Presentation

DNO is a Norwegian E&P company which historically has been focused on the Middle East, where it has had significant success in the Kurdish region of Iraq (KRI). The company re-entered the North Sea through the acquisitions of Origo (2017) and Faroe Petroleum (2019) which added ~20% to reserves and production. DNO is listed on the Oslo Stock Exchange with a market capitalization of USD ~600m and had net debt of USD ~540m as of Q2’20. RAK Petroleum is the company’s largest shareholder, owning a 40% stake.

The company’s main asset is the Tawke oil field (75% WI), which started producing in 2007 and had 245 mill barrels net 2P remaining reserves at YE’19. With continued investments in drilling of production wells (directly cost recoverable through the PSC), Tawke block production is expected to remain above 100,000 bbl/day gross in 2020e. This is in part driven by the successful Peshkabir development, which we expect to add growth in reserves going forward.

DNO has guided down spending for 2020 to USD 640m, driven by lower guidance on production and drilling. However, this is reversible upon a global oil price discovery and regular export payments. As we believe this will be the case going forward, we find DNO attractively priced at P/NAV 0.35x.