DNO ASA has implemented a target 35% reduction across all spend categories to shrink its 2020 budget by $350 million to $640 million in response to turbulence and uncertainty in global oil and financial markets triggered by the coronavirus pandemic.
Cutbacks will reduce 2020 company working interest production (CWI) to a projected 88,000 boe/d, down from 104,800 boe/d last year. The Kurdistan region of Iraq will contribute 71,000 b/d and the North Sea will add 17,000 boe/d.
In Kurdistan, DNO has reduced the number of rigs deployed in drilling, testing, and workovers from five in 2019 and early 2020 to two, down from a total rig count approaching 20 last summer. One rig is drilling the Zartik-1 exploration well on the DNO-operated Baeshiqa license and the other is a Tawke license workover rig that will shortly be moved for scheduled maintenance. Two third-party rigs have been warm stacked at Tawke and Peshkabir and can quickly be mobilized if oil prices climb and export payments are regularized.
Gross production at the DNO-operated Tawke license containing Tawke and Peshkabir fields, absent drilling of new infill wells to arrest natural field decline, is expected to average 100,000 bo/d in 2020. This reflects a drop from 115,210 bo/d in first quarter 2020 to 100,000 bo/d in second quarter 2020 and 90,000 bo/d over the balance of the year. Tawke license exit rate at yearend 2020 is projected at 85,000 bo/d, absent new wells. Production split continues at 55/45 between Tawke and Peshkabir fields.
Budget cuts and the newly announced Norwegian production caps are not expected to make a material change to DNO’s 2020 North Sea projections. The majority of the company’s fields subject to the restrictions are not fully utilizing their previous higher production permits.