DNO's North Sea Engine Powers Through a Kurdistan Shutdown

The North Sea Carries the Load

DNO ASA delivered one of its strongest quarters ever, despite its flagship production in Kurdistan being shut in for most of Q2 2026 due to regional conflict. Revenue hit a record $761 million, up 21% sequentially and nearly 200% year-over-year, driven by the North Sea portfolio and elevated commodity prices. As Managing Director Chris Spencer put it: “But by having the very healthy North Sea business, combined with the high oil and gas prices has meant that we've still hit record revenues for the quarter.” — Christopher Spencer, Managing Director · 2026-08-13 This quarter's record revenue underscores the power of the diversified portfolio built over the past year, which has transformed DNO from a Kurdistan-dependent producer into a balanced international player.

The free cash flow story is even more striking. With Kurdistan producing nothing for most of the quarter, DNO still managed to pay down $220 million of debt, reducing net debt by 30% to $553 million. Spencer highlighted this as a source of pride: “And with this very high cash flow, we have actually paid down $220 million of debt in a quarter with 0 production from Kurdistan.” — Christopher Spencer, Managing Director · 2026-08-13 This financial discipline is a recurring theme, but the ability to generate such cash flow from a single leg of the business marks a significant shift in the company's resilience.

Kurdistan: Commitment Amid Uncertainty

Kurdistan remains a core asset, but the security situation is precarious. Production has restarted on a cautious basis, yet Executive Chairman Bijan Mossavar-Rahmani was clear about the fragility: “one foot on the accelerator in terms of operations, in terms of drilling and one foot always on the brake.” — Bijan Mossavar-Rahmani, Executive Chairman · 2026-08-13 The company is the only international operator still producing and drilling in the region, which reflects both its operational expertise and its long-term commitment. However, the previous target of reaching 100,000 bbl/d gross by year-end has been suspended pending resolution of the security environment. This is a stark contrast to earlier quarters when such targets were confidently discussed, as in the 2026-02 call when Bijan stated: “we believe that in 2026, we will be either part of the export -- the current export arrangements or we will find another mechanism to be exposed to export pricing.” — Bijan Mossavar-Rahmani, Chief Executive Officer · 2026-02-05 That optimism has been tempered by reality.

The company's perseverance in Kurdistan is also visible in its financial strategy. By choosing to sell local output on a cash-and-carry basis rather than waiting for export payments, DNO has maintained cash flow and fully funded its operations. As Bijan noted in November 2025: “We decided that we were better placed, continue to receive money in advance at predictable and set prices” — Bijan Mossavar-Rahmani, Executive Chairman · 2025-11-10—a philosophy that has proven particularly valuable during this quarter's turmoil.

A Possible Offer for Genel

The most significant new development is the possible offer for Genel Energy, announced on 7 August. DNO has proposed 69p per share, a 38% premium, in a move that would consolidate its ownership of the Tawke license and remove a minority partner. The offer is not conditional on Genel's own bid for Capricorn, and DNO argues it provides certainty of value for Genel shareholders. This is a natural extension of DNO's strategy to increase its stake in core assets, and it was a central topic on the call, though the company declined to discuss details due to UK takeover rules.

We are the only international oil company in Kurdistan that's producing. The others have all shut in because of security concerns of their own reasons. But we're the only one drilling, drilling a lot, the only one producing.

The offer also reflects DNO's strengthened balance sheet. The company has been shifting away from legacy bond financing toward highly flexible offtake financing arrangements that are cheaper and effectively borrow against the balance sheets of major trading houses and oil companies. This, combined with a conservative financial policy, gives DNO the firepower to make strategic moves while still returning cash to shareholders via a 17th consecutive quarterly dividend.

Diversification at the Core

This quarter validates the strategic rationale behind the Sval acquisition a year ago. The North Sea portfolio, with its growing slate of tieback projects, is now the primary driver of cash flow. As Bijan explained in a previous call: “We want to grow more in the North Sea and use, again, a size of scale that we can or to do larger transactions.” — Bijan Mossavar-Rahmani, Executive Chairman · 2025-05-15 The company's ability to maintain a dividend streak while pursuing acquisitions and paying down debt is a testament to the strength of this model.

Looking ahead, DNO's immediate challenges are managing the security risk in Kurdistan and engaging with Genel's board. But the underlying message is clear: the company has built a robust, diversified platform that can weather even the harshest conditions. Record revenues and a strengthened balance sheet provide a solid foundation for the next phase of growth.