conflicts. DNO is monitoring international
sanctions and trade control legislation to ensure compliance
and mitigate the potential impact on the Company’s operations.
Stakeholder risk
In order to operate effectively, the Company is maintaining
productive and proactive relationships with its stakeholders,
host governments, business partners and the communities in
which we operate. Failure to do so can result in difficulties in
progressing initiatives as well as delays to ongoing operations.
HSSE performance
Our HSSE standards, procedures and protocols are based on
the following principles:
●
●
operations on the environment;
●
and
●
During 2023:
●
compared to 1.44 in 2022.
●
seven in 2022.
●
driven of 4.9 million kilometers.
●
DNO’s offices and travel stood at 250,381 tonnes of CO
2
equivalent (CO
2
e), compared to 585,481 tonnes in 2022.
●
of CO
2
e in Scope 1 emissions, 383 tonnes of CO2e in Scope
Board of Directors’ report
14
DNO
2 emissions, and 2,808 tonnes of CO
2
e in Scope 3 emissions
(category six only).
●
of 2.8 billion cubic feet (bcf) of otherwise-flared associated
gas was captured and injected in 2023, delivering GHG
savings of 199,880 tonnes of CO
2
e.
●
captured and injected since gas injection started in 2020,
delivering GHG savings of 1.4 million tonnes of CO
2
e.
●
2022; and
●
barrels in 2022, most of which was removed and remediated.
Largely due to minor but reportable incidents on third party rigs
in the North Sea in 2023, DNO had a TRIF of 1.50,
which is higher than the industry average TRIF of 0.90 (based
on data from International Association of Oil and Gas Producers
(IOGP) for year 2022, the latest year for which data are
available). The Company is determined to improve its safety
performance and aims for a TRIF at the IOGP industry average
or better.
The Scope 1 and Scope 2 GHG intensity from our operated
assets averaged 14.6 kilograms of CO
2
2
e) per
barrel of oil equivalent (boe) produced in 2023, compared to
14.8 kgCO
2
e/boe in 2022. Our performance compared
favorably to the target set by a group of 12 of the world’s largest
oil and gas companies comprising the Oil and Gas Climate
Initiative (OGCI) to reduce the average intensity of their
upstream operations to 17 kgCO
2
e/boe by 2025 from a
collective baseline of 23 kgCO
2
e/boe in 2017.
Further activities
To improve the quality and coverage of our GHG quantification
and to better inform our GHG reduction efforts, we engaged a
third-party technical advisor in 2023 for a thorough review of our
GHG verification process. Although this work has improved
accuracy of DNO’s GHG emissions quantification from 2023
onward, it did not find any material shortcomings in DNO’s
practices. Looking ahead, DNO has set a GHG emissions
intensity target well below the average of the global upstream
industry.
In addition to its efforts to reduce CO
2
on reduction of methane emissions, a potent GHG. Since 2022,
DNO has been a signatory of the Aiming for Zero Methane
Emissions Initiative, an oil and gas industry pledge coordinated
by the OGCI, to reach near zero methane emissions from the
Company’s operated oil and gas assets by 2030 and actively
work with its partners in its non-operated assets to achieve the
same. In 2023, DNO joined the Methane Guiding Principles
(MGP), a coalition of industry and civil society organizations to
reduce methane emissions across the oil and gas global supply
chain. The MGP members develop and share practical tools
and guidance to help others to learn from their experience and
put those lessons into practice.
In order to reduce its own methane emissions, DNO has put in
place a Tawke license-wide Leak Detection and Repair (LDAR)
project to discover, measure and mitigate fugitive methane
emissions.
Organization and personnel
At yearend 2023, DNO had a workforce of 1,085 employees, of
which 13 percent were women. A total of 61 individuals were
based at the Company’s headquarters in Oslo and 1,024 were
engaged across our international operations, including in
business unit offices in Erbil, Stavanger, Dubai and Aberdeen.
Our workforce is characterized by strong cultural, religious and
national diversity, with some 39 nationalities represented.
At yearend 2023, the Board of Directors consisted of five
members, two of whom are women (40 percent). Executive
management and other leading personnel consisted of three
women (33 percent) and six men.
The Company is committed to maintain a working environment
with equal opportunities for all based on qualifications,
irrespective of gender, ethnicity, sexual orientation, or disability.
DNO continues to recruit and promote women who at yearend
2023 represented 32 percent of employees in managerial,
administrative and other non-field operational positions. In the
Erbil office, women represented 21 percent of all employees;
the comparable figure in the Dubai office was 21 percent and
40 percent across the Oslo, Stavanger and Aberdeen offices
combined.
There were no incidents of discrimination reported through the
internal mechanisms for raising concern in 2023.
Sickness absence in the Group in 2023 was 1.0 percent,
compared to 1.2 percent in 2022.
Workforce diversity in DNO Norway
In Norway, DNO had a workforce of 183 employees at yearend
2023, of which 42 percent were women. A total of three
employees worked part time during 2023, of which two were
women. No employees in DNO work part time unless they have
initiated or proposed it themselves. A total of nine employees
were on parental leave. Women had an average of 19.5 weeks
of parental leave and men had an average of 14.6 weeks of
parental leave.
Salary mapping of 2023 average women’s salaries and
bonuses compared to those of their male colleagues in the
same job category is shown below in descending order of
seniority for Norway-based employees:
Women's compensation as percentage of
those of men's:
Base salary
Bonus
Level 1
-
-
Level 2
97%
112%
Level 3
103%
108%
Level 4
83%
87%
Level 5
-
-
All employees
85%
82%
Men and women with the same level of jobs, with equal
professional experience and who perform equally receive the
same pay in DNO. The complexity of the job, discipline area
and work experience affect the pay level of individual
employees.
2
defined on the Company’s website.
Board of Directors’ report
Annual Report and Accounts 2023
DNO
15
Diversity is an important part of our key human resources
processes such as recruitment, succession planning,
promotions, performance management and employee
development. In the first half of 2024, DNO plans to establish
Diversity and Inclusion guidelines expressing the principles to
be followed, with clear targets and a plan for action.
Working environment in DNO Norway
DNO has a Working Environment Committee (WEC) as
required under the Norwegian Working Environment Act. The
committee has an important role in monitoring and improving
the working environment and in ensuring that the Company
complies with laws and regulations in this area. The Company
is committed to maintaining an open and constructive dialogue
with the employee representatives and arranged meetings on a
regular basis throughout the year. In the Board of Directors’
view, the working environment in DNO during 2023 was good
as confirmed through WEC meetings and employee satisfaction
surveys.
Leading personnel remuneration policy
The 2023 remuneration of the Company’s executive
management was based on the latest approved remuneration
guidelines at the 2023 AGM, as published on the Company’s
website.
Board of Directors’ report
16
DNO
Executive management as of 13 March 2024
CHRIS SPENCER
Managing Director
Mr. Spencer joined DNO in 2017. Mr. Spencer previously served as CEO of Rocksource ASA
and in various roles at Royal Dutch Shell and BP. Mr. Spencer is a Chartered Engineer with
the Institution of Chemical Engineers in the United Kingdom.
HAAKON SANDBORG
Chief Financial Officer
Mr. Sandborg joined DNO in 2001. In addition to his oil and gas experience, he has a
background in banking, including positions at DNB Bank. Mr. Sandborg holds a Master of
Business Administration from the Norwegian School of Business Administration.
GEIR ARNE SKAU
Chief Human Resources and Corporate Services Officer
Mr. Skau joined DNO in 2019. Mr. Skau previously served in the Norwegian Armed Forces and
in various human resources leadership roles at TechnipFMC. Mr. Skau was educated at the
Norwegian Military Academy.
LINN HOEL
Chief Commercial Officer
Ms. Hoel joined DNO in 2024, coming from a position as corporate advisor with MP Energy
Advisory. She previously served in managerial roles at Wintershall Dea and Equinor. Ms. Hoel
holds a law degree from the University of Oslo.
ERLEND EINUM
Chief Business Development Officer
Mr. Einum joined DNO in 2024, coming from an executive position at Waldorf Production. Prior
to this, he spent 16 years at Pareto Securities, where he was a senior partner in the firm’s
investment banking division. He holds a finance degree from the Norwegian School of
Economics.
SAMEH HANNA
General Manager Kurdistan region of Iraq
Mr. Hanna joined DNO in 2022. He previously served as President of MI-SWACO worldwide and
in various other operational and managerial roles at Schlumberger. Mr. Hanna holds a Bachelor
of Science in Electronics from Ain Shams University, Cairo, and has completed management
education programs at MIT Sloan, Lausanne School of Economics and Harvard University.
ELISABETH FEMSTEINEVIK
General Manager DNO North Sea
Ms. Femsteinevik joined DNO in 2019. She previously served in managerial roles at Faroe
Petroleum and Equinor. She holds a geoscience degree from the University of Oslo.
Board of Directors’ report
Annual Report and Accounts 2023
DNO
17
Parent company
The parent company, DNO ASA, reported a net profit of
USD 86.7 million, down from USD 342.5 million in 2022. Total
assets as of 31 December 2023 stood at USD 1,160 million,
down from USD 1,288.2 million at yearend 2022. The parent
company’s cash balance at yearend 2023 was USD 461.2
million, down from USD 641 million at yearend 2022. Total
liabilities decreased from USD 647.4 million at yearend 2022 to
USD 572.3 million at yearend 2023
.
2023 was USD 587.7 million, down from USD 640.8 million in
2022. The equity ratio was 50.7 percent (49.7 percent at
yearend 2022).
Total dividend of USD 92 million was paid in 2023.
In addition, a
dividend of USD
23.1
million was accrued at yearend 2023 in
the
parent company accounts following board approval in
February 2024. The Board of Directors will recommend that the
shareholders approve the transfer of the net profit of USD 86.7
million to retained earnings at the forthcoming AGM.
Main events since yearend
On 8 February 2024, the Company announced that pursuant to
the authorization granted at the 2023 AGM, the Board of
Directors has approved a dividend payment of NOK 0.25 per
share. Payment of the dividend was made on 26 February
2024.
On 6 February 2024, the Company announced that its wholly-
owned subsidiary DNO Exploration UK Limited has entered into
an agreement to acquire a 25 percent interest in the Arran field
on the UK Continental Shelf from ONE-Dyas E&P Limited. The
transaction is expected to add some four million barrels of oil
equivalent net to DNO, of which 90 percent gas. The cash
consideration is USD 70 million plus a contingent consideration
of up to USD 5 million if certain operational targets are met. The
effective date is set to 1 January 2024 and the transaction is
expected to close in the second quarter of 2024, subject to
authorities’ approval.
On 22 January 2024, DNO ASA fully completed a USD 131.2
million call option redemption of the DNO03 bond (ISIN:
NO0010852643) at redemption price of 100 percent plus
accrued interest.
On 16 January 2024, the Company announced that its wholly-
owned subsidiary DNO Norge AS has been awarded
participation in 14 exploration licenses, of which three are
operatorships, under Norway's APA 2023 licensing round. Of
the 14 new licenses, 10 are in the North Sea and four in the
Norwegian Sea.
Bijan Mossavar-Rahmani
Executive Chairman
Gunnar Hirsti
Deputy Chairman
Elin Karfjell
Director
Anita Marie Hjerkinn Aarnæs
Director
Najmedin Meshkati
Director
Christopher Spencer
Managing Director
Board of Directors’ report
18
DNO
Responsibility statement
DNO ASA’s consolidated financial statements for the period 1 January to 31 December 2023 have been prepared and presented in
accordance with IFRS Accounting Standards as adopted by the EU and additional disclosure requirements in the Norwegian Accounting
Act. The separate financial statements for DNO ASA for the period 1 January to 31 December 2023 have been prepared in accordance
with the Norwegian Accounting Act and Norwegian accounting standards. We confirm to the best of our knowledge that the consolidated
and separate financial statements for the period 1 January to 31 December 2023 have been prepared in accordance with applicable
accounting standards and give a fair view of the assets, liabilities, financial position and results for the period viewed in their entirety,
and that the Board of Directors’ report includes a fair review of any significant events that arose during the period and their effect on the
financial statements, any significant related parties’ transactions and a description of the significant risks and uncertainties to which the
Group and the parent company are exposed.
Oslo, 13 March 2024
Bijan Mossavar-Rahmani
Executive Chairman
Gunnar Hirsti
Deputy Chairman
Elin Karfjell
Director
Anita Marie Hjerkinn Aarnæs
Director
Najmedin Meshkati
Director
Christopher Spencer
Managing Director
Board of Directors’ report
Annual Report and Accounts 2023
DNO
19
Board of Directors’ report
20
DNO
Group company accounts
Consolidated statements of comprehensive income
21
Consolidated statements of financial position
22
Consolidated cash flow statements
23
Consolidated statements of changes in equity
24
Note disclosures
Note 1
Accounting principles
25
Note 2
Segment information
27
Note 3
Revenues
29
Note 4
Cost of goods sold
31
Note 5
Administrative/Other expenses
32
Note 6
Exploration expenses
34
Note 7
Financial income and financial expenses
35
Note 8
Income taxes
36
Note 9
Intangible assets
38
Note 10
Property, plant and equipment
40
Note 11
Impairments
42
Note 12
Joint venture
46
Note 13
Inventory
47
Note 14
Other non-current receivables/Trade and receivables
48
Note 15
Cash and cash equivalents
49
Note 16
Equity
49
Note 17
Interest-bearing liabilities
51
Note 18
Lease liabilities
53
Note 19
Asset Retirement obligations
54
Note 20
Other liabilities
56
Note 21
Trade and other payables
56
Note 22
Financial instruments
57
Note 23
Commitments and contingencies
61
Note 24
Earnings per share
62
Note 25
Group companies
63
Note 26
Oil and gas reserves (unaudited)
64
Note 27
Oil and gas license portfolio
66
Note 28
Significant events after the reporting date
70
Parent company accounts
Income statement
72
Balance sheet
72
Cash flow statement
74
Note disclosures
75
Country-by-Country report
85
Auditor’s report
86
EU Taxonomy
92
Alternative performance measures
94
Glossary and definitions
97
Consolidated accounts
Annual Report and Accounts 2023
DNO
21
Consolidated statements of comprehensive income
1 January - 31 December
USD million
Note
2023
2022
Revenues
2, 3
Cost of goods sold
4
-364.8
-460.9
Gross profit
Share of profit/-loss from Joint Venture
12
Other income/-expenses
Administrative expenses
5
-23.3
-17.9
Other operating expenses
5
-7.9
-7.7
Impairment oil and gas assets
11
-24.9
-371.3
Exploration expenses
6
-47.7
-96.5
Net gain on disposal of licenses
20
Operating profit/-loss
Financial income
7
Financial expenses
7
-112.0
-98.7
Profit/-loss before income tax
Tax income/-expense
8
-132.7
Net profit/-loss
Other comprehensive income
Currency translation differences
-10.9
-31.6
Items that may be reclassified to profit or loss in later periods, net of tax
-10.9
-31.6
Net fair value changes from financial instruments
Items that are not reclassified to profit or loss in later periods, net of tax
Total other comprehensive income, net of tax
-10.9
-17.4
Total comprehensive income, net of tax
Net profit/-loss attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share, basic (USD per share)
24
Earnings per share, diluted (USD per share)
24
Weighted average number of shares outstanding (millions)
Consolidated accounts
22
DNO
Consolidated statements of financial position
Years ended 31 December
USD million
Note
2023
2022
ASSETS
Non-current assets
Goodwill
9
Other intangible assets
9
Property, plant and equipment
10
Investment in Joint Venture
12
Other non-current receivables
14
Total non-current assets
Current assets
Inventories
13
Trade and other receivables
14
Tax receivables
8
Cash and cash equivalents
15
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Shareholders' equity
16
Total equity
Non-current liabilities
Deferred tax liabilities
8
Interest-bearing liabilities
17
Lease liabilities
18
Asset retirement obligations
19
Other liabilities
20
Total non-current liabilities
Current liabilities
Trade and other payables
21
Income taxes payable
8
Current interest-bearing liabilities
17
Current lease liabilities
18
Asset retirement obligations
19
Other liabilities
20
Total current liabilities
Total liabilities
TOTAL EQUITY AND LIABILITIES
Oslo, 13 March 2024
Bijan Mossavar-Rahmani
Executive Chairman
Gunnar Hirsti
Deputy Chairman
Elin Karfjell
Director
Anita Marie Hjerkinn Aarnæs
Director
Najmedin Meshkati
Director
Christopher Spencer
Managing Director
Consolidated accounts
Annual Report and Accounts 2023
DNO
23
Consolidated cash flow statements
1 January - 31 December
USD million
Note
2023
2022
Operating activities
Profit/-loss before income tax
Adjustments to add/-deduct non-cash items:
Exploration cost previously capitalized carried to cost
6
Depreciation, depletion and amortization
4
Impairment oil and gas assets
11
Time value effects receivables
7,14
Share of profit/-loss in Joint Venture
12
-11.9
-6.0
Amortization of borrowing issue costs
17
Accretion expense on ARO provisions
7,20
Interest expense
7
Interest income
7
-36.5
-12.9
Other
-10.0
Changes in working capital items and provisions:
- Inventories
13
-30.8
-11.2
- Trade and other receivables
14
-2.3
- Trade and other payables
21
-23.0
- Provisions for other liabilities and charges
20
-28.7
Cash generated from operations
Income taxes paid
-123.1
-5.1
Tax refund received
-16.1
Interest received
Interest paid
-46.4
-58.1
Net cash from/-used in operating activities
Investing activities
Purchases of intangible assets
-114.6
-74.6
Purchases of tangible assets
-163.6
-300.2
Payments for decommissioning
-17.9
-70.0
Acquisition of subsidiary, net of cash acquired
12
Payments from license transactions
20
-5.1
Proceeds from sale of financial investments
Equity contribution into Joint Venture
12
-6.9
-4.2
Dividends from Joint Venture
12
Net cash from/-used in investing activities
-281.0
-415.0
Financing activities
Proceeds from borrowings
17
Repayment of borrowings
17
-323.7
Payment of debt issue costs
Purchase of treasury shares
16
-50.7
-11.7
Paid dividend
16
-92.0
-72.8
Payments of lease liabilities
-4.3
-10.8
Net cash from/-used in financing activities
-147.0
-419.1
Net increase/-decrease in cash and cash equivalents
-233.9
Cash and cash equivalents at beginning of the period
Exchange gain/-losses on cash and cash equivalents
-1.9
-4.5
Cash and cash equivalents at end of the period
15
Of which restricted cash
15
Consolidated accounts
24
DNO
Consolidated statements of changes in equity
Other comprehensive income
Fair value
Currency
Share
Share
changes equity
translation
Retained
Total
USD million
capital
premium
instruments
difference
earnings
equity
Total shareholders' equity as of 31 December 2021
Fair value changes from equity instruments
Currency translation differences
-31.6
-31.6
Other comprehensive income
-31.6
-17.4
Profit/-loss for the period
Total comprehensive income
-31.6
Share capital increase
Own shares retained as treasury shares from a transaction
-0.6
-19.6
-10.2
-30.4
Purchase of treasury shares
-0.3
-12.1
-12.4
Payment of dividend
-72.0
-72.0
Transactions with shareholders
-19.6
-94.2
-16.9
Total shareholders' equity as of 31 December 2022
-29.0
Other comprehensive income
Fair value
Currency
Share
Share
changes equity
translation
Retained
Total
USD million
capital
premium
instruments
difference
earnings
equity
Total shareholders' equity as of 31 December 2022
-29.0
Currency translation differences
-10.9
-10.9
Other comprehensive income
-10.9
-10.9
Profit/-loss for the period
Total comprehensive income
-10.9
Purchase of treasury shares
-1.1
-49.5
-50.5
Payment of dividend
-91.6
-91.6
Transactions with shareholders
-1.1
-141.1
-142.1
Total shareholders' equity as of 31 December 2023
-39.9
On 17 August 2023, the cancellation of all 79.376.509 treasury shares held by the Company was completed. This reduction of share capital was approved by
shareholders at the AGM on 25 May 2023.
Consolidated accounts
Note 1
Accounting principles
Annual Report and Accounts 2023
DNO
25
■
Principal activities and corporate information
The principal activities of the Group are
activities are mainly undertaken in the Middle East, the North Sea
and West Africa.
organized and existing under the laws of
Norwegian Public Limited Liability Companies Act
(“allmennaksjeloven”). The Company was incorporated on 6
August 1971 and its registration number is 921 526 121. The
shares in the Company have been listed on the Oslo Stock
Exchange since 1981, currently under the ticker "DNO". The
Company's registered office is located at
.
■
Statement of compliance
The consolidated financial statements of DNO ASA have been
prepared in accordance with IFRS Accounting Standards as
adopted by the EU and additional disclosure requirements in the
Norwegian Accounting Act, effective as of 31 December 2023.
The consolidated financial statements were approved by the
Board of Directors on 13 March 2024.
■
Basis for preparation
The consolidated financial statements have been prepared on a
historical cost basis.
As permitted by International Accounting
Standard (IAS) 1
Presentation of Financial Statements
conformity with industry practice, the expenses in the
consolidated statements of comprehensive income are presented
as a combination of nature and function as this gives the most
relevant and reliable presentation for the Group.
Due to rounding, the figures in one or more rows or columns
included in the financial statements and notes may not add up to
the subtotals or totals of that row or column.
■
Significant accounting estimates and assumptions
The preparation of the Group’s financial statements requires
management to make judgments, estimates and assumptions that
affect the reported amounts of revenues and expenses, assets
and liabilities, the accompanying disclosures, and the disclosure
of contingent liabilities at the reporting date. Estimates and
assumptions are based on management’s best knowledge and
experience and various other factors that are believed to be
reasonable under the circumstances. Uncertainty about these
estimates and assumptions could result in outcomes that require
a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
described in the relevant notes throughout this report, see below
for references to notes. The Group based its assumptions and
estimates on parameters available when the Group financial
statements were prepared. However, existing circumstances and
assumptions about future developments may change due to
market changes or circumstances arising beyond the control of
the Group. Such changes are reflected in the assumptions when
they occur.
Estimates and assumptions
The key assumptions and key sources of estimation uncertainty
for the Group are described in each of the following notes:
• Entitlement risk associated with operating in Kurdistan (Note 3
and 14);
• Notional corporate income tax/deferred taxation in Kurdistan
(Note 8);
• Impairment assessment of capitalized exploration expenditures
(Note 9);
• Impairment/reversal of oil and gas assets (Note 11);
• Estimation of the cost for decommissioning (Note 19);
• Contingencies, provisions and litigations (Note 23); and
• Reserves and resources estimates (Note 26).
■
Group accounting and consolidation principles
Basis for consolidation
The consolidated financial statements include the financial
statements of DNO ASA and its subsidiaries. The Company
currently holds a 100 percent interest in all of its subsidiaries.
Functional and presentational currency
■
The consolidated financial statements are presented in USD,
which is also DNO ASA’s functional currency and presentation
currency.
Statements of comprehensive income and statements of cash
flows of subsidiaries and joint operations that have a functional
currency different from the parent company are translated into the
presentation currency at average exchange rates each month.
Statements of financial position items are translated using the
exchange rate at the reporting date, with the translation
differences taken directly to other comprehensive income.
■
Interest in jointly controlled operations (assets)
A joint arrangement is present when DNO holds a long-term
interest which is jointly controlled by DNO and one or more other
parties under a contractual arrangement in which decisions about
the relevant activities require the unanimous consent of the
parties sharing control. Such joint arrangements are classified as
either
joint operations
joint ventures
.
Joint operations
DNO recognizes its investments in joint operations by reporting its
share of related revenues, expenses, assets, liabilities and cash
flows under the respective items in the Group's financial
statements.
Joint ventures
The Group’s investments in a joint venture are accounted for
using the equity method in accordance with
IAS 28 Investments in
Associates and Joint Ventures
.
■
License acquisitions, farm-in/out and swaps
Individual assessment is made whether the acquisition of an oil
and gas license should be treated as a business combination or
as an asset purchase. Generally, purchase of a license in
development or production phase is regarded as a business
combination, while purchase of a license in the exploration phase
is regarded as an asset purchase.
A farm-in or farm-out of an oil and gas license takes place when
the owner of a working interest (the farmor) transfers all or a
Consolidated accounts
Note 1
Accounting principles
26
DNO
portion of its working interest to another party (the farmee) in
return for an agreed upon consideration and/or action, such as
conducting subsurface studies, drilling wells or developing the
asset. Any cash consideration received directly from the farmee is
credited against costs previously capitalized in relation to the
whole interest with any excess accounted for by the farmor as a
gain on disposal.
In the development or production phase, a farm-in/farm-out
agreement will be treated as a transaction recorded at fair value
as represented by the costs carried by the farmee. Any gain or
loss arising from the farm-in/farm-out is recognized in the
statements of comprehensive income.
License swaps are measured at the fair value of the asset being
exchanged, unless the transaction lacks commercial substance,
or neither the fair value of the asset received, nor divested, can
be reliably measured. In the exploration phase, the Group
normally recognizes license swaps based on historical cost basis.
■
Changes in accounting policies
The accounting policies adopted are consistent with those of the
previous financial year.
Other amendments and interpretations may apply for the first time
in 2023 but are not considered to have any material impact on the
Group’s financial statements.
Consolidated accounts
Note 2
Segment information
Annual Report and Accounts 2023
DNO
27
Accounting policies
Segment information
DNO’s operating segments correspond to its reportable segments. The Company identifies and reports its segments based on the
nature of the risk and return within its business and by the geographical location of the Group’s assets and operations. The segment
information is provided to the executive management and the Board of Directors who are considered to collectively be the Chief
Operating Decision Maker and is used as the basis for allocation of resources and decision making.
The accounting policies of the reporting segments equal those described in these consolidated financial statements. Transfer pricing
between the segments and companies is set using the arm’s length principle in a manner similar to transactions with third parties and
are eliminated at the consolidated level. Segment profit/-loss includes profit/-loss from inter-segment sales.
The Company reports the following three operating segments: Kurdistan, the North Sea (which includes the DNO’s oil and gas activities
in Norway and the UK) and West Africa (which represents the DNO’s equity accounted investment in Côte d'Ivoire, see Note 12).
Remaining operating segments are included in the other category based on a materiality assessment. The country-by-country reporting
for companies in extractive industries in line with the Norwegian Accounting Act can be found in page 85 of this report.
USD million
Total
Un-
Full-Year ending
West
reporting
allocated/
Total
31 December 2023
Note
Kurdistan
North Sea
Africa
Other
segments
eliminated
Group
COMPREHENSIVE INCOME INFORMATION
Revenues
3
253.2
414.4
-
-
667.5
-
667.5
Inter-segment sales
-
-
-
-
-
-
-
Production costs
-101.7
-122.1
-
-
-223.8
-0.3
-224.1
Movement in overlift/underlift
-
5.6
-
-
5.6
-
5.6
Depreciation, depletion and amortization
-97.0
-45.9
-
-
-143.0
-3.4
-146.4
Cost of goods sold
4
-198.7
-162.4
-
-
-361.1
-3.7
-364.8
Gross profit
54.5
252.0
-
-
306.4
-3.7
302.7
Share of profit/-loss from Joint Venture
12
-
-
11.9
-
11.9
-
11.9
Other income
-
1.6
-
-
1.6
-
1.6
Administrative expenses
5
-0.3
-5.3
-
-2.2
-7.8
-15.4
-23.3
Other operating expenses
5
-1.8
-
-
-6.1
-7.9
-
-7.9
Impairment of oil and gas assets
11
-
-24.9
-
-
-24.9
-
-24.9
Exploration expenses
6
-
-47.7
-
-
-47.7
-
-47.7
Net gain on disposal of licenses
19
-
5.8
-
-
5.8
-
5.8
Operating profit/-loss
52.4
181.4
11.9
-8.3
237.4
-19.1
218.3
Net financial income/-expense
7
-50.2
-6.7
0.8
0.5
-55.6
-11.4
-67.0
Tax income/-expense
8
-
-132.7
-
-
-132.7
-
-132.7
Net profit/-loss
2.2
42.1
12.7
-7.8
49.1
-30.5
18.6
FINANCIAL POSITION INFORMATION
Non-current assets
855.1
639.0
67.9
-
1,562.0
14.2
1,576.2
Current assets
219.2
334.4
-
3.3
556.9
505.2
1,062.1
Total assets
1,074.3
973.4
67.9
3.3
2,118.9
519.4
2,638.3
Non-current liabilities
69.8
508.3
-
-
578.1
410.3
988.4
Current liabilities
67.3
189.9
-
7.9
265.1
150.0
415.1
Total liabilities
137.0
698.2
-
7.9
843.2
560.3
1,403.5
Consolidated accounts
Note 2
Segment information
28
DNO
USD million
Total
Un-
Full-Year ending
West
reporting
allocated/
Total
31 December 2022
Note
Kurdistan
North Sea
Africa
Other
segments
eliminated
Group
COMPREHENSIVE INCOME INFORMATION
Revenues
3
820.1
556.9
-
-
1,377.0
-
1,377.0
Inter-segment sales
-
-
-
-
-
-
-
Production costs
-124.7
-127.7
-
-
-252.4
0.1
-252.3
Movement in overlift/underlift
-
8.1
-
-
8.1
-
8.1
Depreciation, depletion and amortization
-126.8
-86.5
-
-
-213.3
-3.4
-216.7
Cost of goods sold
4
-251.5
-206.1
-
-
-457.6
-3.3
-460.9
Gross profit
568.5
350.8
-
-
919.4
-3.3
916.1
Share of profit/-loss from Joint Venture
12
-
-
6.0
-
6.0
-
6.0
Other income
-
2.8
-
-
2.8
-
2.8
Administrative expenses
5
-0.1
-6.0
-
-2.3
-8.4
-9.5
-17.9
Other operating expenses
5
-0.9
-
-
-6.8
-7.7
-
-7.7
Impairment of oil and gas assets
11
-
-371.3
-
-
-371.3
-
-371.3
Exploration expenses
6
-
-96.5
-
-
-96.5
-
-96.5
Operating profit/-loss
567.6
-120.3
6.0
-9.1
444.2
-12.8
431.4
Net financial income/-expense
7
10.4
-32.7
0.1
0.5
-21.6
-63.4
-85.0
Tax income/-expense
8
-
38.4
-
-
38.4
-
38.4
Net profit/-loss
578.0
-114.5
6.1
-8.6
461.1
-76.1
384.9
FINANCIAL POSITION INFORMATION
Non-current assets
750.2
503.5
76.1
-
1,329.8
8.3
1,338.1
Current assets
355.4
418.3
-
11.5
785.3
679.7
1,464.9
Total assets
1,105.5
921.8
76.1
11.5
2,115.0
687.9
2,803.0
Non-current liabilities
68.1
391.8
-
-
459.9
528.4
988.4
Current liabilities
97.5
284.4
-
41.6
423.4
21.9
445.3
Total liabilities
165.6
676.2
-
41.6
883.3
550.3
1,433.6
Consolidated accounts
Note 3
Revenues
Annual Report and Accounts 2023
DNO
29
Accounting policies
Revenues
Revenues presented in the consolidated statements of comprehensive income consist of
Revenue from contracts with customers
.
Revenue from contracts with customers is recognized when the customer obtains control of the oil and gas, which normally will be
when title passes at the point of delivery, based on the contractual terms of the agreements.
In general, the revenues from the Group’s production of oil and gas are recognized on the basis of volumes lifted and sold to
customers during the period (the sales method).
Tariff income from processing of oil and gas is related to the North Sea segment and is recognized as earned.
Revenue recognition in Kurdistan
Export revenues in Kurdistan are generated through the sale of oil produced from the Tawke and the Baeshiqa licenses which is
exported by the pipeline through Türkiye. Title to the oil is considered to have passed on delivery of oil to the export pipeline at Fish
Khabur terminal. Revenues generated from export sales are recognized on the basis of invoiced oil sales following monthly deliveries
to the KRG. Based on business practice, the KRG is responsible for exporting the oil produced in Kurdistan and it is assessed that
DNO has a customer relationship with the KRG. The price for export oil deliveries to the KRG is based on Brent prices with
adjustments for oil quality and transportation fees.
Revenues generated from local sales in Kurdistan are recognized on the basis of volumes lifted and sold to customers during the
period. Local deliveries are prepaid by the buyers directly to DNO.
In addition, pursuant to a receivables settlement agreement made with the KRG in August 2017, DNO was entitled to three percent
of gross Tawke license revenues until 31 July 2022. Revenue was recognized based on invoiced oil sales following monthly
deliveries to the KRG.
Entitlement risk associated with operating in Kurdistan
DNO has interests in two licenses in Kurdistan through Production Sharing Contracts (PSCs) and has based its entitlement
calculations on the terms of these PSCs.
The Company notes from public reports that on 15 February 2022, the Federal Supreme Court of Iraq (FSCI) ruled on a matter
stemming back to 2012 along with another related matter dating back to 2019. Reportedly, the FSCI found amongst other things that
the Kurdistan Oil and Gas Law No. 27/2007 (KOGL) is unconstitutional, that the KRG is to hand over all oil production from areas
located in the Kurdistan region of Iraq (KRI) to the Federal Government of Iraq (FGI) and that the FGI has the right to pursue the
nullity of the oil contracts concluded by the KRG. DNO was not a party to the legal proceedings. DNO has learned via media reports
that on 4 July 2022, a commercial court in Baghdad ruled that PSCs signed between the KRG and four international oil companies
including DNO should be voided. Likewise, DNO notes from media reports that on 21 August 2022, the KRG filed third party
objections to the reported 4 July 2022 Baghdad court rulings including those understood to concern DNO. These cases, along with
other similar cases against international oil companies, are reported to be still pending. Furthermore and importantly, the KRG has
issued repeated reassurances that the PSCs remain valid. There have been several rulings in Erbil courts affirming the validity of the
PSCs. DNO notes from public reports that there is dialogue between the KRG and the FGI on oil related matters, including on
possible amendments of the new 2023-2025 Federal Iraqi Budget Law FGI’s 2023 to 2025 Budget Law (Budget Law). It is unclear
how and when the KRG and the FGI will permanently address these matters. To date, DNO continues its operations in Kurdistan,
and developments are closely monitored.
Due to disagreements between the FGI and the KRG, economic conditions in Kurdistan and limited oil export channels, DNO has
historically faced constraints in fully monetizing the oil it produces in Kurdistan. There is no guarantee that oil can be exported or sold
locally in sufficient quantities or at prices required to sustain DNO’s operations and investment plans or that the Group will promptly
receive its full entitlement payments for the oil it delivers for export. Export sales have not always followed the PSC terms and there
has been uncertainty related to receipt of payments but notwithstanding sometimes lengthy delays, payments have ultimately been
received by DNO.
In 2014, the FGI initiated an arbitration case against the Government of Türkiye and its state-owned pipeline operator BOTAS
relating to the Iraq-Türkiye Pipeline (ITP). Following an arbitration ruling which became publicly known on or around 24 March 2023,
and which were in parts in favor of Iraq, the ITP was closed for export of Kurdish oil on 25 March 2023. Consequently, DNO
announced an orderly shutdown of its production in Kurdistan on 29 March 2023. As of the reporting date, the ITP remains closed.
Despite Türkiye’s announcement in October 2023 that the ITP is ready to resume operations. There are media reports that indicate
that the ongoing discussions between the FGI and the KRG about the Budget Law amendments can be linked to the delay of the
restart of export of Kurdish oil through the ITP.
Consolidated accounts
Note 3
Revenues
30
DNO
At yearend 2023, the Company was owed a total of USD 315 million, excluding any interest, by the KRG mainly related to export oil
sales to the KRG for the months October 2022 through March 2023. These receivables are past due (see Note 14). The KRG has
repeatedly stated that it is and remains committed to its PSCs. Timing of export resumption and payments for previous oil sales by
the KRG is uncertain. Consequently, DNO initiated cost reduction measures in Kurdistan and commenced local sales on a cash and
carry basis, where the oil is transported by traders by road tanker or pipelined to local refineries. The contractor entities’ entitlement
is sold by DNO. Varying by contract, local selling prices were in the low-to-mid USD 30s per barrel during 2023, significantly lower
than the international prices previously achieved through pipeline export. However, all local deliveries are prepaid by the buyers
directly to DNO, eliminating counterparty credit risk. The Company continues to engage with the KRG regarding recovery of the
arrears and payment terms and conditions for any future oil exports.
The FGI’s 2023 to 2025 Budget Law entered into force in June 2023. Under the Budget Law, the KRG will be allocated a share of the
federal budget plus compensation for oil production and transportation costs which, according to the Budget Law, shall be based on
an average cost of production of certain, undefined Iraqi fields. The conditions for KRG receiving a share of the FGI budget include a
requirement for the KRG to handover 400,000 bopd of oil produced from fields in Kurdistan to Iraq’s State Oil Marketing Organization
(SOMO), for marketing and sale. The details of FGI-KRG budget allocations, implementation of the Budget Law and the monetary
size of the budget transfers to the KRG are not clear to DNO and are reportedly still under negotiation between the KRG and the
FGI.
1 January - 31 December
Total
USD million
2023
2022
2023
2022
2023
2022
Sale of oil
253.2
820.1
253.0
241.0
506.2
1,061.1
Sale of gas
-
-
137.3
281.1
137.3
281.1
Sale of natural gas liquids (NGL)
-
-
21.6
29.1
21.6
29.1
Tariff income
-
-
2.4
5.8
2.4
5.8
Total revenues from contracts with customers
253.2
820.1
414.4
556.9
667.5
1,377.0
Sale of oil (bopd)
14,806
25,933
8,049
6,341
22,856
32,273
Sale of gas (boepd)
-
-
4,746
4,800
4,746
4,800
Sale of natural gas liquids (NGL) (boepd)
-
-
1,282
1,370
1,282
1,370
Total sales volume (boepd)
14,806
25,933
14,078
12,511
28,885
38,444
Prior to the ITP closure in March last year, DNO generated revenues in Kurdistan through the sale of oil produced from the Tawke and
the Baeshiqa licenses which were exported by pipeline through Türkiye. Following closure of the ITP, the Company gradually resumed
operations at the Tawke license and has been selling oil to local trading companies in Kurdistan since late Q2 2023.
Consolidated accounts
Note 4
Cost of goods sold
Annual Report and Accounts 2023
DNO
31
Accounting policies
Cost of goods sold
Lifting costs and Tariff and transportation expenses
Lifting costs consist of expenses related to the production of oil and gas, including operation and maintenance of installations, well
intervention activities and insurances. Tariff and transportation expenses consist of charges incurred by the Group in the North Sea
for the use of infrastructure owned by other companies. Lifting costs and Tariff and transportation expenses are recognized based on
the Group’s paying interest in the oil and gas licenses.
Movement in overlift/underlift
A liability (overlift, see Note 21) arises when the Group sells more than its share of the oil and gas production. Similarly, an asset
(underlift, see Note 14) arises when the sale is less than the Group’s share of the oil and gas production. In general, the
overlift/underlift balances are valued at production cost including depreciation (the sales method). The movements in overlift/underlift
are presented as an adjustment to Cost of goods sold.
Depreciation, depletion and amortization
Capitalized costs for oil and gas assets are depreciated using the unit-of-production (UoP) method. See Note 10 for more details.
1 January - 31 December
USD million
2023
2022
Lifting costs
-191.7
-222.1
Tariff and transportation expenses
-32.4
-30.2
Production costs based on produced volumes
-224.1
-252.3
Movement in overlift/underlift
5.6
8.1
Production costs based on sold volumes
-218.4
-244.2
Depreciation, depletion and amortization
-146.4
-216.7
Total cost of goods sold
-364.8
-460.9
Consolidated accounts
Note 5
Administrative/Other expenses
32
DNO
Accounting policies
Pensions and share-based payments
Pensions
The Group’s pension obligations in Norway are limited to certain defined contribution plans which are paid to pension insurance
plans and charged to profit or loss in the period in which they are incurred. Once the contributions are paid there are no further
obligations.
Share-based payments
Cash-settled share-based payments are recognized in the income statement as expenses during the vesting period and as a liability.
The liability is measured at fair value and revaluated using the Black & Scholes pricing model at each balance sheet date and at the
date of settlement, with any change in the fair value recognized in the income statement for the period.
1 January - 31 December
USD million
2023
2022
Salaries, bonuses, etc.
-53.1
-55.2
Employer's payroll tax expenses
-7.6
-5.1
Pensions
-4.6
-4.1
Other personnel costs
-4.3
-5.8
General and administration expenses
-27.8
-32.5
Reallocation of salaries and social expenses to lifting costs and exploration costs/PP&E and intangible assets
74.1
84.8
Total administrative expenses
-23.3
-17.9
Other expenses
-7.9
-7.7
Total other operating expenses
-7.9
-7.7
Salaries and social expenses directly attributable to license activities are reclassified to lifting costs and exploration costs, or tangible
assets and capitalized exploration. Other expenses in 2023 were mainly related to provisions for arbitral awards in Yemen, (Note 23).
DNO has a defined contribution scheme for its Norway-based employees, with USD 4.6 million expensed in 2023 (USD 4.1 million in
2022). The Group’s obligations are limited to the annual pension contributions. DNO meets the Norwegian legal requirements for
mandatory occupational pension
(“obligatorisk tjenestepensjon”).
At yearend 2023, the Company’s liability for synthetic shares as part of other variable remuneration amounted to USD 5 million (USD
5.4
million at yearend 2022). For more information about remuneration to executive management, see Note 3 in the parent company
accounts.
Movement in synthetic Company shares during the year
1 January - 31 December
Number of shares
2023
2022
Outstanding as of 1 January
11,453,638
3,178,536
Granted during the year
4,288,935
9,471,309
Forfeited/reversed during the year
624,141
37,099
Settled during the year
4,288,938
1,159,108
Outstanding as of 31 December
10,829,494
11,453,638
Unrestricted as of 31 December
1,032,058
834,872
Weighted average remaining contractual life for the synthetic shares (years)
2.54
2.43
Weighted average settlement price for synthetic shares settled during the year (NOK)
10.20
12.56
Settlement price for synthetic shares at the end of the year (NOK)
10.70
11.81
Consolidated accounts
Note 5
Administrative/Other expenses
Annual Report and Accounts 2023
DNO
33
Remuneration to Board of Directors and executive management
1 January - 31 December
USD million
2023
2022
Managing Director
Salary
-0.58
-0.64
Bonus
-0.16
-0.26
Pension
-0.02
-0.02
Other remuneration
-0.41
-0.17
Remuneration to Managing Director
-1.17
-1.09
Other executive management
Salary
-1.69
-1.99
Bonus
-0.40
-0.15
Pension
-0.06
-0.08
Other remuneration
-0.78
-0.59
Remuneration to other executive management
-2.93
-2.81
Total remuneration to executive management
-4.09
-3.90
Number of managers included
5
6
Total remuneration to Board of Directors
-1.61
-1.17
Total remuneration to Board of Directors and executive management
-5.71
-5.07
On 7 September 2023, the Company announced that Chris Spencer has been appointed Managing Director of the Company as Bjørn
Dale steps down as part of a planned management transition initiated last year. Mr. Spencer has been DNO’s Chief Operating Officer
(COO) since 2021. The Managing Director remuneration presented above represents Mr. Spencer’s remuneration both in the role as the
COO and Managing Director in 2023. A remuneration of USD 1.7 million (not included in the above table) was in 2023 paid to Bjørn
Dale (former Managing Director), which included severance pay portion. For further details on remuneration to the executive
management, see Note 3 in the parent company accounts.
Shares and options held by Board of Directors and executive management
Years ended 31 December
Directors and executive management
Shares
Options
Shares
Options
Bijan Mossavar-Rahmani, Executive Chairman*
125,683,241
-
125,683,241
-
Gunnar Hirsti, Deputy Chairman (Hirsti Invest AS)
350,000
-
350,000
-
Elin Karfjell, Director (Elika AS)
33,000
-
33,000
-
Anita Marie Hjerkinn Aarnæs, Director
-
-
-
-
Najmedin Meshkati, Director
-
-
-
-
Chris Spencer, Managing Director (Chris's Corporation AS)
32,000
-
32,000
-
Haakon Sandborg, Chief Financial Officer
-
-
-
-
Geir Arne Skau, Chief Human Resources and Corporate Services Officer
50,750
-
35,750
-
Sameh Hanna, General Manager Kurdistan region of Iraq
-
-
-
-
Ørjan Gjerde, General Manager DNO North Sea (Kvile Invest AS)
15,000
-
15,000
-
* Bijan Mossavar-Rahmani held interests in the Company through nominee accounts held by Goldman Sachs & Co. LLC, representing 12.89 percent of the
Executive management have been awarded synthetic shares during the year as part of their variable remuneration, see Note 3 in the
parent company accounts.
Auditor fees
1 January - 31 December
USD million (excluding VAT)
2023
2022
Auditor fees
-0.65
-0.71
Other financial auditing
-0.03
-0.04
Tax advisory services
-0.16
-0.08
Other advisory services
-
-
Total auditor fees
-0.84
-0.82
Consolidated accounts
Note 6
Exploration expenses
34
DNO
Accounting policies
Exploration expenses
The Group uses the successful efforts method to account for its exploration and evaluation assets. All exploration costs (including
purchase of seismic, geological and geophysical costs and general and administrative costs), except for acquisition costs of licenses
and drilling costs of exploration wells, are expensed as incurred.
Acquisition costs of licenses and drilling costs of exploration wells are temporarily capitalized pending the determination of oil and
gas resources. These costs include directly attributable employee remuneration, materials and fuel used, rig costs and payments to
contractors. Continued capitalization of such costs is assessed for impairment at each reporting date. The main criterion is that there
must be plans for future activity in the license or that a development decision is expected in the near future. If reserves or resources
are not found, or if discoveries are assessed not technically or commercially recoverable, the costs of exploration wells and licenses
are expensed. Furthermore, 3D seismic cost over a discovery area is capitalized when the objective is to learn more about the
reservoir and to support the determination of new well locations within the discovery area.
1 January - 31 December
USD million
2023
2022
Exploration expenses (G&G and field surveys)
-15.0
-10.2
Seismic costs
-9.9
-18.5
Exploration expenses capitalized in previous years carried to cost
-
-3.9
Exploration expenses capitalized during the year carried to cost
-6.0
-48.3
Other exploration expenses
-16.8
-15.6
Total exploration expenses
-47.7
-96.5
Exploration expenses in 2023 were related to exploration activities in the North Sea, including expensing of exploration wells (Eggen
and Litago wells). Exploration expenses in 2022 were related to exploration activities in the North Sea, including expensing of
exploration wells (Edinburgh, Overly and Uer wells).
Consolidated accounts
Note 7
Financial income and financial expenses
Annual Report and Accounts 2023
DNO
35
Accounting policies
Financial income and expenses
Accretion expenses from unwinding of the discount related to the ARO provision and lease liability are further detailed in Notes 18
and Note 19. Accounting effects from IFRS 9 (expected credit loss model) assessment related to the KRG arrears is further detailed
in Note 14.
1 January - 31 December
USD million
2023
2022
Interest income
36.5
12.9
Currency exchange gains recognized in the income statement (net)
8.4
-
Other financial income
0.1
1.0
Financial income
45.0
13.9
Interest expenses
-44.6
-57.5
Time value effect trade debtors (Note 14)
-44.3
-
Amortization of borrowing issue costs
-3.3
-5.2
Accretion expense ARO (unwinding of discount rate, Note 19)
-17.4
-15.5
Currency exchange loss recognized in the income statement (net)
-
-6.6
Other financial expenses
-2.3
-14.0
Financial expenses
-112.0
-98.9
Net financial income/-expenses
-67.0
-85.0
Other financial expenses in 2022 were higher than 2023 mainly due to bond premium expenses and incurred put option premium.
Consolidated accounts
Note 8
Income taxes
36
DNO
Accounting policies
Income taxes
Tax income/expense consists of taxes receivable/payable and changes in deferred taxes. Taxes receivable/payable are based on
the amount receivable from or payable to the tax authorities. Deferred tax liability is calculated on all taxable temporary differences
unless there is a recognition exception. A deferred tax asset is recognized only to the extent that it is probable that the future taxable
income will be available against which the asset can be utilized. Unrecognized deferred tax assets are reassessed at each reporting
date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be
recovered. Deferred tax assets and deferred tax liabilities are recognized at their nominal value and classified as non-current
assets/liabilities in the statements of financial position. Tax payable and deferred tax are recognized directly in the equity to the
extent that they relate to items charged directly to equity.
Estimation uncertainty: Notional corporate income tax/deferred taxation in Kurdistan
DNO’s PSCs in Kurdistan provide that the corporate income tax to which the contractor is subject is deemed to have been paid to the
government as part of the payment of profit oil to the government or its representatives. Current and deferred taxation arising from
such notional corporate income tax is not calculated for Kurdistan, as there is uncertainty related to the tax laws of the KRG and
there is currently no well-established tax regime for international oil companies. As such, it has not been possible to reliably measure
such notional corporate income taxes deemed to have been paid on behalf of the Company’s subsidiary, DNO Iraq AS. For
accounting purposes, if such notional income tax is to be classified as income tax in accordance with IAS 12
Income Taxes
, the
Group would present this as an income tax expense with a corresponding increase in revenues. Furthermore, it would be assessed
whether any deferred tax asset or liability is required to be recognized equal to the difference between book values and the tax
values of the qualifying assets and liabilities, multiplied by the applicable tax rate.
Tax income/-expense
1 January - 31 December
USD million
2023
2022
Changes in deferred taxes
-125.8
162.9
Income taxes receivable/-payable
-6.9
-124.5
Total tax income/-expense
-132.7
38.4
Income tax receivable/-payable
Years ended 31 December
USD million
2023
2022
Tax receivables
-
25.8
Income taxes payable
-4.6
-125.7
Net tax receivable/-payable
-4.6
-99.9
The tax balances relate to the activity on the Norwegian Continental Shelf (NCS).
During 2023, DNO received tax refunds of USD 27.2 million in the UK in relation to decommissioning spend for 2022. In Norway, DNO
paid net USD 116.7 million in taxes related to taxable profits in 2022.
Reconciliation of tax income/-expense
1 January - 31 December
USD million
2023
2022
Profit/-loss before income tax
151.3
346.5
Expected income tax according to nominal tax rate in Norway, 22 percent
8.0
-108.1
Expected income tax according to nominal petroleum tax rate in Norway, 78 percent
-136.8
43.3
Expected income tax according to nominal tax outside Norway
0.0
33.5
Foreign exchange variations between functional and tax currency
-6.8
2.5
Adjustment of previous years
0.3
0.7
Adjustment of deferred tax assets not recognized
-1.1
-62.3
Other items including other permanent differences
3.7
116.2
Change in tax rate
-
12.4
Tax income/-expense
-132.7
38.4
Effective income tax rate
87.7%
11.1%
Taxes charged to equity
-
-
Consolidated accounts
Note 8
Income taxes
Annual Report and Accounts 2023
DNO
37
Other items above consist mainly of permanent differences on impairments which are not tax deductible, and permanent differences on
tax exempted profits/losses from upstream activities outside of Norway carried out by the Company’s Norwegian subsidiaries.
Tax effects on temporary differences
Years ended 31 December
USD million
2023
2022
Tangible assets
-275.9
-195.8
Intangible assets (including capitalized exploration expenses)
-145.4
-76.9
ARO provisions
238.0
226.2
Losses carried forward
174.4
167.6
Non-deductible interests carried forward
25.7
26.5
Other temporary differences
-0.6
-0.9
Net deferred tax assets/-liabilities
16.2
146.8
Valuation allowance
-208.6
-209.1
Net deferred tax assets/-liabilities
-192.4
-62.4
Recognized deferred tax assets
-
-
Recognized deferred tax liabilities
-192.4
-62.4
A valuation allowance was recognized relating to carried forward losses in Norway (ordinary tax regime) and the UK due to the
uncertainty regarding future taxable profits.
Profits/-losses by Norwegian companies from upstream activities outside of Norway are not taxable/deductible in Norway in accordance
with the General Tax Act, section 2-39. Under these rules, only certain financial income and expenses are taxable in Norway.
There are no tax consequences attached to items recorded in other comprehensive income.
The following nominal tax rates apply in the jurisdictions where the subsidiaries of the Group are taxable: Ordinary tax regime in Norway
(22 percent), the NCS (78 percent), ordinary tax regime in the UK (25 percent) and the UKCS (40 percent). Additionally, in the UK,
Energy Profits Levy (EPL) applies which is a 35 percent temporary levy on oil and gas ringfenced profits, adjusted for decommissioning
spend.
Reconciliation of change in deferred tax assets/-liabilities
Years ended 31 December
USD million
2023
2022
Net deferred tax assets/-liabilities at 1 January
-62.4
-238.0
Change in deferred taxes in the income statement
-125.8
162.9
Deferred taxes related to business combinations and other transactions
1.3
-
Prior period adjustment
-
-
Reclassification from/-to tax receivable
-
-15.3
Currency and other movements
-5.5
28.0
Net deferred tax assets/-liabilities at 31 December
-192.4
-62.4
Reconciliation of change in tax receivable/-payable
Years ended 31 December
USD million
2023
2022
Net tax receivable/-payable at 1 January
-99.9
-11.9
Tax receivable/-payable related to transactions posted directly to balance sheet
0.1
0.9
Tax receivable/-payable in the income statement
-6.9
-124.5
Tax payment/-refund
89.5
21.2
Prior period adjustment
-
-0.5
Reclassification to/-from deferred tax asset
-
15.3
Currency and other movements
12.6
-0.4
Net tax receivable/-payable at 31 December
-4.6
-99.9
Pillar Two
DNO is subject to OECD Pillar Two model rules, with Norway and the UK having enacted legislation applicable from 1 January 2024.
Since the Pillar Two legislation was not effective at the reporting date, DNO has no related current tax exposure and applies the
exception to recognizing and disclosing information about any deferred tax assets and liabilities related to this, as provided in the
amendments to IAS 12 issued in May 2023. DNO is in the process of assessing its exposure to the legislation and the expectation is
that DNO should not be impacted as all its subsidiaries are already subject to high tax rates, exceeding 15 percent. However, due to
the impact of specific adjustments envisaged in the Pillar Two legislation, there might still be potential implications for DNO. The
quantitative impact is not yet reasonably estimable due to the complexities in applying the legislation.
Consolidated accounts
Note 9
Intangible assets
38
DNO
Accounting policies
Intangible assets
General
Intangible assets are stated at cost, less accumulated amortization and accumulated impairment charges. Intangible assets include
acquisition costs for oil and gas licenses, expenditures on the exploration for oil and gas resources, technical goodwill and other
intangible assets. Goodwill is not depreciated.
The useful lives of intangible assets are assessed as either finite or infinite. Amortization of intangible assets is based on the
expected useful economic life and assessed for impairment whenever there is an indication that the intangible asset might be
impaired. The impairment assessment of intangible assets with infinite lives is undertaken annually or more often if indicators exist.
Goodwill
The goodwill that is recognized by the Group is related to technical goodwill and is recognized due to the requirement to recognize
deferred tax for the difference between the assigned fair values and the related tax base. Although not an IFRS term, “technical
goodwill” is commonly used in the oil and gas industry to describe a category of goodwill arising as an offsetting amount to deferred
tax recognized in business combinations. There are no specific IFRS guidelines about the allocation of technical goodwill, and the
Group has therefore applied the general guidelines for allocating goodwill. In general, technical goodwill is allocated to a cash-
generating unit (CGU) or group of CGUs that give rise to the technical goodwill, while any residual goodwill may be allocated across
all CGUs based on facts and circumstances in the business combination.
Exploration and evaluation assets
The Group uses the successful efforts method to account for its exploration and evaluation assets. Acquisition costs of licenses and
drilling costs of exploration wells are temporarily capitalized pending the determination of oil and gas resources. These costs include
directly attributable employee remuneration, materials and fuel used, rig costs and payments to contractors. Continued capitalization
of such costs is assessed for impairment at each reporting date. The main criterion is that there must be plans for future activity in
the license or that a development decision is expected in the near future. If reserves or resources are not found, or if discoveries are
assessed not technically or commercially recoverable, the costs of exploration wells and licenses are expensed. Furthermore, 3D
seismic cost over a discovery area is capitalized when the objective is to learn more about the reservoir and to support the
determination of new well locations within the discovery area.
Estimation uncertainty: Impairment assessment of capitalized exploration expenditures
The Group’s accounting policy is to temporarily capitalize drilling expenditures related to exploration wells, pending an evaluation of
potential oil and gas discoveries. If resources are not discovered, or if recovery of the resources is not considered technically or
commercially viable, the costs of the exploration wells are expensed in the income statement. Decisions as to whether an exploration
well should remain capitalized or expensed during the period may have a material effect on the financial results for the period.
Consolidated accounts
Note 9
Intangible assets
Annual Report and Accounts 2023
DNO
39
INTANGIBLE ASSETS
Total Other
License
Exploration
intangible
2023 - USD million
Goodwill
interest
assets
Other
assets
Total
As of 1 January 2023
Acquisition costs
407.2
97.5
335.3
15.4
448.2
855.4
Accumulated impairments
-351.1
-8.8
-260.5
-
-269.3
-620.3
Accumulated depreciation
-
-70.1
-
-11.6
-81.8
-81.6
Net book amount
56.1
18.7
74.8
3.8
97.2
153.3
Period ended 31 December 2023
Opening net book amount
56.1
18.7
74.8
3.8
97.2
153.3
Translation differences
-1.9
0.3
1.4
-
1.7
-0.3
Additions
-
-
114.2
0.4
114.6
114.6
Transfers*
-
-
-3.3
-
-3.3
-3.3
Exploration cost previously capitalized carried to cost
-
-
-6.0
-
-6.0
-6.0
Impairments
-11.0
-
-
-
-
-11.0
Depreciation
-
-1.0
-
-1.2
-2.2
-2.2
Closing net book amount
43.2
18.0
181.1
3.0
202.1
245.3
As of 31 December 2023
Acquisition costs
397.5
97.8
443.2
15.8
556.8
954.3
Accumulated impairments/exploration write-offs
-354.3
-8.8
-262.1
-
-270.9
-625.2
Accumulated depreciation
-
-71.1
-
-12.8
-83.9
-83.9
Net book amount
43.2
18.0
181.1
3.0
202.1
245.3
Depreciation method
UoP
Linear (3-7 years)
* Transfers was related to reclassification of the book value of Fenja license from exploration phase (intangible assets) to development phase (tangible assets).
INTANGIBLE ASSETS
Total Other
License
Exploration
intangible
2022 - USD million
Goodwill
interest
assets
Other
assets
Total
As of 1 January 2022
Acquisition costs
456.8
98.1
368.4
14.6
481.1
938.0
Accumulated impairments/exploration write-offs
-368.6
-8.7
-161.3
-
-170.0
-538.6
Accumulated depreciation
-
-68.2
-
-10.5
-78.7
-78.7
Net book amount
88.2
21.2
207.1
4.1
232.4
320.6
Period ended 31 December 2022
Opening net book amount
88.2
21.2
207.1
4.1
232.4
320.6
Translation differences
-10.4
-1.0
-21.0
-
-22.0
-32.4
Additions
-
0.4
73.5
0.7
74.6
74.6
Transfers*
-
-
-132.6
-
-132.6
-132.6
Exploration cost previously capitalized carried to cost
-
-
-52.2
-52.2
-52.2
Impairments
-21.5
-
-
-
-
-21.5
Depreciation
-
-1.9
-
-1.1
-3.0
-3.0
Closing net book amount
56.1
18.7
74.8
3.8
97.2
153.3
As of 31 December 2022
Acquisition costs
407.2
97.5
335.2
15.4
448.1
855.3
Accumulated impairments/exploration write-offs
-351.1
-8.8
-260.5
-
-269.1
-620.3
Accumulated depreciation
-
-70.1
-
-11.6
-81.6
-81.6
Net book amount
56.1
18.7
74.8
3.8
97.2
153.3
Depreciation method
UoP
Linear (3-7 years)
* Transfers was related to reclassification of the book value of Brasse license from exploration phase (intangible assets) to development phase (tangible assets).
Consolidated accounts
Note 10
Property, plant and equipment
40
DNO
Accounting policies
Property, plant and equipment (PP&E)
General
PP&E are recognized at historical cost and adjusted for depreciation, depletion and amortization (DD&A) and impairment charges.
Depreciation of PP&E other than oil and gas assets are generally depreciated on a straight-line basis over expected useful lives,
normally varying from three to seven years. Expected useful lives are reviewed at each balance sheet date and, where there are
changes in estimates, depreciation periods are changed accordingly.
Exploration and development costs
Capitalized exploration expenditures are classified as intangible assets and reclassified to tangible assets (i.e., PP&E) at the start of
the development. For accounting purposes, an oil and gas field is considered to enter the development phase when the technical
feasibility and commercial viability of extracting oil and gas from the field are demonstrable. All costs of developing commercial oil
and gas fields are capitalized, including indirect costs. Capitalized development costs are classified as tangible assets.
Acquired license rights are recognized as intangible assets at the time of acquisition. Acquired license rights related to fields in the
exploration phase remain as intangible assets when the related fields enter the development or production phase. Furthermore, 3D
seismic cost over a discovery area is capitalized when the objective is to learn more about the reservoir and to support the
determination of new well locations within the discovery area.
Oil and gas assets in production
Capitalized costs for oil and gas assets are depreciated using UoP method. The rate of depreciation is equal to the ratio of oil and
gas production for the period over the estimated remaining 2P reserves at the beginning of the period. The future development
expenditures necessary to bring those reserves into production are included in the basis for depreciation and are estimated by the
management based on current period end un-escalated price levels. The reserve basis used for depreciation purposes is updated at
least once a year. Any changes in the reserves affecting UoP calculations are reflected prospectively.
Right-of-use (RoU) asset
s
The RoU assets in the balance sheet are mainly related to office rent and are measured to cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of lease liabilities. The RoU assets are depreciated linearly over the
lifetime of the related lease contract. For measurement of lease liabilities, see Note 18. In the consolidated statements of
comprehensive income, operating lease costs, relating to contracts that contain a lease, are replaced by depreciation and interest
expense.
Consolidated accounts
Note 10
Property, plant and equipment
Annual Report and Accounts 2023
DNO
41
PROPERTY, PLANT AND EQUIPMENT
Total
Development
Production
oil & gas
Other
RoU
2023 - USD million
assets
assets
assets
PP&E
assets
Total
As of 1 January 2023
Acquisition costs
358.3
3,072.1
3,430.5
14.3
34.2
3,479.0
Accumulated impairments
-140.6
-332.0
-472.6
-0.1
-
-472.7
Accumulated depreciation
-
-1,861.0
-1,861.0
-13.1
-23.3
-1,897.4
Net book amount
217.7
879.1
1,096.8
1.1
10.6
1,108.6
Period ended 31 December 2023
Opening net book amount
217.7
879.1
1,096.8
1.1
10.6
1,108.6
Translation differences
-4.4
-4.4
-8.8
0.1
-1.1
-9.8
Additions*
53.9
123.7
177.6
0.7
10.7
189.0
Transfers**
-118.1
121.3
3.3
-
-
3.3
Impairments (net)
-
-13.9
-13.9
-
-
-13.9
Depreciation
-
-139.6
-139.6
-0.6
-4.0
-144.2
Closing net book amount
149.1
966.3
1,115.4
1.2
16.6
1,133.2
As of 31 December 2023
Acquisition costs
286.7
3,304.6
3,591.3
14.9
45.1
3,651.3
Accumulated impairments
-137.5
-345.0
-482.6
-0.1
-
-482.7
Accumulated depreciation
-
-1,993.3
-1,993.3
-13.6
-28.5
-2,035.4
Net book amount
149.1
966.3
1,115.4
1.2
16.6
1,133.2
Depreciation method
UoP
Linear (3-7 years)
* Includes changes in estimate of asset retirement, see Note 20.
** Transfer was related to reclassification of the book value of the Fenja license from development phase to production phase.
PROPERTY, PLANT AND EQUIPMENT
Total
Development
Production
oil & gas
Other
RoU
2022 - USD million
assets
assets
assets
PP&E
assets
Total
As of 1 January 2022
Acquisition costs
290.3
2,785.1
3,075.4
13.9
34.6
3,123.9
Accumulated impairments
-42.1
-89.6
-131.7
-0.1
-
-131.8
Accumulated depreciation
-
-1,680.4
-1,680.4
-12.8
-14.1
-1,707.2
Net book amount
248.2
1,015.1
1,263.3
1.0
20.5
1,284.9
Period ended 31 December 2022
Opening net book amount
248.2
1,015.1
1,263.3
1.0
20.5
1,284.9
Translation differences
-19.0
-47.0
-66.0
-0.1
-1.2
-67.2
Additions*
49.4
275.8
325.2
0.9
1.8
327.9
Transfers**
38.1
94.5
132.6
-
-
132.6
Disposal cost price
-
4.6
4.6
-
0.4
5.0
Disposal impairments/depreciations
-
-4.6
-4.6
-
-0.2
-4.8
Depreciation of RoU recognized against ARO
-
-
-
-
-6.7
-6.7
Impairments
-99.0
-250.1
-349.1
-
-
-349.1
Depreciation
-
-209.3
-209.3
-0.7
-3.7
-213.8
Closing net book amount
217.7
879.1
1,096.8
1.1
10.6
1,108.6
As of 31 December 2022
Acquisition costs
358.3
3,072.1
3,430.5
14.4
34.2
3,479.0
Accumulated impairments
-140.6
-332.0
-472.7
-0.1
-
-472.7
Accumulated depreciation
-
-1861.0
-1861.0
-13.1
-23.3
-1,897.4
Net book amount
217.7
879.1
1,096.8
1.2
10.6
1,108.6
Depreciation method
UoP
Linear (3-7 years)
* Includes changes in estimate of asset retirement, see Note 20.
** Transfers were related to reclassification of the book value of Brasse license from exploration phase (intangible assets) to development phase
Depreciation, depletion and amortization (DD&A) is charged to cost of goods sold in the statement of comprehensive income.
Consolidated accounts
Note 10
Property, plant and equipment
42
DNO
Consolidated accounts
Note 11
Impairments
Annual Report and Accounts 2023
DNO
43
Accounting policies
Impairments
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. If an
impairment indicator is concluded to exist, an impairment test is performed.
Indications of impairment may include a decline in the long-term oil and gas price (or short-term oil and gas price for late-life oil and
gas fields), changes in future investments or significant downward revision of reserve and resource estimates. For the purposes of
impairment assessment, assets are grouped at the lowest levels for which there are separable identifiable cash inflows. For oil and
gas assets, a CGU may be individual oil and gas fields, or a group of oil and gas fields that are connected to the same
infrastructure/production facilities, or a license.
An impairment loss is recognized when the carrying amount exceeds the recoverable amount of an asset. The recoverable amount is
the higher of the asset’s fair value less costs to sell and its value in use. Fair value less costs to sell determined through either the
discounted cash flow method (income approach) or the market transactions method (market approach). The value in use can only be
determined through the discounted cash flow method.
Technical goodwill
Technical goodwill is tested for impairment annually or more frequently when there are impairment indicators. Those indicators may
be specific to an individual CGU or groups of CGUs to which the technical goodwill is related. Goodwill is not depreciated and hence,
impairment of technical goodwill is expected on a recurring basis, unless there are positive changes in underlying assumptions that
more than offset the production from the CGU (or groups of CGUs).
When performing the impairment test for technical goodwill, deferred tax recognized in relation to the acquired assets in a business
combination reduces the net carrying value prior to the impairment charges. When deferred tax from the initial recognition decreases,
more goodwill is exposed for impairment. After initial recognition, depreciation of values calculated in the purchase price allocations
from business combinations will result in decreased deferred tax liability.
Estimation uncertainty: Impairment/reversal of impairment of oil and gas assets
The estimation of the recoverable amount for the oil and gas assets includes assessments of expected future cash flows and future
market conditions, including entitlement production, future oil and gas prices, cost profiles, country risk factors (i.e., discount rate)
and the date of expiration of the licenses.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset
or liability, including assumptions about risk, assuming that market participants act in their economic best interest. The Group uses
valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. The
fair value of oil and gas assets is normally based on discounted cash flow models (income approach), where the determination of
different inputs in the model requires significant judgment from management, as described in the section above regarding
impairment.
Climate considerations in impairment assessments
Certain climate considerations are factored into the Group’s estimation of cash flows that are applied in the calculation of recoverable
amount. This includes factoring in current legislation (e.g., environmental taxes/fees) and estimation of future levels of environmental
taxes/fees. For DNO’s oil and gas assets on the NCS, carbon pricing is in line with current legislation and reflects the operators
forecasts for individual assets. As proposed in the Norwegian Government’s Climate Plan for 2021-2030, a steady increase in the
total carbon price (quota plus CO2 tax) to NOK 2,000 per tonne (in 2020 real terms) is expected by 2030. In Kurdistan, the KRG
introduced in 2021 a requirement for oil companies to put plans in place to curb gas flaring to reduce emissions. The Company has
run sensitivities for its Kurdistan oil assets with the CO2 tax assumptions as described in the scenarios described by the International
Energy Agency (IEA).
An energy transition is likely to impact the future oil and gas prices which in turn may affect the recoverable amount of the oil and gas
assets. Indirectly, climate considerations are also assessed in the forecasting of oil and gas prices where supply and demand are
considered.
Consolidated accounts
Note 11
Impairments
44
DNO
Impairment testing
Impairment assessment of DNO’s assets in Kurdistan is based on the value in use approach. For oil and gas assets and goodwill
recognized in relation to the acquisition (e.g., Faroe Petroleum Plc transaction and swap agreement with Equinor ASA, both
transactions completed in 2019), the impairment assessment is based on the fair value approach (level 3 in fair value hierarchy, IFRS
13). For both the value in use and fair value, the impairment testing is performed based on discounted cash flows. The expected future
cash flows are discounted to the net present value by applying a discount rate after tax. Cash flows are projected for the estimated
lifetime of the fields or license, which may exceed periods longer than five years.
Below is an overview of the key assumptions applied for impairment assessment purposes as of 31 December 2023.
Oil and gas prices
Forecasted oil and gas prices are based on management’s estimates and market data. The near-term price assumptions are based on
forward curve pricing over the period for which there is deemed to be a sufficient liquid market and observable broker and analyst
consensus. The long-term price assumptions reflect management’s best estimate of the oil and gas price development over the life of
the Group’s oil and gas fields based on its view of current market conditions and future developments. Management’s assessment also
includes comparison with long-term oil and gas price assumptions communicated by peer companies and other external forecasts. Oil
and gas price assumptions applied for impairment testing are reviewed and, where necessary, adjusted on a periodic basis.
The nominal oil and gas price assumptions applied for impairment assessments at yearend 2023 were as follows (yearend 2022 in
brackets):
2024
2025
2026
2027
Brent (USD/bbl)
77.7 (88.5)
84.0 (85.0)
75.5 (78.4)
73.6 (70.4)
NBP (pence/therm)
104.3 (179.4)
115.0 (126.4)
96.5 (102.9)
86.5 (77.9)
For periods after year 2028, the long-term oil and gas price assumptions applied were USD 65 per barrel and 72 pence sterling per
therm, respectively (in real terms, basis year 2023).
Oil and gas price differential
The estimated net oil and gas price is based on the above nominal price assumptions adjusted for price differentials due to quality and
transportation for each individual field.
Oil and gas reserves and resources
Future cash flows are calculated on the basis of expected production profiles and estimated proven and probable remaining reserves,
and additional risked contingent resources when the impairment assessments are based on the fair value approach. For more
information about reserves and resources estimate, see Note 1 and Note 26.
Discount rate
The discount rate is derived from the Company’s weighted average cost of capital (WACC). Main elements of the WACC include:
•
For the value in use calculations, the capital structure considered in the WACC calculation is derived from DNO’s debt and equity to
enterprise value ratio at yearend. For the fair value calculations, the capital structure considered in the WACC calculation is derived
from the capital structures of an identified peer group and market participants.
•
The cost of equity is calculated on a country-by-country basis using the Capital Asset Pricing Model (CAPM) and adding a country risk
premium. The beta factor is based on publicly available data about the Company’s beta in the value in use calculations, whereas the
beta factors used for the fair value calculations are based on publicly available market data about the identified peer group.
•
For the value in use calculations, the cost of debt is based on yield-to-maturity on the Company’s outstanding bond loans with an
upward adjustment to reflect a potential extension, whereas for fair value calculations the cost of debt is based on an identified peer
group’s bond loan issues.
For the value in use calculations, the relevant post-tax nominal discount rate at yearend 2023 was 13.7 percent (16.1 percent at
yearend 2022) for the Kurdistan assets. For the fair value calculations, the relevant post-tax nominal discount rates at yearend 2023
was 9.8 percent for the North Sea assets (8.4 percent at yearend 2022).
Inflation and currency rates
The long-term inflation rate is assumed to be 2 percent independent of the underlying country or currency (unchanged from yearend
2022). DNO has applied the forward curve and observable broker and analyst consensus as basis for assessment of currency rates.
The USD/NOK applied for impairment testing at yearend 2023, was USD/NOK 10.5 for 2024, USD/NOK 10 for the years 2025-2026,
USD/NOK 9.5 for the years 2027-2028 and thereafter kept constant at USD/NOK 9.0 from the year 2029 onwards.
Consolidated accounts
Note 11
Impairments
Annual Report and Accounts 2023
DNO
45
Impairment charge and/or reversal
The following table shows the recoverable amounts and net impairment charges or reversal for the CGUs which were impaired in 2023
and 2022, and how it was recognized in the income statement and the balance sheet.
Full-Year ended 31 December 2023
Income statement:
Balance sheet:
(in USD million)
Impairment
Impairment
Recoverable
Tax
Other
Property,
Deferred
amount
reversal
income
reversal
intangible
plant and
tax asset/
Currency
CGU, segment
(post-tax)
(pre-tax)
(post-tax)
Goodwill
assets
equipment
effects
Ula area, North Sea
-
-14.9
12.7
-2.2
-
-
-15.6
13.2
0.2
Vilje, North sea
9.4
-10.9
-
-10.9
-11.3
-
-
-
0.4
Other CGUs, North Sea
-
1.0
-
1.0
-
-
1.1
-
-0.1
Total
-24.9
12.7
-12.1
-11.3
-
-14.5
13.2
0.5
Full-Year ended 31 December 2022
Income statement:
Balance sheet:
(in USD million)
Impairment
Impairment
Recoverable
Tax
Other
Property,
Deferred
amount
reversal
income
reversal
intangible
plant and
tax asset/
Currency
CGU, segment
(post-tax)
(pre-tax)
(post-tax)
Goodwill
assets
equipment
effects
Brasse, North Sea
-
-147.0
108.1
-38.9
-8.5
-
-138.5
108.1
-
Berling, North Sea
28.0
39.4
-30.7
8.7
-
-
39.4
-30.7
-
Ula area, North Sea
-
-252.5
182.1
-70.4
-13.0
-
-238.8
180.6
-0.7
Schooner and Ketch, North Sea
-
-13.5
-
-13.5
-
-
-13.4
-
-0.1
Other CGUs, North Sea
-
2.2
-1.4
0.8
-
-
2.2
-1.4
-
Total
-371.3
258.2
-113.1
-21.5
-
-349.1
256.6
-0.8
During 2023, a total impairment charge of USD 24.9 million (USD 12.1 million post-tax) was recognized, mainly driven by:
•
Downward revision of the oil price assumption and reserves estimates, and updated cost profiles (Vilje CGU); and
•
Upward revision in the cost estimate for decommissioning (Ula area CGU).
The Company performed testing of its Kurdistan assets following the ITP closure in March 2023 (Note 3). The estimated recoverable
amounts were higher than the carrying amounts and thus no impairment charges were recognized at yearend 2023.
At yearend 2023, total book value of goodwill of USD 43.2 million is mainly related to technical goodwill on Alve CGU (USD 29.2
million).
During 2022, a total impairment charge of USD 371.3 million (USD 113.1 million post-tax) was recognized, mainly driven by:
•
Decision not to submit a PDO by yearend 2022 (Brasse pre-development asset);
•
Downward revision of reserves and resource estimates, and updated cost profiles (Ula area CGU);
•
Upward revision in the cost estimate for decommissioning (Schooner and Ketch fields and other CGUs); and
•
Partially offset by a reversal of previously recognized impairments following decision to submit a PDO and revised long-term gas price
assumption (Berling development asset).
At yearend 2022, total book value of goodwill of USD 56.1 million was mainly related to technical goodwill on Alve CGU (USD 30.2
million) and Vilje CGU (USD 16.1 million).
Sensitivities
The table below illustrates how the net profit/-loss in 2023 would have been affected by changes in the various assumptions, holding the
remaining assumptions unchanged. The estimated recoverable amounts related to the Tawke license in Kurdistan is substantially higher
than the carrying amounts and the same sensitivity tests would not imply any impairment charges.
Change in reported net profit/-loss (net)
Assumption (USD million)
Change
Increase in assumption:
Decrease in assumption:
Oil and gas price
-
-9
Reserves (2P) and resources (2C)
-
-1
Discount rate (WACC)
-
-
Currency rate (USD/NOK)
-
-2
Climate considerations in impairment assessment
To
assess the robustness of the Group’s oil and gas assets, the Company has run sensitivities with the oil and gas price assumptions
described by three scenarios outlined by the IEA: the Net Zero Emissions Scenario by 2050, the Announced Pledges Scenario and the
Stated Policies Scenario. These scenarios are commonly applied by peer companies and the Company believes that these are useful
for investors and other stakeholders in assessing portfolio resilience across companies in the industry. The oil and gas price
assumptions in the scenarios have been provided by the IEA for the years 2030 and 2050 (in 2022 real terms), and for the sensitivity
calculation a linear development between average actual 2023 and IEA 2030, as well as between IEA 2030 and IEA 2050 have been
Consolidated accounts
Note 11
Impairments
46
DNO
applied. The table below summarizes how the reported net profit would be impacted by an increase (+) or decrease (-) in impairment
charge using the oil and gas price assumptions in the following scenarios:
Oil price USD/bbl (assumption)
Gas price USD/MMBTU (assumption)
Change in reported
IEA scenario (USD million)
2030
2050
2030
2050
net profit/-loss (net):
Stated Policies
85
83
6.9
-
Announced Pledges
74
60
6.5
-
Net Zero Emissions by 2050
42
25
4.3
-127
A significant reduction in the oil and gas price assumptions could also affect the estimated economic cut-off of the projects.
These illustrative impairment sensitivities assume no changes to assumptions other than oil and gas prices. The illustrative sensitivities
on climate change are not considered to represent a best estimate of an expected impairment impact. Moreover, a significant and
prolonged reduction in oil and gas prices would likely result in mitigating actions by DNO and its license partners; for example it could
have an impact on drilling plans and production profiles for new and existing assets. Quantifying such impacts is considered
impracticable, as it requires detailed evaluations based on hypothetical scenarios and not based on existing business or development
plans.
License expiry and economic cut-off dates for development and production assets
In Kurdistan, the Tawke license expires in 2026 but DNO has the right to one automatic five-year extension (i.e., to 2031) and, if
commercial production is still possible at the end of this extended period, DNO is entitled to, upon request to the KRG, a further five-
year extension (i.e., to 2036). Based on DNO’s current assessments, the production from Tawke license will be commercial for the
duration of its contractual term and through subsequent extensions. On the Baeshiqa license, commerciality was declared by the
contractor on 1 August 2021, terminating the exploration period and moving into the PSC development period, which has as a 20-year
duration. If commercial production is still possible at the end of the 20-year period, DNO is entitled to a five-year extension.
In the North Sea, the following relevant license expiry and economic cut-off (in brackets) dates were applied in relation to yearend 2023
impairment assessments; the Ula area CGU have license expiry dates that ranges between 2029 and 2036 (economic cut-off assumed
to be at the end of 2028); the Ringhorne East license expires in 2030 (2035); the Brage license expires in 2030 (2030; the Trym license
expires in 2027 (2026); the Alve license expires in 2029 (2029); the Marulk license expires in 2030 (2030); the Vilje license expires in
2032 (2030); the Fenja license expires in 2039 (2039); and the Berling license, where, following the PDO approval in June 2023, the
partnership expects a 20-year extension to 2043 to be granted in due course (economic cut-off date 2033).
Consolidated accounts
Note 12
Joint Venture
Annual Report and Accounts 2023
DNO
47
Accounting policies
Joint Venture
The Group’s investments in a joint venture are accounted for using the equity method. The income statement reflects the Group’s
share of the results of operations in the joint venture. The financial statements of the joint venture are prepared for the same
reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the
Group.
In October 2022, DNO acquired Mondoil Enterprises LLC (Mondoil Enterprises) and its 33.33 percent indirect interest in privately-held
Foxtrot International LDC (Foxtrot International) whose principal assets are operated stakes in offshore production of gas and
associated liquids in Côte d'Ivoire. Foxtrot International holds a 27.27 percent interest in and operatorship of Block CI-27 containing
reserves of gas, produced together with condensate and oil, from four offshore fields tied back to two fixed platforms. Foxtrot
International also operates an exploration license offshore Côte d’Ivoire, Block CI-12 in which it holds a 24 percent interest.
Foxtrot International's summarized statement of financial position
Year ended 31 December
USD million
2023
2022
Non-current assets
199.9
216.5
Current assets
64.3
67.3
Total assets
264.2
283.7
Non-current liabilities
68.8
67.1
Current liabilities
27.5
30.0
Total liabilities
96.3
97.2
Equity
167.9
186.6
Group's share of net assets (33.33 percent)
56.0
62.2
Goodwill
0.8
0.8
Fair value uplift on PP&E and ARO (net of related deferred tax)
11.1
13.0
Carrying amount Investment in Joint Venture
67.9
76.1
Foxtrot International's summarized statement of comprehensive income
1 January - 31 December
USD million
2023
2022
Revenues
79.4
28.8
Expenses
-17.6
-4.2
Depreciation
-30.8
-8.0
Other income/finance income
8.6
3.5
Tax income/-expense
-
-
Net profit/-loss
39.6
20.1
Group's share of net profit (33.33 percent)
13.2
6.7
Depletion of fair value uplift of PP&E and ARO (net of related deferred tax)
-1.3
-0.7
Share of profit/-loss from Joint Venture
11.9
6.0
Movement in the carrying amount of Investment in Joint Venture
1 January - 31 December
USD million
2023
2022
Opening balance
76.1
77.5
Share of profit/-loss from Joint Venture
11.9
6.0
Equity contribution into Joint Venture
6.9
4.2
Dividends from Joint Venture
-27.1
-11.5
Carrying amount Investment in Joint Venture
67.9
76.1
Consolidated accounts
Note 13
Inventory
48
DNO
Accounting policies
Inventories
Inventories comprise of drilling equipment, spare parts and consumables and are valued at the lower of cost and net realizable value.
Inventories that meet the definition of PP&E are presented under the PP&E and are depreciated as part of the underlying capitalized
asset using the UoP method.
Years ended 31 December
USD million
2023
2022
2023
2022
2023
2022
Drilling equipment, spare parts and consumables
80.4
48.8
14.8
15.3
95.2
64.0
Provision for obsolete inventory
-15.0
-15.0
-2.3
-2.0
-17.4
-17.0
Total inventories
65.3
33.7
12.5
13.3
77.8
47.0
Consolidated accounts
Note 14
Other non-current receivables/Trade and other receivables
Annual Report and Accounts 2023
DNO
49
Accounting policies
Trade debtors
Trade debtors are recognized at nominal value less any provisions for expected credit losses (ECL). ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the (discounted) cash flows that are
expected to be received (i.e., cash shortfalls). ECLs on trade receivables are measured by applying either the general model or the
simplified model. A company must apply the simplified model for trade receivables, which, when invoiced, were without a significant
financing component. This applies to the Company’s oil and gas sales and hence the simplified model is applied in respect of the
ELC assessment of the Kurdistan trade debtors (see below).
Overlift/underlift
An underlift arises when the sale is less than the Group’s share of the oil and gas production. In general, the overlift/underlift
balances are valued at production cost including depreciation (the sales method). For overlift, see Note 21.
Years ended 31 December
USD million
2023
2022
Trade debtors (non-current portion)
129.8
-
Other long-term receivables
-
-
Total other non-current receivables
129.8
-
Trade debtors
149.5
311.8
Underlift
12.1
14.0
Other short-term receivables
103.8
111.9
Total trade and other receivables
265.4
437.8
At yearend 2023, the Company was owed a total of USD 315 million, excluding any interest, by the KRG mainly related to sales of
DNO’s entitlement shares of oil to the KRG for the months October 2022 through March 2023 plus part of the amount invoiced for oil
sold to the KRG in September 2022. These receivables are past due. Since 2017, DNO has consistently invoiced the KRG for such oil
sales based on an agreed Brent pricing mechanism. For September 2022, the KRG unilaterally decided to pay based on a purported
price realized by the KRG during the delivery month. The KRG proposed such change to the agreed pricing mechanism in September
2022 to which DNO has not agreed. DNO therefore continues to request payment of the full invoiced amount.
The Company continues to engage with the KRG regarding collection of the arrears and expects that it will recover the full invoiced
amount (as has occurred in the past), but the timing of recovery is uncertain. Nonetheless, due to the IFRS 9 Financial Instruments
requirement to incorporate the time value of money, the Company has reduced the book value of the KRG arrears by USD 44.3 million
(presented under
Financial expenses
of the estimated future cash flows. The calculation of present value in accordance with IFRS 9, considers a range of possible scenarios
with assigned weighting, involving estimation of the timing of receipt of the arrears which will be dependent upon uncertain future
events, in particular the assumed timing of the re-opening of the ITP which has been shut-in since end of March 2023. A discount rate of
12 percent has been applied for discounting of the estimated future cash flows. In addition, USD 129.8 million was reclassified from
short-term to non-current arrears considering the assumed timing of the recovery of the arrears.
The underlift receivable of USD 12.1 million at yearend 2023 relates to North Sea underlifted volumes. Other short-term receivables
mainly relate to items of working capital in licenses in Kurdistan and the North Sea and accrual for earned income not invoiced in the
North Sea.
Consolidated accounts
Note 15
Cash and cash equivalents
50
DNO
Accounting policies
Cash and cash equivalents
Cash and short-term deposits in the statements of financial position comprise cash held in banks, cash in hand and short-term
deposits with an original maturity of three months or less held to meet short term commitments. Restricted cash is cash reserved for
a specific purpose and therefore not available for immediate and general use by the Group.
Years ended 31 December
USD million
2023
2022
Cash and cash equivalents, restricted
14.3
22.5
Cash and cash equivalents, non-restricted
704.5
931.8
Total cash and cash equivalents
718.8
954.3
Restricted cash consists of deposits on escrow account, employees’ tax withholdings and deposits for rent. Non-restricted cash is
mainly related to bank deposits in USD, NOK, GBP and EUR as of 31 December 2023.
Included in the non-restricted cash and cash equivalents as of 31 December 2023 is USD 41.2 million held on fixed interest time deposit
contracts with different duration and maturity dates up to 26 January 2024.
Note 16
Equity
Accounting policies
Equity
Ordinary shares
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares are recognized as a reduction of
equity.
Repurchase of share capital (treasury shares)
Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are
subsequently sold or reissued, the amount received is recognized as an increase in equity and the resulting surplus or deficit of the
transaction is transferred to/from retained earnings.
Dividend
A liability to pay a dividend is recognized when the distribution is authorized by the shareholders at the AGM. A corresponding
amount is recognized directly in equity.
Share capital
Number of
Ordinary
Treasury
USD million
shares (1,000)
shares
shares
Total
As of 1 January 2022
975,433
32.9
-
32.9
Treasury shares sold/-purchased
-36,369
-
-0.9
-0.9
Share issues
78,944
1.8
-
1.8
As of 31 December 2022
1,018,008
34.8
-0.9
33.9
Number of
Ordinary
Treasury
USD million
shares (1,000)
shares
shares
Total
As of 1 January 2023
1,018,008
34.8
-0.9
33.9
Treasury shares sold/-purchased
-43,007
-
-1.0
-1.0
Cancellation of treasury shares
-
-1.9
1.9
-
As of 31 December 2023
975,000
32.9
-
32.9
Consolidated accounts
Note 16
Equity
Annual Report and Accounts 2023
DNO
51
At the 2023 Annual General Meeting (AGM), the Board of Directors was given the authority to acquire treasury shares with a total
nominal value of up to NOK 24,375,000 which corresponds to 97,500,000 new shares. The maximum amount to be paid per share is
NOK 100 and the minimum amount is NOK 1. Purchases of treasury shares are made on the Oslo Stock Exchange. The authorization
was time-limited until the 2024 AGM, and not beyond 30 June 2024.
The Board of Directors was also given the authority to increase the Company’s share capital by up to NOK 24,375.000 which
corresponds to 97,500,000 new shares. The authorization was time-limited until the 2024 AGM, and not beyond 30 June 2024.
In addition, the Board of Directors was given the authority to raise convertible bonds with an aggregate principal amount of up to USD
300,000,000. Upon conversion of bonds issued pursuant to this authorization, the Company’s share capital may be increased by up to
NOK 24,375.000. The authorization is valid until the 2024 AGM, but not beyond 30 June 2024.
The Board of Directors was given the authority to approve total dividend distributions of up to NOK 1 per share from the date of the 2023
AGM until the date of the 2024 AGM. Following this, the Board of Directors decided to distribute quarterly dividends of NOK 0.25 in
February, May, August, and November 2023.
The Board of Directors was also given the authority to reduce share capital by NOK 19,844,127.25 through the cancellation of
79,376,509 treasury shares, each with a nominal value of NOK 0.25. On 17 August 2023 the cancellation of all 79,376,509 treasury
shares held by the Company was completed.
Interest
The Company's shareholders as of 31 December 2023
Shares
(percent)
Goldman Sachs & Co. LLC*
92,535,456
9.49
Euroclear Bank S.A./N.V.
90,576,149
9.29
Folketrygdfondet
69,504,098
7.13
RAK Gas LLC
34,311,403
3.52
Goldman Sachs & Co. LLC*
33,147,785
3.40
BNP Paribas
30,908,678
3.17
State Street Bank and Trust Comp
24,816,914
2.55
The Bank of New York Mellon
18,136,059
1.86
JPMorgan Chase Bank
16,814,249
1.72
HSBC Bank Plc
13,888,921
1.42
Clearstream Banking S.A.
13,813,018
1.42
CACEIS Bank
12,803,672
1.31
Saxo Bank A/S
9,620,072
0.99
Salt Value AS
9,382,143
0.96
State Street Bank and Trust Comp
9,123,969
0.94
Verdipapirfondet KLP Aksjenorge IN
8,919,483
0.91
State Street Bank and Trust Comp
7,615,795
0.78
Nordnet Bank AB
7,533,472
0.77
UBS Switzerland AG
6,479,383
0.66
Nordnet Livsforsikring AS
5,876,299
0.60
Other shareholders
459,192,982
47.10
Total number of shares excluding treasury shares
975,000,000
100.00
Treasury shares as of 31 December 2023 (DNO ASA)
0.00
0.00
Total number of outstanding shares
975,000,000
100.00
* At yearend 2023, DNO's Executive Chairman Bijan Mossavar -Rahmani held interests in the Company through nominee accounts at the
Dividends of USD 92 million were paid in 2023 (USD 72.8 million in 2022). See Note 28 for dividend payment approved by the Board
after the reporting date. See Note 5 for shares held by the Board of Directors and executive management.
Consolidated accounts
Note 17
Interest-bearing liabilities
52
DNO
Accounting policies
Interest-bearing liabilities
At initial recognition, the bonds are measured at its fair value minus transaction costs that are directly attributable to the issue of the
financial liability. Subsequently, bonds are measured at amortized cost.
Transaction costs directly attributable to the acquisition, issuance, or restructuring of financial liabilities, are amortized over the
expected life of the liability using the effective interest rate method. Amortization is recognized in the income statement, ensuring a
systematic and rational allocation of these costs over the period during which the liability is outstanding.
Effective
interest
Fair value
Carrying amount
Ticker
Facility
Facility
Interest
rate
USD million
OSE
currency
amount
(percent)
Maturity
(percent)
2023
2022
2023
2022
Non-current
Bond loan (ISIN NO0010852643)
DNO03
USD
131.2
8.375
29.05.24
9.0
-
131.5
-
131.2
Bond loan (ISIN NO0011088593)
DNO04
USD
400.0
7.875
09.09.26
8.8
378.1
375.8
400.0
400.0
Capitalized borrowing issue costs
-8.0
-11.3
Reserve based lending facility
-
USD
310.0
see below
see below
-
-
26.6
-
26.6
Total non-current interest-bearing liabilities
378.1
533.9
392.0
546.4
Current
Bond loan (ISIN NO0010852643)
DNO03
USD
131.2
8.375
29.05.24
9.0
130.9
131.2
Reserve based lending facility (current)
-
USD
310.0
see below
see below
-
35.0
8.4
35.0
8.4
Total current interest-bearing liabilities
165.9
8.4
166.2
8.4
Total interest-bearing liabilities
544.0
542.3
558.2
554.8
Facility and carrying amount for the bonds is shown net of bonds held by the Company. On 22 January 2024, DNO ASA fully completed
a USD 131.2 million call option redemption of the DNO03 bond (at a price of 100 percent plus accrued interest).
The financial covenants of the bonds issued by DNO ASA require a minimum USD 40 million of liquidity and the maintenance by the
Group of either an equity ratio of 30 percent or a total equity of a minimum of USD 600 million. There is also a restriction on declaring or
making any dividend payments if the liquidity of the Company is less than USD 80 million immediately following such distribution.
As of 31 December 2023, the Group has a reserve-based lending (RBL) facility for its Norway and UK production licenses with a total
facility limit of USD 310 million which is available for both debt and issuance of letters of credit. Interest charged on utilizations is based
on SOFR plus a margin, currently 3.00 percent. The facility will amortize over the loan life with a final maturity date of 7 November 2026.
The entities that participate in the facility are required to submit quarterly a liquidity test and maintain a consolidated net debt divided by
EBITDAX ratio of maximum 3.50. The security under the RBL includes, without limitation, a pledge over the shares in DNO North Sea
plc and its subsidiaries, assignment of claims under shareholder loans, intra-group loans and insurances, a pledge of certain bank
accounts and mortgages over the license interests. There are also restrictions on loans and dividend payments to DNO ASA. The
borrowing base amount of the facility from 1 January 2024 is USD 100 million. Amount utilized as of the reporting date is disclosed in
the table above. In addition, USD 17.9 million is utilized in respect of letters of credit.
There have been no breaches of the financial covenants of any interest-bearing liability in the current period.
Consolidated accounts
Note 17
Interest-bearing liabilities
Annual Report and Accounts 2023
DNO
53
Changes in liabilities arising from financing activities split on cash and non-cash changes
At 1 Jan
Cash
Non-cash changes
At 31 Dec
USD million
2023
flows
Amortization
Currency
Acquisition
Reclass
2023
Bond loans (non-current)
531.2
-
-
-
-
-131.2
400.0
Bond loans (current)
-
-
-
-
-
131.2
131.2
Borrowing issue costs
-11.3
-
3.3
-
-
-
-8.0
Reserve based lending facility (non-current)
26.6
-
-
-
-
-26.6
-
Reserve based lending facility (current)
8.4
-
-
-
-
26.6
35.0
Total
554.8
-
3.3
-
-
-
558.2
At 1 Jan
Cash
Non-cash changes
At 31 Dec
USD million
2022
flows
Amortization
Currency
Acquisition
Reclass
2022
Bond loans (non-current)
794.9
-263.7
-
-
-
-
531.2
Bond loans (current)
-
-
-
-
-
-
-
Borrowing issue costs
-16.5
-
5.2
-
-
-
-11.3
Reserve based lending facility (non-current)
95.0
-60.0
-
-
-
-8.4
26.6
Reserve based lending facility (current)
-
-
-
-
-
8.4
8.4
Total
873.4
-323.7
5.2
-
-
-
554.8
Consolidated accounts
Note 18
Lease liabilities
54
DNO
Accounting policies
Lease liabilities
The Group assesses at contract inception whether a contract is, or contains, a lease. The Group applies a single recognition and
measurement approach for all leases, except for short-term leases (12 months or less) and leases of low-value assets. Short term
leases and leases of low value assets have not been reflected in the balance sheet but expensed or capitalized as incurred,
depending on the activity in which the leased asset is used.
Lease liabilities are measured at the present value of lease payments to be made over the lease term. In calculating the present
value of lease payments, the Group uses the implicit interest rate and if not readily determinable, its incremental borrowing rate at
the lease commencement date. Extension options are included in the lease liability when, based on the management’s judgement, it
is reasonably certain that an extension will be exercised.
In the consolidated cash flow, lease payments related to lease liabilities recognized in accordance with IFRS 16, are presented as
cash flow used in financing activities.
Years ended 31 December
USD million
2023
2022
Non-current lease liabilities
14.0
6.5
Current lease liabilities
3.6
6.8
Total lease liabilities
17.5
13.3
The recognized lease liabilities in the balance sheet are mainly related to office rent.
The identified lease liabilities have no significant impact on the Group’s financing, loan covenants or dividend policy. The Group does
not have any residual value guarantees. Lease payments related to short-term leases and leases of low-value assets are mainly
recognized under lifting costs and exploration costs, or tangible assets and capitalized exploration. Total lease payments related to
short-term leases and low-value assets were USD 49.1 million as of yearend 2023 (2022: USD 56 million) with most of the lease
payments related to drilling rigs.
The following table summarizes the Group’s maturity profile of the lease liabilities based on contractual undiscounted lease payments
and are related to office rent and equipment.
1 January - 31 December
USD million
2023
2022
Within one year
4.8
7.0
Two to five years
11.8
6.5
After five years
5.4
-
Total undiscounted lease liabilities end of the period
22.0
13.5
.
Consolidated accounts
Note 19
Asset retirement obligations
Annual Report and Accounts 2023
DNO
55
Accounting policies
Provisions for asset retirement obligations (ARO)
Provisions for ARO are initially recognized at the present value of the estimated future costs determined in accordance with local
conditions and requirements. A corresponding asset of an amount equivalent to the ARO provision is also recognized initially and is
presented as part of the PP&E. The retirement asset is subsequently depreciated as part of the development and production asset it
relates to.
The ARO provisions and the discount rates are reviewed at each balance sheet date. The discount rates used in the calculation of
the present value of the ARO are pre-tax risk-free rates with the addition of a credit margin. The risk-free rate used has a maturity
date that is expected to coincide with the time the removal will be affected and denominated in the same currency as the expected
future expenditures. According to IFRIC 1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
, changes in the
measurement of the ARO resulting from a change in the timing or amount of the outflow of resources embodying economic benefits
required to settle the obligation, or a change in the discount rate, are added to or deducted from the cost of the related asset.
Changes in the estimated ARO provisions impact the retirement asset in the period in which the estimate is revised.
Estimation uncertainty: Estimation of the cost for decommissioning
Estimation of the costs for decommissioning is complex and requires judgement as these estimates are based on currently
applicable laws and regulations, and technology. Decommissioning activities will normally take place in the distant future, and the
technology, regulatory requirements and related costs may change. The energy transition may bring forward the decommissioning
activities and thereby increasing the present value of associated decommissioning provisions. Based on various scenario analysis
performed by the Company, management does not expect any reasonable change in the expected timeframe to have a material
effect on the Group’s decommissioning provisions, assuming cost estimates (i.e., cash flows) remain unchanged. The estimates
cover expected removal concepts based on known technology and, in the case of offshore decommissioning, estimated costs of
maritime operations, hiring of heavy-lift barges and drilling rigs. As a result, the initial recognition of the liability and the capitalized
cost associated with decommissioning obligations, and the subsequent adjustment of these balance sheet items, involve the
application of significant judgement. Based on the described uncertainty, there may be significant adjustments in estimates of
liabilities that can affect future financial results.
Asset retirement obligations (ARO)
The provisions for ARO are based on the present value of estimated future cost of decommissioning oil and gas assets in Kurdistan and
the North Sea. The discount rates before tax applied at yearend 2023 were between 4.9 percent and 5.0 percent (yearend 2022:
between 4.5 percent and 4.8 percent). The credit risk element included in the discount rates at yearend 2023 was 0.8 percent (yearend
2022: 0.8 percent).
Credit risk discussion
The Company note that IASB in relation to its project “Provisions – Targeted Improvements”, based on a staff paper recommendation,
have tentatively proposed to specify the use of a discount rate reflecting the time value of money, based on a risk-free rate without
adjustments for credit risk element (non-performance risk). However, considering that no new requirements in the standard have been
concluded, the Company deem it reasonable not to change its method for determining the discount rate. The Company have compared
its discount rate towards peers and noted that they are within a range applied by other peer companies.
Years ended 31 December
USD million
2023
2022
Non-current asset retirement obligations (ARO)
382.7
368.2
Current asset retirement obligations (ARO)
10.6
20.5
Total asset retirement obligations (ARO)
393.2
388.6
Consolidated accounts
Note 19
Asset retirement obligations
56
DNO
Years ended 31 December
USD million
2023
2022
Asset retirement obligation as of 1 January
388.6
456.0
Decommissioning spend
-17.9
-70.5
Increase/-decrease in existing provisions
10.5
25.0
Amounts charged against provisions
-
-
Effects of change in the discount rate
-5.4
-37.0
Accretion expenses (unwinding of discount)
17.4
15.2
Reclassification and transfer
-
-
Asset retirement obligation as of 31 December
393.2
388.6
Net gain on disposal of licenses of USD 5.5 million in the third quarter, was mainly related to DNO's sale of the 10 percent working
interest in the East Foinaven license on the UKCS. The transaction was completed on 14 July 2023 and involved a net negative
consideration of USD 5.4 million from DNO and in return, the buyer took over the ARO obligation. Consequently, as part of the gain/loss
calculation, the related book value of the ARO provision (USD 10.4 million) was derecognized from the balance sheet.
.
Consolidated accounts
Note 20
Other liabilities
Annual Report and Accounts 2023
DNO
57
Accounting policies
Provisions for other liabilities
A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event, there is likely
that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the obligation amount.
The provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
Estimation uncertainty
The assessment of the existence and potential quantum of contingencies inherently involves the exercise of significant judgment and
the use of estimates regarding the outcome of future events. Management uses its judgment, and if necessary also external legal
experts to evaluate certain provisions and legal disputes in order to ensure the correct accounting treatment.
Years ended 31 December
USD million
2023
2022
Non-current
Other long-term obligations
7.3
4.9
Total non-current other liabilities
7.3
4.9
Current
Accrued interest expense
2.8
2.8
Other provisions and charges
6.4
36.9
Total current other liabilities
9.1
39.8
Total other liabilities
16.5
44.7
Note 21
Trade and other payables
Accounting policies
Overlift
An overlift arises when the Group sells more than its share of the oil and gas production (the sales method). For underlift, see Note
14.
Years ended 31 December
USD million
2023
2022
Trade payables
70.5
62.7
Public duties payable
4.3
4.1
Prepayments from customers
21.2
12.7
Overlift
1.2
9.0
Other accrued expenses
123.9
155.7
Total trade and other payables
221.1
244.1
Trade payables and other accrued expenses include items of working capital related to participation in licenses in Kurdistan and the
North Sea, and prepayment from customers related to oil sales in the North Sea. The overlift payable relates to North Sea overlifted
volumes, valued at production cost including depreciation.
Consolidated accounts
Note 22
Financial instruments
58
DNO
Accounting policies
Financial instruments
Financial assets
The Group’s financial assets include trade and other receivables, tax receivables and cash and cash equivalents.
Financial assets are initially recognized at fair value. After initial recognition the measurement and accounting treatment depend on
the type of instrument and classification: Financial investments at amortized cost through profit and loss, at fair value through profit
and loss (FVTPL), and at fair value through other comprehensive income (FVTOCI).
A financial asset is derecognized when the Group no longer has the right to receive cash flows from the asset, and risks and rewards
are of ownership are transferred through sale or the contractual rights to the cash flows expire, are redeemed, or cancelled.
Financial liabilities
The Group’s financial liabilities include trade and other payables and loans.
Interest-bearing loans are after initial recognition measured at amortized cost using the effective interest rate method. Gains and
losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process. Amortized
cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the
effective interest rate. The amortization cost is included as finance expense in the statements of comprehensive income. This applies
mainly to bond loans, see Note 17.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such a modification is treated as a derecognition of the original liability and a recognition of a new liability. The
difference in the respective carrying amounts is recognized in the statements of comprehensive income.
Financial risk management, objectives and policies
Overview
DNO is exposed to a range of risks affecting its financial performance including market risk, liquidity risk and credit risk. The Group
seeks to minimize potential adverse effects of such risks through sound business practices and risk management programs. No hedge
accounting is applied.
Market risk
The Group is exposed to market risks driven by fluctuations in oil and gas prices, foreign currency exchange rates and interest rates.
Oil and gas price risk
DNO’s revenues are generated from the sale of oil and gas. The Group had no oil and gas price hedging arrangements at yearend 2023
although it monitors its oil and gas price risk on a continuous basis and evaluates hedging alternatives.
The following table illustrates the impact on reported 2022 and 2023 profit/-loss before income tax from oil and gas price fluctuations
deemed reasonable and possible, with all other variables held constant. In addition to driving revenues, price fluctuations or the
expectations of price fluctuations could impact DNO’s capital expenditure levels and impairment assessments. See Note 10 for a
sensitivity analysis related to the impairment assessment of oil and gas assets.
Change in yearend
Effect on profit
oil and gas price
before tax
2023
+/- 15.0
2022
+/- 15.0
Foreign currency exchange rate risk
Revenues from oil and gas production are primarily in USD and EUR, while operating expenses, capital and abandonment expenditures
are primarily denominated in USD, NOK and GBP. Dividend distributions from the Company are in NOK. The Group had no currency
hedging instruments at yearend 2023 although it monitors its foreign currency risk exposure on a continuous basis and evaluates
hedging alternatives.
Consolidated accounts
Note 22
Financial instruments
Annual Report and Accounts 2023
DNO
59
The following tables illustrate the impact on DNO’s reported profit/-loss before income tax in 2022 and 2023 from foreign currency
exchange rate fluctuations deemed reasonable and possible in NOK, EUR and GBP to USD exchange rates, with all other variables
held constant. The other currencies (e.g., AED, IQD) are not included as the exposure is deemed immaterial.
Change in
Effect on profit
NOK (percent)
before tax (USD mill)
2023
+ 10.0
6.0
2023
- 10.0
-6.0
2022
+ 10.0
-3.5
2022
- 10.0
3.5
Change in
Effect on profit
GBP (percent)
before tax (USD mill)
2023
+ 10.0
-36.7
2023
- 10.0
36.7
2022
+ 10.0
-19.0
2022
- 10.0
19.0
Change in
Effect on profit
EUR (percent)
before tax (USD mill)
2023
+ 10.0
0.3
2023
- 10.0
-0.3
2022
+ 10.0
-4.8
2022
- 10.0
4.8
Interest rate risk
As most of the Group’s financing derives from bond loans which are issued in USD and at fixed interest rates, the Group does not
engage in interest rate hedging. Interest rate exposure on the RBL is considered limited and no hedging arrangement was in place
during 2023. The Group is also exposed to interest rate risk on its cash deposits held at floating interest rates.
The following table illustrates the impact on DNO’s reported profit/-loss before income tax in 2022 and 2023 from a change in interest
rates on that portion of interest-bearing liabilities and cash deposits deemed reasonable and possible, with all other variables held
constant.
Increase/decrease
Effect on profit
in basis points
before tax (USD mill)
2023
+/- 200
+/-7.6
2022
+/- 200
+/-7.7
Liquidity risk
Liquidity risk is the risk that suitable sources of funding for the Group’s business activities may not be available. Prudent liquidity risk
management requires sufficient cash balances, credit facilities and other financial resources to maintain financial flexibility under
dynamic market conditions. The Group’s principal sources of liquidity are operating cash flows from its producing assets in Kurdistan
and the North Sea. In addition to its operating cash flows, the Group relies on the debt capital markets for both short- and long-term
funding, see Note 17. The Group’s finance function prepares projections on a regular basis in order to plan the Group’s liquidity
requirements. These plans are updated regularly for various scenarios and form part of the basis for decision making by the Company’s
Board of Directors and the executive management.
Investment in joint venture
Foxtrot International issues cash calls to Mondoil Enterprises (see Note 12) to fund capital and operating requirements for Côte d’Ivoire
Block CI-27 and Block CI-12, which are made on a regular basis pursuant to an approved budget and work program. The cash
distributions anticipated to be received from Foxtrot International will be sufficient to enable the Company to meet all of its scheduled
and anticipated obligations.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical
region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in
economic, political or other conditions. DNO’s revenues in 2023 derived primarily from production in the Tawke license in Kurdistan (see
also entitlement risk described in Note 3) and from several licenses in the North Sea. The Group actively seeks to reduce such risk
through organic growth and asset acquisitions aimed at further diversifying its revenue sources. See also Note 12 regarding the
Company’s entry in West Africa.
Consolidated accounts
Note 22
Financial instruments
60
DNO
The tables below summarize the maturity profile of the Group’s financial liabilities based on contractual undiscounted cash flows.
USD million
On
Less than
3 to 12
1 to 3
Over 3
At 31 December 2023
demand
3 months
months
years
years
Interest-bearing liabilities*
-
-
131.2
435.0
-
Other provisions and charges
-
-
9.1
-
-
Taxes payable
-
-
4.6
-
-
Trade and other payables
-
218.0
2.0
-
-
Total liabilities
-
218.0
146.9
435.0
-
USD million
On
Less than
3 to 12
1 to 3
Over 3
At 31 December 2022
demand
3 months
months
years
years
Interest-bearing liabilities*
-
11.3
33.8
203.8
460.7
Other provisions and charges
-
18.4
22.2
-
-
Taxes payable
-
125.7
-
-
-
Trade and other payables
-
233.0
2.0
-
-
Total liabilities
-
388.4
58.0
203.8
460.7
* Face value of the bonds was USD 531.2 million at yearend 2023 (USD 531.2 million at yearend 2022).
For changes in liabilities arising from financing activities, see Note 17.
Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts due causing
financial loss to the Group. The Group’s exposure to credit risk is mainly related to its outstanding trade debtors. Other counterparty
credit risk exposure to DNO is related to its cash deposits with banks and financial institutions. The table below provides an overview of
financial assets exposed to credit risk at yearend.
Years ended 31 December
USD million
2023
2022
Trade debtors (non-current portion) (Note 14)
129.8
-
Trade debtors (Note 14)
149.5
311.8
Other receivables (Note 14)
115.9
126.0
Tax receivables
-
25.8
Cash and cash equivalents
718.8
954.3
Total
1,114.1
1,417.9
Trade debtors from oil sales invoices in Kurdistan
The past due trade debtors are entirely related to Kurdistan. Refer to Note 14 regarding ELC assessment of the Kurdistan receivables.
The table below shows the aging of trade debtors and information about credit risk exposure using a provision matrix.
Contract
Days past due (trade debtors)
USD million
assets
Current
< 30 days
30-60 days
61-90 days
> 90 days
Total
As of 31 December 2023
Trade debtors (nominal value) (Note 14)
-
12.0
-
-
-
311.6
323.6
Expected credit loss rate (percent)
-
-
-
-
-
-
-
Expected credit loss rate (USD million)
-
-
-
-
-
-
-
As of 31 December 2022
Trade debtors (nominal value) (Note 14)
-
132.7
58.1
55.9
63.1
2.0
311.8
Expected credit loss rate (percent)
-
-
-
-
-
-
-
Expected credit loss rate (USD million)
-
-
-
-
-
-
-
Cash deposits
Credit risk from balances with banks and financial institutions is managed by the Group’s treasury function. The Group limits its
counterparty credit risk by maintaining its cash deposits with multiple banks and financial institutions with high credit ratings.
Capital management
For the purpose of the Group’s capital management, capital is defined as the total equity and debt of DNO. The Group manages and
adjusts its capital structure to ensure that it remains sufficiently funded to support its business strategy and maximize shareholder value.
If required, the capital structure may be adjusted through equity or debt transactions, asset restructuring or through other measures.
Consolidated accounts
Note 22
Financial instruments
Annual Report and Accounts 2023
DNO
61
The Group monitors capital on the basis of the equity ratio, which is calculated as total equity divided by total assets. It is DNO’s policy
that this ratio should be 30 percent or higher. The financial covenants of the bond loans require a minimum of USD 40 million of liquidity
and that the Group maintains either an equity ratio of 30 percent or a total equity of a minimum of USD 600 million.
There is also a restriction from declaring or making any dividend payments if the liquidity of the Company is less than USD 80 million
immediately after such distribution is made, see Note 17. The equity ratio has improved primarily due to a net profit in 2023. The table
below shows the book equity ratio at yearend.
No changes were made in the objectives, policies or processes for managing capital during 2023 and 2022.
Years ended 31 December
USD million
2023
2022
Total equity
1,234.8
1,369.4
Total assets
2,638.3
2,803.0
Equity ratio
46.8%
48.9%
Fair value measurement
Assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value
hierarchy as described below.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table shows the carrying amounts and fair values of financial liabilities, including their levels in the fair value hierarchy. It
does not include the carrying amounts and fair value information for financial assets and financial liabilities not measured or disclosed at
fair value if the carrying amount is a reasonable approximation of fair value.
Carrying amount
Financial
Fair value hierarchy
liabilities
at amortized
2023 - USD million
Note
cost
Total
Date of valuation
Level 1
Level 2
Level 3
Financial liabilities measured or disclosed at fair value
Interest-bearing liabilities (non-current)
17
392.0
392.0
31 December 2023
378.1
-
-
Interest-bearing liabilities (current)
17
166.2
166.2
130.9
-
35.0
Carrying amount
Financial
Fair value hierarchy
liabilities
at amortized
2022 - USD million
Note
cost
Total
Date of valuation
Level 1
Level 2
Level 3
Financial liabilities measured or disclosed at fair value
Interest-bearing liabilities (non-current)
17
546.4
546.4
31 December 2022
507.3
-
26.6
Interest-bearing liabilities (current)
17
8.4
8.4
-
-
8.4
Consolidated accounts
Note 23
Commitments and contingencies
62
DNO
Accounting policies
Commitments and contingencies
A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event, there is likely
that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the obligation amount.
Contingent liabilities are not recognized but are disclosed unless the possibility of an outflow of resources is remote.
Estimation uncertainty: Contingencies, provisions and litigations
By their nature, contingencies will only be resolved when one or more uncertain future event occurs or fails to occur. The
assessment of the existence and potential quantum of contingencies inherently involves the exercise of significant judgment and the
use of estimates regarding the outcome of future events. Management uses its judgment to evaluate certain provisions and legal
disputes in order to ensure the correct accounting treatment.
Contingent liabilities and contingent assets
Disputes with Ministry of Oil and Minerals of Yemen – Block 53, Block 43 and Block 32
The Ministry of Oil and Minerals (MOM or Ministry) of Yemen filed an arbitration claim against operator Dove Energy Limited and the
other partners (including DNO Yemen AS) for allegedly wrongful withdrawal from Block 53. An arbitral award was rendered in July 2019
partially in the Ministry’s favor in the amount of USD 29 million (out of a USD 171 million claim). The Contractor (including DNO Yemen
AS) filed for annulment proceedings in the Paris Court d’Appel which is still pending before the French Supreme Court.
DNO Yemen AS (DNO Yemen) was involved in a dispute with MOM with respect to DNO Yemen’s relinquishment of Block 32 in 2016.
An arbitral award was rendered on 7 April 2021 in the Ministry’s favor in the amount of USD 8.1 million (out of a USD 151 million
counterclaim) while the Contractor of the license was awarded USD 5 million (out of a USD 14 million claim).
DNO Yemen was involved in a dispute with MOM with respect to DNO Yemen’ relinquishment of Block 43 in 2016. An arbitral award
was rendered on 18 February 2020 in DNO Yemen’s favor in the amount of USD 6.8 million (almost entirely dismissing the USD 131
million counterclaim of the MOM).
On 8 December 2022, the Oslo District Court ruled that previously rendered arbitration awards regarding Blocks 53 and 32 (above) are
enforceable against DNO Yemen in Norway. DNO Yemen appealed this decision, first to the Court of Appeal that substantially upheld
the District Court’s ruling and thereafter to the Supreme Court. The Supreme Court appeal was dismissed. The Oslo District Court also
ruled that the previously rendered arbitration award regarding Block 43 in favor of DNO Yemen is enforceable against the MOM in
Norway.
As part of the Block 43 arbitral award in 2020, a cost recovery audit was mandated for the years 2014 and 2015. In 2021, MOM filed an
arbitration claim against DNO Yemen AS for allegedly over-recovered costs of USD 17.2 million from the Ministry in 2014 and 2015. On
24 July 2023, the arbitral award was rendered in favor of DNO Yemen dismissing all claims by the MOM and ordering the MOM to pay
all of DNO Yemen’s legal fees and court administrative costs.
In 2023, therefore, the net amount of USD 29.2 million was paid by DNO Yemen to MOM in connection with arbitral awards resolving
disputes regarding Block 53, 43 and 32 (described above). DNO has taken action against a former license partner to the amount paid, in
respect of which that partner is liable. The accounting provision of USD 22.2 million, recognized at yearend 2022 for these arbitral
awards was reversed following the payment.
Other claims
During the normal course of its business, the Group may be involved in other legal proceedings and unresolved claims. The Group has
made provisions in its consolidated financial statements for probable liabilities related to litigation and claims based on management's
best judgment and in line with IAS 37. Other than what is set out above, DNO is not aware of any governmental, legal or arbitral
proceedings (including any such proceedings which are pending or threatened) initiated against DNO and which may have significant
effects on DNO’s results of operations, cash flows or financial position.
Capital commitments and abandonment expenditures
Based on work plans as of yearend 2023 and contingent on future market conditions including development in the oil price, and
outcome of ongoing discussions related to recovery of arrears for past oil deliveries to the KRG and payment terms and conditions for
any future oil exports, the Group’s projected operational spend for 2024 comprising of capital and exploration expenditures,
abandonment expenditures and operational expenditures amounts to USD 645 million. The projected operational spend reflects the
Group’s share of planned drilling and facility investments and decommissioning plan in its licenses for 2024. These work plans are
subject to revisions.
Consolidated accounts
Note 23
Commitments and contingencies
Annual Report and Accounts 2023
DNO
63
Guarantees related to assets in operation at yearend
The Company has issued parent company guarantees to authorities in Norway and the UK on behalf of certain subsidiaries that
participate in licenses on the NCS and the UKCS.
Liability for damages/insurance
Installations and operations are covered by various insurance policies.
Note 24
Earnings per share
1 January - 31 December
2023
2022
Net profit/-loss attributable to ordinary equity holders of the parent (USD million)
18.6
384.9
Weighted average number of ordinary shares excluding treasury shares (millions)
980.04
975.43
Earnings per share, basic (USD per share)
0.02
0.39
Earnings per share, diluted (USD per share)
0.02
0.39
Basic earnings per share are calculated by dividing the net profit/-loss attributable to equity holders by the weighted average number of
outstanding ordinary shares during the period, excluding ordinary shares purchased and held as treasury shares.
The Company did not have any potential dilutive shares at yearend 2023.
Consolidated accounts
Note 25
Group companies and other companies
64
DNO
Ownership and voting
USD million
Office
interest (percent)
Shares in the Company's subsidiaries
DNO Iraq AS
Norway
100
DNO UK Limited
United Kingdom
100
DNO Mena AS
Norway
100
DNO Technical Services AS
Norway
100
DNO Exploration UK Limited
United Kingdom
100
DNO Yemen AS
Norway
100
DNO North Sea plc
United Kingdom
100
Mondoil Enterprises LLC
United States
100
Shares in subsidiaries owned through subsidiaries
DNO Mena AS
DNO Oman Limited
Bermuda
100
DNO Oman Block 8 Limited
Guernsey
100
South Limited
Guernsey
100
DNO Tunisia Limited
Guernsey
100
RAK Petroleum Public Company Limited
United Arab Emirates
100
DNO North Sea plc
DNO Norge AS
Norway
100
DNO North Sea (UK) Limited
United Kingdom
100
DNO North Sea (ROGB) Limited
United Kingdom
100
DNO North Sea (Energy) Limited
United Kingdom
100
DNO North Sea SIP EBT Limited
United Kingdom
100
Shares in other entities, indirectly (equity accounted)
Mondoil Côte d’Ivoire LLC
United States
50
Foxtrot International LDC
Cayman Islands
33.33
The Group’s operations in Kurdistan are carried out through its subsidiary DNO Iraq AS, while activities on the NCS are carried out
through DNO Norge AS and UKCS activities are carried out through DNO North Sea (UK) Limited and DNO North Sea (ROGB) Limited.
Activities in Côte d'Ivoire are carried out by Foxtrot International LDC, in which the Company’s indirect ownership of 33.33 percent is
accounted for using the equity method. DNO ASA, DNO Technical Services AS and DNO North Sea plc provide technical support and
services to the various companies in the Group. The other subsidiaries from the table above had minimal activity during the year. In
2023 DNO Oman Block 30 Limited was renamed to South Limited and North Limited was liquidated.
Consolidated accounts
Note 26
Oil and gas reserves (unaudited)
Annual Report and Accounts 2023
DNO
65
Estimation uncertainty: Reserves and resources estimates
DNO’s reserves and contingent resources are estimated and classified by the Company in accordance with the rules and guidelines
of the Society of Petroleum Engineers (SPE) and are in conformity with requirements from the Oslo Stock Exchange for the reporting
of reserves and resources. All estimates of reserves and resources involve uncertainty.
Important factors that could cause actual results to differ from the estimates include, but are not limited to: technical, geological and
geotechnical conditions; economic and market conditions; oil and gas prices; changes in government regulations; political
development; interest rates; and currency exchange rates. Specific parameters of uncertainty related to the field/reservoir include but
are not limited to: reservoir pressure and porosity; recovery factors; water cut development; production decline rates; gas/oil ratios;
and oil properties.
Changes in commodity prices and costs may impact economic cut-off and remaining reserves, which may change the timing of
assumed decommissioning activities. Future changes to estimated reserves can also have a material effect on depreciation,
impairment of oil and gas fields and operating results. The Group may also not be able to commercially develop its contingent
resources that are used in impairment assessments or acquisition accounting where the fair value approach is applied.
Net reserves by region/field as of 31 December 2023
Proven (1P)
Proven and probable (2P)
Proven, probable and possible (3P)
MMboe
Oil
NGL
Gas
Total
Oil
NGL
Gas
Total
Oil
NGL
Gas
Total
Tawke
112.4
-
-
112.4
142.5
-
-
142.5
161.9
-
-
161.9
Peshkabir
62.7
-
-
62.7
102.0
-
-
102.0
136.1
-
-
136.1
Kurdistan
175.1
175.1
244.5
-
-
244.5
298.0
-
-
298.0
Blane
0.1
-
-
0.1
0.2
-
-
0.2
0.3
-
-
0.3
Enoch
-
-
-
-
-
-
-
-
-
-
-
-
UK
0.1
-
-
0.1
0.3
-
-
0.3
0.4
-
-
0.4
Alve
0.5
0.9
3.1
4.5
0.6
0.9
3.4
5.0
0.7
1.0
3.7
5.4
Andvare
-
0.2
1.7
2.0
0.1
0.3
2.7
3.1
0.2
0.5
3.9
4.7
Berling
1.5
1.1
5.2
7.8
2.2
1.6
7.3
11.2
3.1
2.2
9.5
14.8
Brage
0.7
-
0.1
0.8
1.1
0.1
0.3
1.6
1.9
0.2
0.5
2.7
Fenja
1.4
0.1
0.6
2.1
2.5
0.1
0.9
3.4
3.8
0.1
1.3
5.2
Marulk
-
-
0.4
0.4
-
0.1
0.6
0.7
0.1
0.1
0.8
1.0
Oda
0.3
-
-
0.3
0.4
-
-
0.4
0.5
-
-
0.5
Ringhorne East
1.1
-
-
1.1
1.3
-
-
1.3
1.5
-
-
1.5
Tambar
0.7
-
0.1
0.9
1.1
0.1
0.3
1.4
1.3
0.1
0.4
1.7
Tambar East
0.8
-
0.1
0.8
2.3
0.1
0.1
2.4
3.9
0.1
0.2
4.2
Trym
0.2
-
1.1
1.3
0.3
-
1.4
1.7
0.4
-
1.8
2.2
Ula
0.8
0.1
-
0.9
1.0
0.1
-
1.1
1.7
0.2
-
1.9
Vilje
0.7
-
-
0.7
1.3
-
0.1
1.4
3.0
-
0.1
3.1
Total Norway
8.7
2.4
12.4
23.7
14.2
3.4
17.2
34.8
22.1
4.5
22.2
49.0
Subtotal Consolidated reserves
198.8
279.5
347.3
Côte d'Ivoire
0.1
7.5
7.6
0.1
10.4
10.5
0.2
13.0
13.2
Total West Africa
0.1
-
7.5
7.6
0.1
-
10.4
10.5
0.2
-
13.0
13.2
Subtotal Equity accounted reserves
7.6
10.5
13.2
Total Group
206.4
290.1
360.5
Consolidated accounts
Note 26
Oil and gas reserves (unaudited)
66
DNO
Reserves development by segment (net to DNO)
Kurdistan
North Sea
Subtotal
West Africa
Total Group
MMboe
1P
2P
3P
1P
2P
3P
1P
2P
3P
1P
2P
3P
1P
2P
3P
As of 1 January 2022
162.2
267.4
348.5
33.9
54.0
72.2
196.1
321.4
420.6
-
-
-
196.1
321.4
420.6
Production
-29.3
-29.3
-29.3
-4.9
-4.9
-4.9
-34.2
-34.2
-34.2
-1.2
-1.2
-1.2
-35.4
-35.4
-35.4
Acquisitions
-
-
-
-
-
-
-
-
-
5.6
11.5
22.5
5.6
11.5
22.5
Divestments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
New developments
-
-
-
8.4
12.1
16.5
8.4
12.1
16.5
-
-
-
8.4
12.1
16.5
Revision of previous estimates
58.1
7.2
-3.2
-12.5
-24.8
-34.3
45.6
-17.6
-37.6
-
-
-
45.6
-17.6
-37.6
As of 31 December 2022
190.9
245.3
316.0
25.0
36.5
49.4
215.9
281.8
365.4
4.4
10.3
21.3
220.3
292.1
386.7
Production
-12.7
-12.7
-12.7
-5.2
-5.2
-5.2
-17.9
-17.9
-17.9
-1.3
-1.3
-1.3
-19.1
-19.1
-19.1
Acquisitions
-
-
-
-
-
-
-
-
-
4.5
1.5
-6.9
4.5
1.5
-6.9
Divestments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
New developments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Revision of previous estimates
-3.2
11.9
-5.3
4.0
3.8
5.1
0.9
15.7
-0.2
-
-
-
0.9
15.7
-0.2
As of 31 December 2023
175.1
244.5
298.0
23.8
35.1
49.3
198.9
279.6
347.3
7.6
10.5
13.2
206.4
290.1
360.5
Net Entitlement (NE) reserves by segment
Kurdistan
North Sea
Subtotal
West Africa
Total Group
MMboe
1P
2P
3P
1P
2P
3P
1P
2P
3P
1P
2P
3P
1P
2P
3P
As of 31 December 2022
63.8
74.3
84.7
25.0
36.5
49.4
88.8
110.8
134.1
2.7
6.3
12.0
91.5
117.1
146.1
As of 31 December 2023
60.9
74.0
82.7
23.8
35.1
49.3
84.7
109.1
132.0
4.9
6.8
8.3
89.6
115.9
140.3
The reserves and contingent resources are according to the Annual Statement of Reserves and Resources (ASRR) dated 13 March
2024. Reported reserves fall within class 1-3 of the Norwegian Offshore Directorate (NOD) classification and 2C resources fall within
class 4-7.
International petroleum consultants DeGolyer and MacNaughton (D&M) carried out an independent assessment of the Tawke license
(containing the Tawke and Peshkabir fields) and the Baeshiqa license (containing the Baeshiqa and Zartik structures) in the Kurdistan
region of Iraq. International petroleum consultants RPS Energy Consultants (RPS) carried out an independent assessment of DNO's
licenses in Norway and the UK. The International petroleum consultants Beicip-Franlab carried out an independent assessment of
DNO's licenses (held through its indirect 33.33 percent interest in the operating entity) in Côte d’Ivoire. The Company internally
assessed volumes reported for its Block 47 in Yemen.
At yearend 2023, DNO’s net 1P reserves stood at 206.4 MMboe, compared to 220.3 MMboe at yearend 2022, after adjusting for
production during the year and upward technical revisions. On a 2P reserves basis, DNO’s net reserves stood at 290.1 MMboe,
compared to 292.1 MMboe at yearend 2022. On a 3P reserves basis, DNO’s net reserves were 360.5 MMboe, compared to 386.7
MMboe at yearend 2022. DNO’s net 2C resources were 205.1 MMboe, up from 152.5 MMboe at yearend 2022.
DNO’s net production in 2023 totaled 19.1 MMboe (of which 12.7 MMbbls were in Kurdistan, 5.1 MMboe in Norway, 1.3 MMboe in Côte
d’Ivoire and the balance in the UK), compared to 35.4 MMboe in 2022 (of which 29.3 MMbbls in Kurdistan, 4.8 MMboe in Norway, 1.2
MMboe in Côte d’Ivoire and the balance in the UK).
The Company’s net yearend 2023 Reserve Life Index (R/P) stood at 10.8 years on a 1P reserves basis, 15.2 years on a 2P reserves
basis and 18.8 years on a 3P reserves basis.
Net reserves in DNO’s licenses governed by PSCs (Kurdistan and Côte d’Ivoire) are based on the participation interest. NE reserves
are net to DNO after royalty and include DNO’s additional share of cost oil covering its advances towards the government carried
interest (if any). Net reserves reflect pre-tax shares while Net Entitlement (NE) reserves reflect post-tax shares. NE reserves are based
on economic evaluation of the license agreements, incorporating projections of future production, costs and oil and gas prices. NE
reserves may therefore fluctuate over time, even if there are no changes in the underlying gross and net volumes.
Net and NE reserves in DNO’s licenses not governed by PSCs (Norway and the UK) are equivalent and reflect pre-tax shares.
Consolidated accounts
Note 27
Oil and gas license portfolio
Annual Report and Accounts 2023
DNO
67
Kurdistan licenses
At yearend 2023, DNO held interests in two licenses in Kurdistan. The Tawke license contains the producing Tawke and Peshkabir
fields. The Baeshiqa license contains two large structures with multiple independent stacked target reservoirs, including in the
Cretaceous, Jurassic and Triassic formations. The structures at Baeshiqa and Zartik have the potential to be part of a single
accumulation of hydrocarbons at one or more of the geological formation intervals.
North Sea (Norway, the UK and other)
At yearend 2023, DNO held 73 offshore licenses in Norway, four offshore licenses in the UK and one offshore license in Netherlands.
West Africa (Côte d’Ivoire)
At yearend 2023, DNO held two licenses in Côte d’Ivoire through its indirect 33.33 percent in Foxtrot International, both of which are
PSCs. Foxtrot International holds a 27.27 percent interest in and operatorship of the producing Block CI-27, which contains the Foxtrot
gas field, the Mahi gas field, the Marlin oil and gas field and the Manta gas field. Foxtrot International also operates the exploration
Block CI-12, in which it holds a 24 percent interest. In accordance with IFRS, DNO’s indirect interest in Foxtrot Mondoil Côte
d’Ivoire/Foxtrot International is accounted for using the equity method (see Note 12).
Other
At yearend 2023, DNO held one onshore license in Yemen.
As is customary in the oil and gas industry, most of the Group's assets are held in partnership with other companies. Below is an
overview of the Group's licenses, which are held through several wholly-owned subsidiary companies.
As of 31 December 2023
Held through DNO as a subsidiary:
Participating
Region/license
interest
(percent)
Operator
Partner(s)
Kurdistan
Tawke PSC
75.0
DNO Iraq AS
Genel Energy International Limited
Baeshiqa PSC
64.0
DNO Iraq AS
Turkish Energy Company Limited, Kurdistan Regional Government
Norway
PL006 C (SE Tor)
65.0
DNO Norge AS
Aker BP ASA
PL018 ES
45.0
A/S Norske Shell
DNO Norge AS, Sval Energi AS
PL019 (Ula)
20.0
Aker BP ASA
DNO Norge AS
PL019 E (Ula)
20.0
Aker BP ASA
DNO Norge AS
PL019 F (Ula)
45.0
Aker BP ASA
DNO Norge AS
PL036 D (Vilje)
28.9
Aker BP ASA
DNO Norge AS, PGNiG Upstream Norway AS
PL048 D (Enoch)
9.3
Equinor Energy AS
DNO Norge AS, Petrolia NOCO AS, Aker BP ASA
PL053 B (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL055 (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL055 B (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL055 D (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL055 E (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL065 (Tambar)
45.0
Aker BP ASA
DNO Norge AS
PL065 B (Tambar)
45.0
Aker BP ASA
DNO Norge AS
PL1049
40.0
DNO Norge AS
Longboat Japex Norge AS, Petoro AS
PL1083
30.0
Aker BP ASA
DNO Norge AS, Petoro AS
PL1084
40.0
Aker BP ASA
DNO Norge AS
PL1085
25.0
Aker BP ASA
DNO Norge AS, Petoro AS
PL1086
50.0
DNO Norge AS
Source Energy AS, Petoro AS
PL1102
30.0
Aker BP ASA
DNO Norge AS, Equinor Energy AS
PL1106
40.0
DNO Norge AS
Petoro AS, Petrolia NOCO AS, Aker BP ASA
PL1108
40.0
DNO Norge AS
Pandion Energy AS, OKEA ASA
PL1109
30.0
OMV (Norge) AS
DNO Norge AS, Pandion Energy AS
PL1112
20.0
A/S Norske Shell
DNO Norge AS, Neptune Energy Norge AS, Sval Energi AS
PL1120
40.0
DNO Norge AS
Equinor Energy AS, Vår Energi ASA, Wintershall Dea Norge AS
PL1145
60.0
DNO Norge AS
Aker BP ASA
PL1146
25.0
ConocoPhillips Skandinavia AS
DNO Norge AS
PL1146B
25.0
ConocoPhillips Skandinavia AS
DNO Norge AS
PL1147
20.0
Sval Energi AS
DNO Norge AS, Equinor Energy AS, Aker BP ASA
PL1148
30.0
Wellesley Petroleum AS
DNO Norge AS, Aker BP ASA, Equinor Energy AS
PL1148B
30.0
Wellesley Petroleum AS
DNO Norge AS, Aker BP ASA, Equinor Energy AS
PL1151
20.0
Wintershall Dea Norge AS
DNO Norge AS, Aker BP ASA, Pandion Energy AS
PL1158
40.0
Aker BP ASA
DNO Norge AS, Sval Energi AS
PL1160
60.0
DNO Norge AS
Sval Energi AS
PL1171
50.0
Aker BP ASA
DNO Norge AS
Consolidated accounts
Note 27
Oil and gas license portfolio
68
DNO
PL1172
30.0
Aker BP ASA
DNO Norge AS, PGNiG Upstream Norway AS
PL1175
30.0
Aker BP ASA
DNO Norge AS, PGNiG Upstream Norway AS
PL1182S
40.0
DNO Norge AS
Aker BP ASA, Longboat Japex Norge AS
PL1186
20.0
Equinor Energy AS
DNO Norge AS, OKEA ASA, Wintershall DEA Norge AS
PL1187
30.0
OKEA ASA
DNO Norge AS, M Vest Energy AS, Wintershall DEA Norge AS
PL122 (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 B (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 C (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 D (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL147 (Trym)
50.0
DNO Norge AS
Sval Energi AS
PL159 B (Alve)
32.0
Equinor Energy AS
DNO Norge AS, PGNiG Upstream Norway AS
PL159 G (Alve)
32.0
Equinor Energy AS
DNO Norge AS, PGNiG Upstream Norway AS
PL169 E (Ringhorne
Øst)
87.0
DNO Norge AS
Vår Energi ASA
PL185 (Brage)
14.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, Petrolia NOCO AS, M Vest Energy AS
PL248 F
20.0
Wintershall Dea Norge AS
DNO Norge AS, Petoro AS
PL248 GS
20.0
Wintershall Dea Norge AS
DNO Norge AS, Petoro AS
PL248 K
20.0
Wintershall Dea Norge AS
DNO Norge AS, Petoro AS
PL293 B
29.0
Equinor Energy AS
DNO Norge AS, INPEX Idemitsu Norge AS, Longboat Japex Norge AS
PL293 CS
29.0
Equinor Energy AS
DNO Norge AS, INPEX Idemitsu Norge AS, Longboat Japex Norge AS
PL300 (Tambar Øst)
45.0
Aker BP ASA
DNO Norge AS
PL405 (Oda)
15.0
Sval Energi AS
DNO Norge AS, Aker BP ASA
PL586 (Fenja)
7.5
Neptune Energy Norge AS
DNO Norge AS, Vår Energi ASA, Sval Energi AS
PL586 B (Fenja)
7.5
Neptune Energy Norge AS
DNO Norge AS, Vår Energi ASA, Sval Energi AS
PL644 (Berling)
30.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS
PL644 B (Berling)
30.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS
PL644 C (Berling)
30.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS
PL740 (Brasse)
39.3
OKEA ASA
DNO Norge AS, Lime Petroleum AS, M Vest Energy AS
PL827 S
49.0
Equinor Energy AS
DNO Norge AS
PL827 SB
49.0
Equinor Energy AS
DNO Norge AS
PL836 S
30.0
Wintershall Dea Norge AS
DNO Norge AS, Equinor Energy AS
PL836 SB
30.0
Wintershall Dea Norge AS
DNO Norge AS, Equinor Energy AS
PL923
20.0
Equinor Energy AS
DNO Norge AS, Petoro AS
PL923 B
20.0
Equinor Energy AS
DNO Norge AS, Petoro AS
PL929
10.0
Neptune Energy Norge AS
DNO Norge AS, Pandion Energy AS, Wintershall Dea Norge AS, AkerBP ASA
PL969
45.0
A/S Norske Shell
DNO Norge AS, Sval Energi AS
PL969B
45.0
A/S Norske Shell
DNO Norge AS, Sval Energi AS
PL984
30.0
DNO Norge AS
Vår Energi ASA, Source Energy AS, Equinor Energy AS, AkerBP ASA
PL984 BS
30.0
DNO Norge AS
Vår Energi ASA, Source Energy AS, Equinor Energy AS, AkerBP ASA
UK
P111
54.3
BRITOIL LIMITED
DNO North Sea (U.K.) Ltd, DNO North Sea (ROGB) Ltd, Dana Petroleum (BVUK)
Ltd.
P219
18.2
Repsol Sinopec North Sea Ltd
DNO North Sea (ROGB) Ltd, Dana Petroleum (BVUK) Ltd, Waldorf Production UK
Ltd
P255
45.0
Shell U.K. Ltd
DNO North Sea (U.K.) Ltd, Spirit Energy Resources Ltd
P2543
50.0
DNO North Sea (U.K.) Ltd
Aker BP ASA
Netherlands
D18a
2.5
Neptune E&P UKCS Ltd
DNO North Sea (U.K.) Ltd, Ineos UK SNS Ltd, Premier Oil E&P UK Ltd
Yemen
Block 47
64.0
DNO Yemen AS
The Yemen Company, Geopetrol Hadramaut Incorporated
Held through equity-accounted investment Mondoil Côte d’Ivoire/Foxtrot International as a joint venture (Note 12):
Côte d’Ivoire
Block CI-27
27.3
Foxtrot International LDC
SECI SA, Petroci*
Block CI-12
24.0
Foxtrot International LDC
SECI SA, Petroci
Consolidated accounts
Note 27
Oil and gas license portfolio
Annual Report and Accounts 2023
DNO
69
As of 31 December 2022
Held through DNO as a subsidiary:
Participating
Region/license
interest
(percent)
Operator
Partner(s)
Kurdistan
Tawke PSC
75.0
DNO Iraq AS
Genel Energy International Limited
Baeshiqa PSC
64.0
DNO Iraq AS
Turkish Energy Company Limited, Kurdistan Regional Government
Norway
PL006 C (SE Tor)
65.0
DNO Norge AS
Aker BP ASA
PL018 ES
45.0
A/S Norske Shell
DNO Norge AS, Spirit Energy Norway AS
PL019 (Ula)
20.0
Aker BP ASA
DNO Norge AS
PL019 E (Ula)
20.0
Aker BP ASA
DNO Norge AS
PL019 F (Ula)
45.0
Aker BP ASA
DNO Norge AS
PL036 D (Vilje)
28.9
Aker BP ASA
DNO Norge AS, PGNiG Upstream Norway AS
PL048 D (Enoch)
9.3
Equinor Energy AS
DNO Norge AS, Petrolia NOCO AS, Aker BP ASA
PL053 B (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norway
AS
PL055 (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norway
AS
PL055 B (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norway
AS
PL055 D (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norway
AS
PL055 E (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norway
AS
PL065 (Tambar)
45.0
Aker BP ASA
DNO Norge AS
PL065 B (Tambar)
45.0
Aker BP ASA
DNO Norge AS
PL1048
50.0
Lundin Energy Norway AS
DNO Norge AS
PL1076
50.0
Equinor Energy AS
DNO Norge AS
PL1083
30.0
Lundin Energy Norway AS
DNO Norge AS, Petoro AS
PL1084
40.0
Lundin Energy Norway AS
DNO Norge AS
PL1085
25.0
Aker BP ASA
DNO Norge AS, Petoro AS
PL1086
50.0
DNO Norge AS
Source Energy AS, Petoro AS
PL1102
30.0
Lundin Norway AS
DNO Norge AS
PL1106
40.0
DNO Norge AS
Petoro AS, Petrolia NOCO AS, Lundin Energy Norway AS
PL1108
40.0
DNO Norge AS
Pandion Energy AS, OKEA ASA
PL1109
30.0
OMV (Norge) AS
DNO Norge AS, ONE-Dyas Norge AS
PL1112
20.0
A/S Norske Shell
DNO Norge AS, Neptune Energy Norge AS, Spirit Energy Norway AS
PL1120
40.0
DNO Norge AS
Equinor Energy AS, Vår Energi ASA, Wintershall Dea Norge AS
PL1145
60.0
DNO Norge AS
DNO Norge AS, Aker BP ASA
PL1146
25.0
ConocoPhilips Skandinavia AS
ConocoPhilips Skandinavia AS; DNO Norge AS
PL1147
20.0
Lundin Norway AS
Spirit Energy Norway AS; Lundin Energy Norway AS; DNO Norge AS; Equinor
Energy AS
PL1148
30.0
Wellesley Petroleum AS
Wellesley Petroleum AS; DNO Norge AS; Aker BP ASA; Equinor Energy AS
PL1151
20.0
Wintershall Dea Norge AS
Wintershall Dea Norge AS; DNO Norge AS; Aker BP ASA; ONE-Dyas Norge AS
PL1158
40.0
Lundin Norway AS
Aker BP ASA; DNO Norge AS; Spirit Energy Norway AS
PL1160
60.0
DNO Norge AS
DNO Norge AS; Spirit Energy Norway AS
PL122 (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 B (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 C (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL122 D (Marulk)
17.0
Vår Energi ASA
DNO Norge AS, Equinor Energy AS, PGNiG Upstream Norway AS
PL147 (Trym)
50.0
DNO Norge AS
Spirit Energy Norway AS
PL159 B (Alve)
32.0
Equinor Energy AS
DNO Norge AS, PGNiG Upstream Norway AS
PL159 G (Alve)
32.0
Equinor Energy AS
DNO Norge AS, PGNiG Upstream Norway AS
PL169 E (Ringhorne
Øst)
87.0
DNO Norge AS
Vår Energi ASA
PL185 (Brage)
14.3
Wintershall Dea Norge AS
DNO Norge AS, Lime Petroleum AS, Vår Energi ASA, Neptune Energy Norge AS
PL248 F
20.0
Wintershall Dea Norge AS
DNO Norge AS, Petoro AS
PL248 GS
20.0
Wintershall Dea Norge AS
DNO Norge AS, Petoro AS
PL274 (Oselvar)
55.0
DNO Norge AS
CapeOmega AS
PL293 B
29.0
Equinor Energy AS
DNO Norge AS, Idemitsu Petroleum Norge AS, Longboat Energy Norway AS
PL300 (Tambar Øst)
45.0
Aker BP ASA
DNO Norge AS
PL405 (Oda)
15.0
Spirit Energy Norway AS
DNO Norge AS, Aker BP ASA, Suncor Energy Norge AS
PL586 (Fenja)
7.5
Neptune Energy Norge AS
DNO Norge AS, Vår Energi ASA, Suncor Energy Norge AS
PL586B (Fenja)
7.5
Neptune Energy Norge AS
DNO Norge AS, Vår Energi ASA, Suncor Energy Norge AS
PL644 (Berling)
20.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS, Spirit Energy Norway AS
PL644 B (Berling)
20.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS, Spirit Energy Norway AS
PL644 C (Berling)
20.0
OMV (Norge) AS
DNO Norge AS, Equinor Energy AS, Spirit Energy Norway AS
PL740 (Brasse)
50.0
DNO Norge AS
Vår Energi ASA
PL827 S
49.0
Equinor Energy AS
DNO Norge AS
PL836 S
30.0
Wintershall Dea Norge AS
DNO Norge AS, Spirit Energy Norway AS
PL836 SB
30.0
Wintershall Dea Norge AS
DNO Norge AS, Spirit Energy Norway AS
Consolidated accounts
Note 27
Oil and gas license portfolio
70
DNO
PL906
30.0
Aker BP ASA
DNO Norge AS, Longboat Energy Norge AS
PL923
20.0
Equinor Energy AS
DNO Norge AS, Wellesley Petroleum AS, Petoro AS
PL923B
20.0
Equinor Energy AS
DNO Norge AS, Wellesley Petroleum AS, Petoro AS
PL929
10.0
Neptune Energy Norge AS
DNO Norge AS, Pandion Energy AS, Wintershall Dea Norge AS, Lundin Norway
AS
PL943
30.0
Equinor Energy AS
DNO Norge AS, Sval Energi AS
PL968
50.0
DNO Norge AS
Petoro AS, MOL Norge AS, Aker BP ASA
PL969
45.0
A/S Norske Shell
DNO Norge AS, Spirit Energy Norway AS
PL969B
45.0
A/S Norske Shell
DNO Norge AS, Spirit Energy Norway AS
PL984
30.0
DNO Norge AS
Vår Energi ASA, Source Energy AS
PL984 BS
30.0
DNO Norge AS
Vår Energi ASA, Source Energy AS
PL994
30.0
Neptune Energy Norge AS
DNO Norge AS, Petrolia NOCO AS
UK
P111
54.3
Repsol Sinopec Resources UK Ltd
DNO North Sea (U.K.) Ltd, DNO North Sea (ROGB) Ltd, Dana Petroleum (BVUK)
Ltd.
P219
18.2
Repsol Sinopec North Sea Ltd
DNO North Sea (ROGB) Ltd, Dana Petroleum (BVUK) Ltd, Waldorf Production UK
Ltd
P2401
45.0
Shell U.K. Ltd
DNO North Sea (U.K), Spirit Energy Resources Ltd
P255
45.0
Shell U.K. Ltd
DNO North Sea (U.K.) Ltd, Spirit Energy Resources Ltd
P558
10.0
Britoil Ltd
DNO North Sea (U.K.) Ltd, Rockrose Energy
P803
10.0
BP Exploration Operating Company
Ltd
DNO North Sea (U.K.) Ltd, Rockrose UKCS 10 Ltd
P2537
30.0
Chrysaor Production (U.K.) Limited
DNO North Sea (U.K.) Ltd, Neo Energy (ZEX) Limited
Netherlands
D15
5.0
Neptune E&P UKCS Ltd
DNO North Sea (U.K.) Ltd, Ineos UK SNS Ltd, Premier Oil E&P UK Ltd
D18a
2.5
Neptune E&P UKCS Ltd
DNO North Sea (U.K.) Ltd, Ineos UK SNS Ltd, Premier Oil E&P UK Ltd
Yemen
Block 47
64.0
DNO Yemen AS
The Yemen Company, Geopetrol Hadramaut Incorporated
Held through equity-accounted investment Mondoil Côte d’Ivoire/Foxtrot International as a joint venture (Note 12):
Côte d’Ivoire
Block CI-27
27.3
Foxtrot International LDC
SECI SA, Petroci*
Block CI-12
24.0
Foxtrot International LDC
SECI SA, Petroci
*Soci
é
t
é
Nationale d’Op
é
rations P
é
troli
è
res de la C
ô
te d’Ivoire
Consolidated accounts
Note 28
Significant events after the reporting date
Annual Report and Accounts 2023
DNO
71
Accounting policies
Significant events after the reporting date
Adjusting events are those providing evidence of conditions existing at the end of the reporting period, whereas non-adjusting events
are indicative of conditions arising after the reporting period (the latter being disclosed where material).
The Company’s Board of Directors approve dividend payment
On 8 February 2024, the Company announced that pursuant to the authorization granted at the 2023 AGM, the Board of Directors has
approved a dividend payment of NOK 0.25 per share. Payment of the dividend was made on 26 February 2024. This is considered a
non-adjusting event (see also parent company accounts).
DNO acquires interest in UK’s Arran field, expands North Sea portfolio
On 6 February 2024, the Company announced that its wholly-owned subsidiary DNO Exploration UK Limited has entered into an
agreement to acquire a 25 percent interest in the Arran field on the UK Continental Shelf from ONE-Dyas E&P Limited. The transaction
is expected to add some four million barrels of oil equivalent net to DNO, of which 90 percent gas. The cash consideration is USD 70
million plus a contingent consideration of up to USD 5 million if certain operational targets are met. The effective date is set to 1 January
2024 and the transaction is expected to close in the second quarter of 2024, subject to authorities’ approval. This is considered a non-
adjusting event.
Redemption of bond DNO03
On 22 January 2024, DNO ASA fully completed a USD 131.2 million call option redemption of the DNO03 bond (ISIN: NO0010852643)
at redemption price of 100 percent plus accrued interest.
DNO receives 14 awards in Norway's APA licensing round
On 16 January 2024, the Company announced that its wholly-owned subsidiary DNO Norge AS has been awarded participation in 14
exploration licenses, of which three are operatorships, under Norway's APA 2023 licensing round. Of the 14 new licenses, 10 are in the
North Sea and four in the Norwegian Sea.
72
DNO
Parent company accounts
Income statement
72
Balance sheet
72
Cash flow statement
74
Note disclosures
Note 1
Accounting principles
75
Note 2
Operating revenues
76
Note 3
Salaries, pensions, remuneration, shares, options and severance
76
Note 4
Other operating expenses
78
Note 5
Net financial income/-expenses
78
Note 6
Taxes
79
Note 7
Property, plant and equipment/Intangible assets
80
Note 8
Investment in shares/Other investments
80
Note 9
Other receivables
81
Note 10
Cash and cash equivalents
81
Note 11
Equity
81
Note 12
Guarantees, leasing liabilities and commitments
82
Note 13
Interest-bearing liabilities
82
Note 14
Current liabilities
82
Note 15
Financial instruments
82
Note 16
Related party disclosure
83
Note 17
Significant events after the reporting date
83
Note 18
Earnings per share
83
Note 19
Intercompany
84
Parent company accounts
Annual Report and Accounts 2023
DNO
73
Income statement
1 January - 31 December
USD thousand
Note
2023
2022
Operating revenues
2, 19
25,029
27,448
Total operating revenues
25,029
27,448
Depreciation
-1,559
-1,353
Payroll and other social expenses
-22,130
-20,514
Other operating expenses
-19,761
-18,414
Total operating expenses
-43,450
-40,281
Operating profit/-loss
-18,421
-12,833
Net financial income/-expense
105,122
355,341
Profit/-loss before income tax
86,701
342,508
Tax income/-expense
-
-
Net profit/-loss
86,701
342,508
Earnings per share, basic (USD per share)
18
0.09
0.35
Earnings per share, diluted (USD per share)
18
0.09
0.35
Weighted average number of shares outstanding (millions)
980.04
986.97
Balance sheet
ASSETS
Years ended 31 December
USD thousand
Note
2023
2022
Fixed assets
Intangible assets
2,976
3,801
Property, plant and equipment
556
398
Total intangible and tangible assets
3,532
4,199
Financial assets
Shares in subsidiaries
523,283
543,597
Intercompany receivables
158,913
86,081
Total financial assets
682,196
629,678
Total non-current assets
685,728
633,877
Current assets
Intercompany receivables
6,586
9,773
Other receivables
6,476
3,511
Cash and cash equivalents
461,162
641,007
Total current assets
474,224
654,291
TOTAL ASSETS
1,159,952
1,288,168
Parent company accounts
74
DNO
EQUITY AND LIABILITIES
Years ended 31 December
USD thousand
Note
2023
2022
Paid-in capital
Share capital
32,858
34,777
Treasury shares
-
-869
Share premium
343,620
343,620
Total paid-in capital
11
376,478
377,528
Retained earnings
Retained earnings
211,202
263,269
Total retained earnings
11
211,202
263,269
Total equity
11
587,680
640,797
Non-current liabilities
Intercompany liabilities
-
80,967
Interest-bearing liabilities
393,181
521,401
Other non-current liabilities
3,403
1,283
Total non-current liabilities
396,584
603,651
Current liabilities
Trade payables and provisions for other liabilities and charges
15,293
18,461
Intercompany liabilities
6,144
-
Current interest-bearing liabilities
131,162
-
Dividend
23,089
25,259
Total current liabilities
175,688
43,720
Total liabilities
572,272
647,371
TOTAL EQUITY AND LIABILITIES
1,159,952
1,288,168
Oslo, 13 March 2024
Bijan Mossavar-Rahmani
Gunnar Hirsti
Elin Karfjell
Executive Chairman
Deputy Chairman
Director
Anne Marie Hjerkinn Aarnæs
Najmedin Meshkati
Christopher Spencer
Director
Director
Managing Director
Parent company accounts
Annual Report and Accounts 2023
DNO
75
Cash flow statement
1 January - 31 December
USD thousand
Note
2023
2022
Operating activities
Profit/-loss before income tax
86,701
342,508
Adjustments to add (deduct) non-cash items:
Depreciation and impairment of tangible and intangible assets
1,559
1,353
Impairment/-reversal of impairment of financial assets
33,116
152,601
Change in fair value of financial investments
-
-14,211
Amortization of borrowing issue costs
5,13
2,942
4,454
Interest expense
42,490
52,153
Interest income
-25,742
-9,429
Other
184
-728
Changes in working capital and provisions:
222
-2,523
-3,168
-1,054
3,032
968
Cash generated from operations
141,336
526,092
Income taxes paid
Interest received
26,265
9,504
Interest paid
-42,485
-53,636
Dividend received
20,000
-
Net cash from/-used in operating activities
145,116
481,961
Investing activities
Purchases of intangible and tangible assets
-890
-1,098
Loans to subsidiaries
-105,646
-5,325
Proceeds from sale of financial investments
-
1,017
Net cash from/-used in investing activities
-106,536
-5,406
Financing activities
Repayment of borrowings
-
-263,745
Payment debt issue costs
13
-
-
Loans from subsidiaries
19
-75,735
-2,289
Purchase of treasury shares
-50,688
-11,713
Paid dividend
-92,002
-72,819
Net cash from/-used in financing activities
-218,425
-350,565
Net increase/-decrease in cash and cash equivalents
-179,845
125,991
Cash and cash equivalents at the beginning of the period
641,007
515,018
Cash and cash equivalents at end of the period
10
461,162
641,007
Of which restricted cash
2,187
2,153
Parent company accounts
76
DNO
Note 1
Accounting principles
◼
General
The financial statements of DNO ASA (the Company) are
presented in accordance with the Norwegian Accounting Act and
Norwegian accounting standards. The notes are an integral part
of the financial statements. For more information about the
accounting principles, see Note 1 in the consolidated accounts.
◼
Use of estimates
Preparation of the financial statements requires management to
make judgements, estimates and assumptions that affect the
application of policies and reported revenues and expenses,
assets and liabilities, and the disclosures. Actual results could
differ from those estimates.
◼
Currency
The financial statements are presented in USD, which is also the
functional currency that best reflects the economic substance of
the underlying events and circumstances relevant to the
Company. Monetary items denominated in foreign currencies are
converted using exchange rates on the balance sheet date.
Realized and unrealized currency gains and losses are included
in the profit or loss. Foreign currency transactions are recorded
using exchange rates on the date of transaction.
◼
Consolidated financial statements
The consolidated financial statements of the Group have been
prepared in accordance with IFRS as adopted by the EU and
additional disclosure requirements in the Norwegian Accounting
Act and have been presented separately from the parent
company accounts.
◼
Investments in subsidiaries
Investments in subsidiaries are recorded at historical cost. If the
market value of the investment is lower than the carrying value,
an impairment charge is recorded and a new cost basis of the
investment is established. The impairment charge is reversed if
the basis for the impairment ceases to exist.
◼
Valuation and classification of balance sheet items
Current assets and short-term liabilities include items due less
than one year from drawdown and items related to the operating
cycle. Other assets or liabilities are classified as fixed assets or
long-term liabilities. Other financial investments including
investments in bonds are classified as non-current assets. They
are initially valued at cost price and subsequently may be
impaired to fair value.
◼
Shares
Shares classified as financial assets are valued at their cost price
and impaired in the case of permanent and significant decline in
value. Listed shares are valued at fair value.
◼
Fixed assets
Intangible assets and PP&E are stated at cost, less accumulated
amortization and accumulated impairment charges. Intangible
assets and PP&E are depreciated using a straight-line method
based on estimated useful life. Estimated useful life varies
between three and seven years. Impairment charge is recognized
when the book value exceeds the fair value of the asset.
◼
Income taxes
Tax income/-expense consists of taxes receivable/-payable and
changes in deferred tax. Tax receivables/payables are based on
amounts receivable from or payable to tax authorities. Deferred
tax liability is calculated on all taxable temporary differences,
unless there is a recognition exception. A deferred tax asset is
recognized only to the extent that it is probable that the future
taxable income will be available against which the asset can be
utilized.
◼
Share-based payments
Cash-settled share-based payments are recognized in the income
statement as expenses during the vesting period and as a liability.
The liability is measured at fair value and revaluated using the
Black & Scholes pricing model at each balance sheet date and at
the date of settlement, with any change in fair value recognized in
the profit or loss for the period.
◼
Pensions
The Company records pension schemes according to the
Norwegian accounting standard for pension costs. The Company
has contribution plans for employees as provided for under
Norwegian law. For such plans, only the contributions paid during
the period are expensed.
◼
Revenue recognition
Revenues from services are recorded when the service has been
performed.
◼
Allowance for doubtful balances
Trade receivables are recognized and carried at their anticipated
realizable value, which implies that a provision for a loss
allowance on expected credit losses of the receivable is
recognized.
◼
Contingent assets/liabilities
According to Norwegian accounting standards relating to
contingent items, provisions are made for contingent liabilities that
are probable and quantifiable, while contingent assets are not
recognized.
◼
Cash flow statement
The cash flow statement is based on the indirect method. Cash
equivalents include bank deposits.
◼
Dividend
In accordance with Norwegian accounting standards, the
Company recognizes a liability to pay dividend for proposed
ordinary dividend and additional or extraordinary dividend
resolved after yearend but before or on the date of approval of the
financial statements by the Board of Directors.
Parent company accounts
Annual Report and Accounts 2023
DNO
77
Note 2
Operating revenues
1 January - 31 December
USD thousand
2023
2022
Operating revenues
25,029
27,448
Total operating revenues
25,029
27,448
Operating revenues relate to services provided by the Company to its subsidiaries.
Note 3
Salaries, pensions, remuneration, shares, options and severance
1 January - 31 December
USD thousand
2023
2022
Payroll and other social expenses
Salaries, bonuses and other salary expenses
-15,798
-15,088
Employer's payroll tax expense
-3,688
-2,487
Pensions
-2,039
-2,164
Other personnel costs
-605
-775
Total payroll and other social expenses
-22,130
-20,514
Average number of man-labor years
58
56
Pensions
DNO has a defined contribution scheme for its Norway-based employees that meets the Norwegian requirements for mandatory
occupational pensions
(“obligatorisk tjenestepensjon”).
Remuneration to the Board of Directors and executive management
Remuneration to the Board of Directors (USD thousand)
2023
2022
Bijan Mossavar-Rahmani, Executive Chairman, member of the nomination and remuneration committees
1,327.1
919.8
Gunnar Hirsti, Deputy Chairmen, chairs the audit committee and is a member of the remuneration committee
95.4
72.1
Elin Karfjell, Director, member of the audit committee
74.8
59.1
Anita Marie Hjerkinn Aarnæs, Director, member of the HSSE committee
74.8
38.2
Najmedin Meshkati, Director and member of the HSSE committee (from June 2023)
40.5
-
Lars Arne Takla, former Deputy Chairman and member of the HSSE (until May 2022) and nomination (until May 2023) committees
1.6
26.0
Shelley Watson, former Director and member of the audit and HSSE committees (until November 2022)
-
59.6
Total
1,614.2
1,174.8
Total remuneration to the Board of Directors consists of regular fees (USD 1,336,984), extraordinary cash remuneration (USD 232,992)
and fees for participation in the board committees (USD 44,236). Separately, a fee of USD 3,483 was paid to Kåre Tjønneland and a fee
of USD 2,181 was paid to Ferris J. Hussein for service on the nomination committee. The Company may reimburse travel expenses and
other relevant expenses incurred by the members of the Board of Directors in connection with the performance of their duties.
Synthetic
Remuneration to Managing Director and executive management (USD thousand)
Salary
Bonus
Other
Total
Pension
Chris Spencer, Managing Director**
582.9
156.6
333.7
73.8
1,147.0
19.4
Haakon Sandborg, Chief Financial Officer
409.8
113.9
237.5
47.1
808.3
19.4
Geir Arne Skau, Chief Human Resources and Corporate Services Officer
404.5
113.6
236.9
46.6
801.5
19.4
Sameh Hanna, General Manager Kurdistan region of Iraq
483.1
62.5
-
161.0
706.7
-
Ørjan Gjerde, General Manager DNO North Sea**
394.8
110.6
-
47.0
552.4
19.4
* Synthetic share awards that vested during the year.
** On 7 September 2023, the Company announced that Chris Spencer has been appointed Managing Director of the Company as Bjørn Dale steps down
as part of a planned management transition initiated last year. Mr. Spencer has been DNO’s Chief Operating Officer (COO) since 2021. The Managing
Director remuneration presented above represents Mr. Spencer’s remuneration both in the role as the COO and the Managing Director during 2023.
A
remuneration of USD 1.7 million (not included in the above table) was in 2023 paid to Bjørn Dale, which included a severance pay portion.
On 15 January 2024, Ørjan Gjerde steps down as General Manager of DNO’s North Sea Business Unit and is replaced by Elisabeth Femsteinevik (former
Exploration Manager in DNO North Sea Business Unit).
Parent company accounts
78
DNO
Note 3
Salaries, pensions, remuneration, shares, options and severance
The following table is an overview of synthetic shares that have been awarded to the directors of the Board and members of the
executive management during the year. For an overview of total synthetic shares of employees at yearend 2023, see Note 5 in the
consolidated accounts.
Movement in synthetic Company shares during 2023
Opening
Closing
Weight.
balance
Movemements (full-year)
balance
Unresrict.
average
Number of shares
at 1 Jan
Granted
Settled
at 31 Dec
at 31 Dec
price
Bijan Mossavar-Rahmani, Executive Chairman
-
347,156
-
347,156
Gunnar Hirsti, Deputy Chairmen
-
20,693
-
20,693
Elin Karfjell, Director
-
17,262
-
17,262
Anita Marie Hjerkinn Aarnæs, Director
-
17,262
-
17,262
Najmedin Meshkati, Director
-
20,693
-
20,693
Chris Spencer, Managing Director
1,449,166
551,634
441,969
1,558,831
Haakon Sandborg, Chief Financial Officer
950,145
179,234
252,383
876,996
Geir Arne Skau, Chief Human Resources and Corporate Services Officer
767,596
162,977
251,714
678,859
Sameh Hanna, General Manager Kurdistan Region of Iraq
-
254,707
-
254,707
Ørjan Gjerde, General Manager DNO North Sea
11,696
101,247
-
112,943
The weighted average settlement price for synthetic shares settled during 2023 was NOK 10.20. The weighted average remaining
contractual life of the synthetic shares was 2.5 years.
For more information regarding remuneration of executive management and the Board of Directors, please refer to the Company’s
remuneration guidelines that was approved at the 2023 AGM and a separate 2023 remuneration report, both reports published on the
Company’s website.
Auditor fees
1 January - 31 December
All figures are exclusive of VAT (USD thousand)
2023
2022
Auditor fees
-284
-296
Other financial audit services
-17
-26
Total auditing fees
-301
-322
Tax assistance
-100
-54
Other assistance
-
-
Total auditor fees
-401
-376
See Note 5 in the consolidated accounts for further information on administrative expenses.
Parent company accounts
Annual Report and Accounts 2023
DNO
79
Note 4
Other operating expenses
1 January - 31 December
USD thousand
2023
2022
Lease expense on buildings and equipment
-2,831
-2,492
Other office expenses
19
-203
IT expenses
-9,187
-9,760
Travel expenses
-2,538
-1,146
Legal expenses
-880
-281
Consultant fees
-2,637
-3,418
Other general and administrative costs
-1,707
-1,113
Total other operating expenses
-19,761
-18,414
Note 5
Net financial income/-expenses
1 January - 31 December
USD thousand
2023
2022
Dividend and group contribution received from group companies
145,641
556,648
Interest income
25,742
9,429
Interest income from group companies
15,745
6,050
Other financial income
-
875
Gain on foreign exchange
2,325
4,925
Change in fair value of financial investments
-
14,211
Total financial income
189,453
592,138
Interest expenses
-42,490
-52,153
Interest expenses group companies
-2,107
-13,106
Loss on foreign exchange
-3,521
-7,204
Impairment of financial assets
-33,116
-152,601
Other financial expenses
-3,097
-11,733
Total financial expenses
-84,331
-236,797
Net financial income/-expenses
105,122
355,341
In 2023, the impairment of financial assets of USD 33.1 million was mainly related to DNO Yemen AS (USD 32.8 million). Other financial
expenses in 2023 were mainly related to amortization of bond issue costs (USD 2.9 million).
In 2022, the impairment of financial assets of USD 152.6 million was mainly related to DNO North Sea plc (USD 146.4 million), DNO
Yemen AS (USD 3.6 million) and DNO Oman Ltd (USD 1.1 million). Change in fair value of financial investments was related to the
Company’s shareholding in RAK Petroleum until transaction completion with RAK Petroleum. Other financial expenses in 2022 were
mainly related to amortization of bond issue costs (USD 4.5 million) and expensing of bond premium and fees related to repurchase of
bonds (USD 6.8 million).
Parent company accounts
80
DNO
Note 6
Taxes
Tax income/-expense
1 January - 31 December
USD thousand
2023
2022
Change in deferred taxes
-
-
Income tax receivable/-payable
-
-
Tax income/-expense
-
-
Reconciliation of tax income/-expense
1 January - 31 December
USD thousand
2023
2022
Profit/-loss before income tax
86,701
342,508
Expected income tax according to nominal tax rate of 22 percent
-19,074
-75,352
Foreign exchange variations between functional and tax currency
-929
4,063
Adjustment of deferred tax assets not recognized
-4,357
-18,113
Impairment financial assets
-7,016
-30,233
Tax-free dividend from subsidiaries
21,915
119,125
Other items
9,462
510
Tax income/-expense
-
-
Effective income tax rate
0%
0%
Tax effects of temporary differences and losses carried forward
Years ended 31 December
USD thousand
2023
2022
Intangible assets
-
-38
Losses carried forward
78,528
83,750
Non-deductible interests carried forward
25,541
26,358
Other temporary differences
-270
-816
Deferred tax assets/-liabilities
103,799
109,254
Valuation allowance
-103,799
-109,254
Net deferred tax assets/-liabilities
-
-
Recognized deferred tax assets
-
-
Recognized deferred tax liabilities
-
-
The corporate tax rate in Norway is 22 percent.
The carry forward period for unused losses in Norway is indefinite. Non-deductible interest expense can be carried forward for a period
of up to 10 years and will expire in the period 2026 to 2031. A deferred tax asset has not been recognized for these losses as there is
uncertainty regarding future taxable profits. The losses cannot be used towards petroleum activities on the NCS. The petroleum
activities carried out abroad by Norwegian subsidiaries are tax exempt in Norway and under the exemption method dividends from
subsidiaries are not taxable in Norway.
Parent company accounts
Annual Report and Accounts 2023
DNO
81
Note 7
Property, plant and equipment/Intangible assets
Intangible
USD thousand
assets
PP&E
Total
Costs as of 1 January 2023
15,520
3,678
19,198
Additions
436
454
890
Costs as of 31 December 2023
15,956
4,132
20,088
Accumulated depreciation as of 1 January 2023
-11,719
-3,280
-14,999
Depreciation
-1,261
-296
-1,559
Accumulated depreciation and impairments as of 31 December 2023
-12,980
-3,576
-16,556
Book value as of 31 December 2023
2,976
556
3,532
Book value as of 31 December 2022
3,801
398
4,199
Intangible assets and PP&E are depreciated using the linear method based on estimated useful life of three to seven years.
Note 8
Investment in shares
Ownership
Share
Book
Net profit/
Book value
interest
capital in
equity in
-loss in
of shares
Subsidiaries owned by the Company
Office
(percent)
1,000
USD 1,000
USD 1,000
USD 1,000
DNO Yemen AS*
Norway
100
-70,691
-8,073
-
DNO UK Limited
UK
100
-134
-6
-
DNO Iraq AS
Norway
100
871,126
2,234
279,848
DNO Mena AS**
Norway
100
2,083
138
1,904
DNO Technical Services AS
Norway
100
4,982
28
4,970
DNO Exploration UK Limited
UK
100
GBP 30,912
-1,519
-206
-
DNO North Sea plc**
UK
100
GBP 37,289
178,579
40,033
157,585
Mondoil Enterprises LLC**
United States
100
USD 1
78,976
12,681
78,976
Total
1,063,402
46,829
523,283
* Production start-up at the Block 47 in Yemen remains on hold due to force majeure.
** See Note 25 in the consolidated accounts. The figures above include the respective subgroup's equity and any excess values
recognized by the Group.
In 2022, the book value of shares in subsidiaries was partially written off by USD 146.5 million mainly related to DNO North Sea plc.
Equity and profit/loss for the subsidiaries in the table above are presented as reported for consolidation purposes. Statutory accounts for
the subsidiaries are finalized after the release of the parent company accounts.
Parent company accounts
82
DNO
Note 9
Other receivables
Years ended 31 December
USD thousand
2023
2022
Prepayments and accrued income
5,908
2,549
Other short-term receivables
568
962
Other receivables
6,476
3,511
Note 10
Cash and cash equivalents
Years ended 31 December
USD thousand
2023
2022
Cash and cash equivalents, restricted
2,187
2,153
Cash and cash equivalents, non-restricted
458,975
638,854
Total cash and cash equivalents
461,162
641,007
Restricted cash relates to employees' tax withholdings and deposits for rent.
Non-restricted cash is mainly related to bank deposits in USD as of 31 December 2023.
Included in the non-restricted cash and cash equivalents as of 31 December 2023 is USD 41.2 million held on fixed interest time
deposit
contracts with different duration and maturity dates up to 26 January 2024.
Note 11
Equity
Share
Total
capital
Treasury
share
Share
Retained
Total equity
USD thousand
registered
shares
capital
premium
earnings
Shareholders' equity as of 1 January 2022
32,936
-
32,936
247,743
37,809
318,487
Purchase of treasury shares
-
-869
-869
-
-41,837
-42,706
Share capital increase
1,841
-
1,841
95,877
-
97,718
Dividend
-
-
-
-
-49,951
-49,951
Additional dividend
-
-
-
-
-25,259
-25,259
Profit/-loss for the year
-
-
-
342,508
342,508
Shareholders' equity as of 31 December 2022
34,777
-869
33,908
343,620
263,270
640,797
-
Shareholders' equity as of 1 January 2023
34,777
-869
33,908
343,620
263,270
640,797
Purchase of treasury shares
-
-1,050
-1,050
-
-49,546
-50,596
Dividend
-
-
-
-
-66,133
-66,133
Additional dividend
-
-
-
-
-23,089
-23,089
Profit/-loss
-
-
-
-
86,701
86,701
Cancellation of treasury shares
-1,919
1,919
-
-
-
-
Shareholders' equity as of 31 December 2023
32,858
-0
32,858
343,620
211,202
587,680
See Note 16 in the consolidated accounts for further information regarding the Company’s equity and shareholders.
During 2023, the Board of Directors approved three dividend distributions of NOK 0.25 per share, each. The dividends were paid in
June, August and November 2023. On 8 February 2024, the Company announced that pursuant to the authorization granted at
the 2023 AGM, the Board of Directors has approved a dividend payment of NOK 0.25 per share which was made on 26 February 2024
The Company has made an accrual for this dividend in the parent company accounts at yearend 2023.
Parent company accounts
Annual Report and Accounts 2023
DNO
83
Note 12
Guarantees, leasing liabilities and commitments
See Note 23 in the consolidated accounts for information regarding other guarantees and commitments.
The Company’s future minimum lease payments under non-cancellable operating leases are related to office rent. The lease period
expires on 31 December 2031 and the yearly rent is USD 2.2 million.
Note 13
Interest-bearing liabilities
Effective
interest
Fair value
Carrying amount
Ticker
Facility
Facility
Interest
rate
USD thousand
OSE
currency
amount
(percent)
Maturity
(percent)
2023
2022
2023
2022
Non-current
Bond loan (ISIN NO0010852643)
DNO03
USD
131,162
8.375
29.05.24
9.0
-
131,507
131,162
Bond loan (ISIN NO0011088593)
DNO04
USD
400,000
7.875
09.09.26
8.8
378,140
375,816
400,000
400,000
Capitalized borrowing issue costs
-6,819
-9,761
Total non-current interest-bearing liabilities
378,140
507,323
393,181
521,401
Current
Bond loan (ISIN NO0010852643)
DNO03
USD
131,162
8.375
29.05.24
9.0
130,895
-
131,162
-
Total current interest-bearing liabilities
130,895
-
131,162
-
Total interest-bearing liabilities
509,035
507,323
524,343
521,401
See Note 17 in the consolidated accounts for further information on interest-bearing liabilities.
Note 14
Current liabilities
Years ended 31 December
USD thousand
2023
2022
Trade payables
1,986
3,255
Public duties payable
2,007
1,794
Accrued expenses and other current liabilities
11,300
13,412
Trade payables and provisions for other liabilities and charges
15,293
18,461
Accrued expenses and other current liabilities include accrued interest for bond loans of USD 2.8 million (USD 2.8 million in 2022) and
accruals for incurred costs of USD 8.5 million (USD 9.5 million in 2022).
Note 15
Financial instruments
See Note 22 in the consolidated accounts for information on financial instruments.
Parent company accounts
84
DNO
Note 16
Related party disclosure
Overhead expenses and IT-services in the parent company are allocated to the subsidiaries based on their proportional use of the
services provided by the parent company.
See Note 19 for intercompany transactions and balances at yearend.
Note 17
Significant events after the reporting date
See Note 23 and Note 28 in the consolidated accounts for information on contingencies and events after the balance sheet date.
Note 18
Earnings per share
1 January - 31 December
USD thousand
2023
2022
Net profit/-loss attributable to ordinary equity holders of the parent
86,701
342,508
Weighted average number of ordinary shares (excluding treasury shares) (millions)
980.04
986.97
Earnings per share, basic (USD per share)
0.09
0.35
Earnings per share, diluted (USD per share)
0.09
0.35
Parent company accounts
Annual Report and Accounts 2023
DNO
85
Note 19
Intercompany
Long-term intercompany receivables/liabilities
Years ended 31 December
Functional
Receivables
Liabilities
USD thousand
currency
2023
2022
2023
2022
DNO Iraq AS
USD
61,586
-
-
76,115
DNO Mena AS
USD
2,684
2,503
-
-
DNO Norge AS
NOK
10,823
-
-
-
DNO North Sea plc
USD
83,514
83,580
-
-
DNO Oman Block 8 Limited
USD
-
-
-
4,852
DNO Technical Services AS
USD
306
-
-
-
Total long-term intercompany receivables and liabilities
158,913
86,081
-
80,967
Except for loans to companies with exploration activities, the intercompany receivables and liabilities are interest bearing.
The intercompany interest rates used by DNO ASA and its subsidiaries are set at arm's length.
Short-term intercompany receivables/liabilities
Years ended 31 December
Functional
Receivables
Liabilities
USD thousand
currency
2023
2022
2023
2022
DNO Iraq AS
USD
3,665
3,658
-
-
DNO Mena AS
USD
98
73
-
-
DNO Norge AS
USD / NOK
437
2,461
-
-
DNO North Sea Plc
GBP
2,109
1,967
-
-
DNO North Sea (U.K.) Limited
GBP
19
3
-
-
DNO Technical Services AS
USD
-
1,423
896
-
DNO Oman Block 8 Limited
USD
222
188
5,248
-
Other
USD
11
-
-
Total Short-term intercompany receivables and liabilities
6,586
9,772
6,144
-
Intercompany sales/purchases
1 January - 31 December
Functional
Sales
Purchases
USD thousand
currency
2023
2022
2023
2022
DNO Iraq AS
USD
9,140
8,659
-
-91
DNO Norge AS
USD
3,139
3,235
-1,864
-1,616
DNO North Sea plc
USD
276
501
-
-
DNO North Sea (U.K.) Limited
USD
29
25
-
-
DNO North Sea (ROGB) Limited
USD
12
70
-
-
DNO Oman Limited
USD
5
26
-
-
DNO Oman Block 8 Limited
USD
27
42
-
-
DNO Technical Services AS
USD
12,120
14,741
-2,936
-3,033
DNO Yemen AS
USD
207
107
-
-
Other
USD
75
43
-
-
Total intercompany sales/purchases
25,029
27,447
-4,800
-4,742
The Company's other related parties consist of other subsidiaries in the Group.
The Company sells and purchases services to and from its subsidiaries.
Intercompany interest income/-expense, dividend and group contribution
1 January - 31 December
Interest income, dividend
Interest expense
Functional
and group contribution
USD thousand
currency
2023
2022
2023
2022
DNO Technical Services AS
USD
306
-
-
-
DNO Iraq AS
USD
142,078
555,590
-1,648
-12,595
DNO North Sea Plc
USD
-
-
-459
-
DNO Mena AS
USD
193
1,058
-
-
DNO North Sea (Norge) AS
USD
10,255
107
-
-
DNO North Sea Plc
USD
8,554
5,943
-
-
DNO Oman Block 8 Limited
USD
-
-
-
-511
Mondoil Enterprises LLC
USD
-
-
-
-
Total intercompany interest income/-expense
161,386
562,698
-2,107
-13,106
See Note 5 for more details on financial items.
Country-by-Country report
86
DNO
Country-by-Country report 2023
In line with the Norwegian Accounting Act and Norwegian Securities Trading Act, the Company has prepared a country-by-country
report for its activities in the extractive industries, including information on investments, revenue, production, cost and the number of
employees in each country of operation by subsidiary. Among other requirements, total payments to governmental bodies during the
financial year must be broken down by country and by payment type.
Additional information regarding the Group's performance in each geographic area can be found in Note 2 of the DNO ASA’s Annual
Report and Accounts 2023. A complete list of the Group's oil and gas license portfolio is disclosed in Note 27.
(USD million)
License, legal entity level and
country/region of operation
1
Country of
incorpor-
ation
2
Royalty
3
Net
produc-
tion
4
Corporate
income
tax
5
Special
tax
6
Area
fee
7
Contract-
ual
bonuses
8
Invest-
ments
9
Revenue
10
Expend-
iture
11
Net inter-
comp-
any
interest
12
Profit/
-loss
before
tax
10
Tax
income/-
expense
1
3
Equity
10
Number
of
employees
14
Tawke
-83.3
34,707
-
-336.5
-
-
-
-
-
-
-
Baeshiqa
-0.6
143
-
-1.3
-
-
-
-
-
-
-
DNO Iraq AS
Norway
-
-
-
-
72.2
253.2
-200.8
-
2.2
-
871.1
Total Kurdistan region of Iraq
-83.9
34,850
-
-337.9
-
-
72.2
253.2
-200.8
-
2.2
-
871.1
819
DNO Norge AS
Norway
-
13,926
-40.2
-75.6
-1.1
-
224.5
406.1
-197.5
-0.4
179.8
-141.5
226.9
Total Norway (NCS)
-
13,926
-40.2
-75.6
-1.1
-
224.5
406.1
-197.5
-0.4
179.8
-141.5
226.9
122
DNO North Sea (U.K.) Limited
UK
-
206
-
-
-
-
-1.5
2.9
-5.0
-
3.2
-
-245.2
DNO North Sea (ROGB) Limited
UK
-
71
16.3
10.9
-
-
-0.6
5.4
-4.2
-
-0.6
-
-85.0
DNO Exploration UK Limited
UK
-
-
-
-
-
-
-
-
-0.2
-
-0.2
-
-1.5
Total United Kingdom (UKCS)
-
277
16.3
10.9
-
-
-2.2
8.2
-9.4
-
2.4
-
-331.8
-
DNO Yemen AS
Norway
-
-
-
-
-
-
-
-
-8.1
-
-8.1
-
-70.7
Total Yemen
-
-
-
-
-
-
-
-
-8.1
-
-8.1
-
-70.7
2
DNO Mena AS
Norway
-
-
-
-
-
-
-
-
-
-
-
-
0.6
-
DNO ASA
Norway
-
-
-
-
-
-
9.2
25.0
-43.0
13.6
86.3
-
610.2
61
DNO Technical Services AS
Norway
-
-
-
-
-
-
-
34.2
-34.3
-
-
-
5.0
70
DNO North Sea plc
UK
-
-
-
-
-
-
-
-
-0.6
-8.1
-90.2
-
360.2
11
South Limited
Guernsey
-
-
-
-
-
-
-
-
-0.0
-
-0.0
-
-0.6
DNO Oman Block 8 Limited
Guernsey
-
-
-
-
-
-
-
0.0
-0.2
0.5
0.3
-
5.0
DNO UK Limited
UK
-
-
-
-
-
-
-
-
-0.0
-
-0.0
-
-0.1
Føroya Kolvetni P/F
UK
-
-
-
-
-
-
-
-
-
-
-
-
-
DNO Oman Ltd
Guernsey
-
-
-
-
-
-
-
-
-0.0
-
-0.0
-
28.0
DNO North Sea (Norge) AS
Norway
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Oman
-
-
-
-
-
-
-
-
-
-
-
-
-24.8
RAK tunisia
-
-
-
-
-
-
-
-
-
-
-
-
-
Mondoil
US
-
3,513
-
-
-
-
-
-
-0.0
-
12.7
-
97.9
Other *
-
3,513
-
-
-
-
-
-
-0.3
0.5
12.9
-
105.4
-
Other *
-
3,513
-
-
-
-
9.2
59.3
-78.2
6.0
9.0
-
1,081.4
142
Eliminations/ Intercompany
-
-
-59.3
52.0
-5.6
-34.0
8.8
-542.2
GRAND TOTAL
-83.9
52,566
-23.8
-402.6
-1.1
-
303.7
667.5
-442.0
-
151.3
-132.7
1,234.8
1,085
* Other includes subsidiaries of DNO ASA that did not hold oil and gas licenses during the year and equity accounted investments.
1
2
3
4
5
income tax received relate to carry back of decommissioning loss.
6
petroleum activities. In the UK, special tax relates to carry back of decommissioning loss.
7
8
9
10
include intercompany transactions. Audit of statutory financial statements has not been completed at the time of issuing this report.
11
expenses, other operating expenses and exploration costs expensed including intercompany transactions.
12
13
14
Auditor’s report
Annual Report and Accounts 2023
DNO
87
Auditor’s report 2023
Auditor’s report
88
DNO
Auditor’s report 2023
Auditor’s report
Annual Report and Accounts 2023
DNO
89
Auditor’s report 2023
Auditor’s report
90
DNO
Auditor’s report 2023
Auditor’s report
Annual Report and Accounts 2023
DNO
91
Auditor’s report 2023
Auditor’s report
92
DNO
Auditor’s report 2023
EU Taxonomy
EU Taxonomy 2023
Annual Report and Accounts 2023
DNO
93
The EU Taxonomy Regulation, which came into effect on 1 January 2023 in Norway, aims to promote environmentally sustainable
economic activities within the European Economic Area (EEA) by providing a standardized framework for classifying activities as
environmentally sustainable. The regulation sets specific criteria and thresholds that companies must meet to qualify their activities as
environmentally sustainable. The report covers DNO ASA and its subsidiaries.
Key Performance Indicators (KPI) presented are derived from the figures reported in DNO’s consolidated accounts prepared in
accordance with IFRS as adopted by the EU.
The dominators of the financial KPIs can be reconciled with the consolidated accounts as follows:
Turnover corresponds to
Revenues
, see Note 3 to the consolidated accounts.
Capex corresponds to additions to
Property, plant and equipment
Intangible assets
, see Note 9 and Note 10 to the consolidated
accounts. Additions to
Exploration assets
Taxonomy Regulation.
Opex is narrowly defined in the EU Taxonomy Regulation and consists of maintenance, other direct expenditure related to day-to-day
servicing of assets and short-term leases. These items are included in
Cost of goods sold
EU Taxonomy Eligibility and Alignment Assessment
An economic activity qualifies for taxonomy eligibility when it aligns with the activity description in the EU Taxonomy Regulation.
To determine eligible activities within DNO, we reviewed DNO's operations, products and sustainability initiatives, comparing them to the
descriptions of economic activities outlined in the EU Taxonomy Regulation.
It was determined that the Company's activities, which are all related to the core activity of extracting and selling oil and gas, do not
meet the eligibility criteria under the EU Taxonomy Regulation.
As DNO does not have any eligible activities, it does not have any activities that meet the alignment criteria under the EU Taxonomy
Regulation.
EU Taxonomy KPIs
USD million
Turnover
CAPEX
OPEX
Taxonomy eligible but not taxonomy aligned activities
-
0%
-
0%
-
0%
Taxonomy aligned activities
-
0%
-
0%
-
0%
Taxonomy non-eligible activities
667.5
100%
181.9
100%
44.6
100%
Total
667.5
100%
181.9
100%
44.6
100%
EU Taxonomy
EU Taxonomy 2023
94
DNO
Turnover
Economic activities
Code
Turnover
Proportion
of turnover
Climate
change
mitigation
Climate
change
adaptation
Water
Circular
economy
Pollution
Biodiversity
Climate
change
mitigation
Climate
change
adaptation
Water and
marine
resources
Circular
economy
Pollution
Biodiversity
Minimum
safeguards
Taxonomy-
aligned//eligible
proportion of
turnover in 2023
Category
(enabling
activity)
Category
(transitional
activity)
USD mill
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1) - - -
A.2 Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities)
Turnover of Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2) - -
Total (A.1 + A.2) - -
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities (B)
667.5
100.0
Total (A + B) 667.5 100.0
CAPEX
Economic activities
Code
CAPEX
Proportion
of CAPEX
Climate
change
mitigation
Climate
change
adaptation
Water
Circular
economy
Pollution
Biodiversity
Climate
change
mitigation
Climate
change
adaptation
Water and
marine
resources
Circular
economy
Pollution
Biodiversity
Minimum
safeguards
Taxonomy-
aligned/eligible
proportion of
CAPEX in 2023
Category
(enabling
activity)
Category
(transitional
activity)
USD mill
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
CAPEX of environmentally sustainable activities (Taxonomy-aligned) (A.1) - - -
A.2 Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities)
CAPEX of Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2) - -
Total (A.1 + A.2) - -
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CAPEX of Taxonomy-non-eligible activities (B) 181.9 100.0
Total (A + B) 181.9 100.0
OPEX
Economic activities
Code
OPEX
Proportion
of OPEX
Climate
change
mitigation
Climate
change
adaptation
Water
Circular
economy
Pollution
Biodiversity
Climate
change
mitigation
Climate
change
adaptation
Water and
marine
resources
Circular
economy
Pollution
Biodiversity
Minimum
safeguards
Taxonomy-
aligned//eligible
proportion of
OPEX in 2023
Category
(enabling
activity)
Category
(transitional
activity)
USD mill
%
%
%
%
%
%
%
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (Taxonomy-aligned)
OPEX of environmentally sustainable activities (Taxonomy-aligned) (A.1) - - -
A.2 Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities)
OPEX of Taxonomy-eligible but not environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2) - -
Total (A.1 + A.2) - -
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OPEX of Taxonomy-non-eligible activities (B) 44.6 100.0
Total (A + B) 44.6 100.0
Substantial Contribution Criteria
DNSH criteria (Do No Significant Harm)
Substantial Contribution Criteria
DNSH criteria (Do No Significant Harm)
Substantial Contribution Criteria
DNSH criteria (Do No Significant Harm)
Disclosures in accordance with Annex II to the EU Taxonomy Regulation
Alternative performance measures
Alternative performance measures
Annual Report and Accounts 2023
DNO
95
DNO discloses alternative performance measures (APMs) as a supplement to the Group’s financial statements prepared based on
issued guidelines from the European Securities and Markets Authority (ESMA). DNO believes that the APMs provide useful
supplemental information to management, investors, securities analysts and other stakeholders and are meant to provide an enhanced
insight into the financial development of DNO’s business operations, financing and future prospects and to improve comparability
between periods. Reconciliations of relevant APMs, definitions and explanations of the APMs are provided below.
EBITDA
USD million
2023
2022
Revenues
667.5
1,377.0
Lifting costs
-191.7
-222.1
Tariffs and transportation
-32.4
-30.2
Movement in overlift/underlift
5.6
8.1
Share of profit/-loss from Joint Venture
11.9
6.0
Exploration expenses
-47.7
-96.5
Administrative expenses
-23.3
-17.9
Other operating income/expenses
-6.2
-5.0
EBITDA
383.8
1,019.5
EBITDAX
USD million
2023
2022
EBITDA
383.8
1,019.5
Exploration expenses
47.7
96.5
EBITDAX
431.5
1,116.0
Lifting costs
2023
2022
Lifting costs (USD million)
-191.7
-222.1
Net production (MMboe)*
17.9
34.3
Lifting costs (USD/boe)
10.7
6.5
* For accounting purposes, the net production from equity accounted investments is not included.
Capital expenditures
USD million
2023
2022
Purchases of intangible assets
-114.6
-74.6
Purchases of tangible assets
-163.6
-300.2
Capital expenditures*
-278.3
-374.8
* Exclude estimate changes on asset retirement obligations.
Operational spend
USD million
2023
2022
Lifting costs
-191.7
-222.1
Tariff and transportation expenses
-32.4
-30.2
Exploration expenses
-47.7
-96.5
Exploration cost previously capitalized carried to cost (Note 6 in the consolidated accounts)
6.0
52.2
Capital expenditures
-278.3
-374.8
Payments for decommissioning
-17.9
-70.0
Operational spend
-561.9
-741.4
Alternative performance measures
Alternative performance measures
96
DNO
Equity ratio
USD million
2023
2022
Equity
1,234.8
1,369.4
Total assets
2,638.3
2,803.0
Equity ratio
46.8%
48.9%
Free cash flow
USD million
2023
2022
Net cash from/-used in operating activities*
194.1
1,056.3
Capital expenditures
-278.3
-374.8
Payments for decommissioning
-17.9
-70.0
Equity contribution into Joint Venture (Note 12)
-6.9
-4.2
Dividends from Joint Venture (Note 12)
27.1
11.5
Free cash flow
-81.8
618.8
Net debt
USD million
2023
2022
Cash and cash equivalents
718.8
954.3
Bond loans and reserve based lending
566.2
566.2
Net cash/-debt
152.7
388.2
Reserve Life Index (R/P)*
2023
2022
Net production (MMboe)
19.1
35.5
1P reserves
206.4
220.3
2P reserves
290.1
292.1
3P reserves
360.5
386.7
1P Reserve Life Index (R/P in years)
10.8
6.2
2P Reserve Life Index (R/P in years)
15.2
8.3
3P Reserve Life Index (R/P in years)
18.8
10.9
* Net production and net reserves includes West Africa segment (equity accounted investment).
Definitions and explanations of APMs
ESMA issued guidelines on APMs that came into effect on 3 July 2016. The Company has defined and explained the purpose of the
following APMs:
EBITDA (Earnings before interest, tax, depreciation and amortization)
EBITDA, as reconciled above, can be found by excluding the DD&A and impairment of oil and gas assets from the profit/-loss from
operating activities. Management believes that this measure provides useful information regarding the Group’s ability to fund its capital
investments and provides a helpful measure for comparing its operating performance with those of other companies.
EBITDAX (Earnings before interest, tax, depreciation, amortization and exploration expenses)
EBITDAX, as reconciled above, can be found by excluding the exploration expenses from the EBITDA. Management believes that this
measure provides useful information regarding the Group’s profitability and ability to fund its exploration activities and provides a helpful
measure for comparing its performance with those of other companies
Alternative performance measures
Alternative performance measures
Annual Report and Accounts 2023
DNO
97
Lifting costs (USD/boe)
Lifting costs comprise of expenses related to the production of oil and gas, including operation and maintenance of installations, well
intervention activities and insurances. DNO’s lifting costs per boe are calculated by dividing DNO’s share of lifting costs across
producing assets by net production for the relevant period. Management believes that the lifting cost per boe is a useful measure
because it provides an indication of the Group’s level of operational cost effectiveness between time periods and with those of other
companies.
Capital expenditures
Capital expenditures comprise the purchase of intangible and tangible assets irrespective of whether paid in the period. Management
believes that this measure is useful because it provides an overview of capital investments used in the relevant period.
Operational spend
Operational spend is comprised of lifting costs, tariff and transportation expenses, exploration expenses, capital expenditures and
payments for decommissioning. Management believes that this measure is useful because it provides a complete overview of the
Group’s total operational costs, capital investments and payments for decommissioning used in the relevant period.
Equity ratio
The equity ratio is calculated by dividing total equity by the total assets. Management uses the equity ratio to monitor its capital and
financial covenants. The equity ratio also provides an indication of how much of the Group’s assets are funded by equity.
Free cash flow
Free cash flow comprises net cash from/-used in operating activities less capital expenditures, payments for decommissioning and net
cash received/-paid from equity accounted investments. Management believes that this measure is useful because it provides an
indication of the profitability of the Group’s operating activities excluding the non-cash items of the income statement and includes
operational spend. This measure also provides a helpful measure for comparing with that of other companies.
Net debt
Net debt comprises cash and cash equivalents less bond loans. Management believes that net debt is a useful measure because it
provides indication of the minimum necessary debt financing (if the figure is negative) to which the Group is subject at the balance sheet
date.
Reserve Life Index
The Reserve Life Index measures the length of time it will take to deplete a resource at given production rates. The ratio is used to
measure how long an oil and gas field will last, or more precisely how long the Group’s oil and gas reserves will last, and is calculated
by dividing the quantity of reserves by the production of petroleum from those reserves during the relevant period.
Glossary and definitions
Glossary and definitions
98
DNO
AED
United Arab Emirates dirham
AGM
Annual General Meeting
ASRR
Annual Statement of Reserves and
Resources
bbls
Barrels of oil
bcf
billion cubic feet
Board of Directors
The Board of Directors of the Company
boe
Barrels of oil equivalent
bopd or boepd
Barrels of oil per day or barrels of oil
equivalent per day
CAPM
Capital Asset Pricing Model
Company
DNO ASA
Contingent resources
Quantities of petroleum estimated, as of a
given date, to be potentially recoverable
from known accumulations but not currently
considered to be commercially recoverable
or where a field development plan has not
yet been submitted
Contractor
A company or companies operating in a
country under a PSC on behalf of the host
government for which it receives either a
share of production or a fee
Cost oil
Share of oil produced which is applied to
the recovery of costs under a Production
Sharing Contract
Crude oil, crude or oil
A mixture that consists mainly of pentanes
and heavier hydrocarbons, which may
contain sulphur and other non-hydrocarbon
compounds, that is recoverable at a well
from an underground reservoir and that is
liquid at the conditions under which its
volume is measured or estimated
DKK
Danish kroner
D&M
DeGolyer and MacNaughton
DD&A
Depreciation, depletion and amortization
DNO
DNO ASA and its consolidated
subsidiaries
Group
The Company and its consolidated
subsidiaries
E&P
Exploration and production
EBITDA
Earnings before interest, tax, depreciation
and amortization
EBITDAX
Earnings before interest, tax, depreciation,
amortization and exploration expenses
ESMA
European Securities and Markets
Authority
EU
The European Union
EUR
Euros
Farm-in
To acquire an interest in a license from
another party
Farm-out
To assign an interest in a license to
another party
Faroe
Faroe Petroleum plc
Gas
A mixture of light hydrocarbons that exist
either in the gaseous phase or in solution
in crude oil in reservoirs but are gaseous
at atmospheric conditions
GBP
Pound sterling
HSSE
Health, safety, security and environment
Hydrocarbons
Compounds containing only the elements
of hydrogen and carbon, which may exist
as solid, liquid or gas
IAS/IFRS
International Financial Reporting
Standards
IQD
Iraqi dinar
KRG
Kurdistan Regional Government
Kurdistan
Kurdistan region of Iraq
License or permit
Area of specified size licensed to a
company by the government for
production of oil or gas
MMbbls
Million barrels of oil
MMboe
Million barrels of oil equivalent
NCS
Norwegian Continental Shelf
Net entitlement
The portion of future production (and
thus resources) legally accruing to a
contractor under the terms of the
development and production contract
Net entitlement reserves
Reserves based on net entitlement
production
Net production
Production based on the participation
interest in the license
Net reserves and resources
Reserves and resources based on the
participation interest in the license
NOK
Norwegian kroner
Norwegian Public Limited Liability
Companies Act
The Norwegian Public Limited Liability
Companies Act of 13 June 1997 no. 45
(“allmennaksjeloven”)
Operator
A company responsible for managing an
exploration, development, or production
operation
Oslo Stock Exchange
Oslo Børs ASA
Petroleum
A complex mixture of naturally occurring
hydrocarbon compounds found in rocks.
Glossary and definitions
Glossary and definitions
Annual Report and Accounts 2023
DNO
99
PP&E
Property, plant and equipment
Profit oil
Production remaining after royalty and
cost oil, which is split between the
government and the contractors under a
Production Sharing Contract
PSC
A Production Sharing Contract or a PSC is
an agreement between a contractor and a
host government, whereby the contractor
bears all risk and cost for exploration,
development and production in return for a
stipulated share of production
Royalty
Royalty refers to payments that are due to
the host government or mineral owner in
return for depletion of the reservoirs and the
producer contractor for having access to
the petroleum resources
RPS
RPS Energy Consultants
SPE
Society of Petroleum Engineers
UAE
The United Arab Emirates
UK
The United Kingdom
UKCS
The United Kingdom Continental Shelf
USD
United States dollar
WACC
Weighted Average Cost of Capital
Glossary and definitions
Glossary and definitions
100
DNO
DNO ASA
DOKKVEIEN 1 / AKER BRYGGE / 0250 OSLO / NORWAY / PHONE + 47 23 23 84 80 / FAX +47 23 23 84 81/ www.dno.no