DNO ASA (DNO) Earnings Call Transcript & Summary

Good morning, and welcome to DNO's First Quarter 2025 Earnings Call. My name is Jostein Løvås, and I am the Communication Manager here at DNO. Present with me in Oslo on this beautiful day in May are Executive Chairman, Bijan Mossavar-Rahmani; Managing Director, Chris Spencer; and CFO, Haakon Sandborg. At first, Bijan will give an introduction. It will be followed by a presentation of the results, which will be given by Chris and Haakon. After the presentation, we will open for questions in the customary Q&A session. Since this call is for investors and analysts, primarily press questions will be dealt with afterwards. [Operator Instructions] With that, let's get started. I will hand over to Bijan.

Jostein, thank you. Jostein mentioned who the call is primarily for. I should just add to that, it's primarily for our shareholders and our bondholders. And the analysts and the press come alongside those important stakeholders in DNO. I seem to be blocking the DNO logo, so I'll duck my head. That's what stands behind me. As I welcome everyone to our 2025 first quarter earnings report and discussion with management. My colleagues, as Jostein mentioned, Chris, our Managing Director; and Haakon, our CFO. And of course, we will then open the floor to the -- all to any questions that you'd like to pose to us. Just a few words of introduction before we go into the results presentation, which some of you may have already had a chance to look at. I know the analysts in Oslo have before the meeting. I'd like to again emphasize that the first quarter has been a very exciting and, in fact, a very important quarter for us, transformative in many important respects, first and foremost, with the announcement of our acquisition of Sval Energi, which we previously announced. And now we're in the final stages of the activities that will permit us to proceed with the closing, which is expected to occur in mid-June, so not too far from now. We've already said the obvious that there are many advantages to DNO from this transaction. Of course, it increases our size and scale considerably. As a result of the transaction, our production, our output in the Norwegian continental shelf will quadruple. As at the completion of the transaction, that's significant. We will, together with the small assets, the DNO assets, will total output averaging, I think, just over 80,000 barrels of oil equivalent a day, and that now puts the combined companies in the top 10 producers of oil and gas in Norway. That's very -- to us a very significant milestone and one that we hope to continue improving on as we bring our discoveries on stream, hopefully, at a more rapid clip, but also as we perhaps do additional acquisitions, whether they are smaller bolt-on acquisitions in the North Sea to improve our portfolio and our positioning, but also through -- perhaps through larger acquisitions that might become available to us. So we are -- we hope and we expect on an upward slope in terms of acquisitions and additions of -- through developments in terms of North Sea producers. There has been other, again, advantages to us. We expect having a larger North Sea production portfolio would reduce and improve the terms of financing for DNO to reduce our cost of capital. And there are different reasons why we expect that will be the case, importantly, because Norway is considered more safe and more secure and more creditworthy than our other leg where we have important production in Kurdistan. But -- so there are these strategic advantages to us. We will be able to access some of the hubs that have been more difficult for us to tap into, where Sval has been a joint venture partner in the blocks that have flown through these hubs, and that will help us, again, accelerate the development of our impressive list of discoveries. As those of you who follow us know that DNO has been, over the last several years, one of the most successful explorers in offshore Norway. I think in 1 year, we probably came in the #1 in terms of the cumulative size of the discoveries that we've made. So we've been very successful, and we hope to continue that trend as well. Importantly, also with the merger acquisition by I think -- as a merger of DNO and Sval, we will acquire a crack and very impressive group of Sval employees. The number is small due to some rightsizing done recently. But the group, I have a chance to meet with them yesterday in Stavanger, and it's a very impressive group. And importantly, they are coming from a high-tech group and ownership. They have a private equity mindset and private equity culture that's been importantly created and nurtured by the senior high-tech individuals. John Knight and also Einar Gjelsvik and -- to whom both our friends, to whom we owe a lot of gratitude for creating and nurturing a private equity investors' first mindset at Sval. And DNO has been moving in that direction more and more. As you can see in the, for example, our dividend policy, which of the last several years we've created and maintained and do so for this quarter, and it's part of our announcement. And hopefully, we will the -- move more in that direction as well. We've also announced today in our Annual General Meeting notification that we are adding 2 new Board members. These were -- we're nominating them for shareholder votes in June at our meeting on June 5 here in Oslo. One of them has been on the Board of Sval and very knowledgeable about Sval, the organization, organization of the Norwegian oil sector and knows the -- has worked with the management team and the rest of the team at Sval. So that will be, I think, an important addition to our own -- to our Board. And the second is an individual who's been in the -- has a Board industry background and very active and a partner, in fact, in a major U.S. private equity firm. So he will also bring a private equity background and a private equity mindset that hopefully will help us pivot even faster towards that culture. Let me -- and I think we've said in the press release that today that our -- we're driven by the need and the expectation that we will move faster, cheaper and better in terms of bringing discoveries to market. Norway, that process is very slow by international standards. And some of the discoveries that we have, we have to spend in, say, the Gulf of America or the Gulf of Mexico. These would have been on development less than a year. Here in Norway, it takes 3, 4, 5, 6 years, sometimes, to get there, and we want to move that faster. And I think other companies of our size and scale will be very supportive, but hopefully even the largest of the companies here in Norway would be motivated and more inclined and join with us in trying to accelerate the development of the many discoveries in Norway that are sitting, waiting to be monetized. I think that's very important. This moving faster, better, cheaper, of course, has served us well in Kurdistan, where we remain happy for the past 20 years or so. The most important in terms of volume production, company operating in Kurdistan, and we've done it the DNO way. Norwegians -- this is before my time at DNO. Norwegians, my predecessors who were going into Kurdistan were able to bring a lot of innovative, creative and quite fast techniques and mindset to putting oil in production, and we'll continue that. Now the highlight of this quarter, which I'd like to also touch on, and I know Chris will in his remarks from the presentation and his own thoughts, we've been -- we surprised everyone in the market, maybe not ourselves, we've surprise everyone how well we've been able to maintain and even inch up our production in Kurdistan without significant investments. We have not drilled a new well in Kurdistan in at least a couple of years. But we've been able to maintain production at the current levels from the reservoirs that typically have a natural decline of 15% to 20% a year. We arrested that decline. In fact, we have inched it up a bit through creative workovers in the existing wells and pumps and managing production from the wells that has allowed us to keep our production at 80,000 barrels a day that are higher now from where it should have been, in fact, a significant lower figure. So we, again, like to bring -- to continue to pivot DNO and the industry towards that kind of Norwegian Viking get-it-done mindset. And hopefully, we will see the results from that in the coming quarters. But the second quarter, of course, we'll have a very different look and feel because of the addition of the Sval assets following our merger and the nature and character of our presentation and our financial presentation, operational presentation will change, and that will be very exciting. So I look forward to seeing many of you at the second quarter presentation. I think we're going to have more calling in because prior to Sval, callers are largely interested in Kurdistan because that was the core and most important part of our activity in our business. With the combination of Sval and we created our operations in the North Sea, I expect we will have an appeal to a larger group of investors. So I expect our -- hopefully, all our investors, current investors will still be with us. But I expect to see other investors who will find DNO an attractive opportunity for them because of our North Sea presence. So with those comments, and welcome to our presentation, and I look forward to responding together with my colleagues any questions that you have about the quarter and the future. So thank you. Chris?

Thank you, Bijan. And good afternoon to all who are joining this conference from me. So let's dive straight into the slides following that helpful introduction from Bijan. And as we often do, sorry, just maybe go back to the picture, we start with a wonderful picture from the DNO world. This time after last quarter, I think we've ventured into the North Sea. Here we are back in our heartland of Kurdistan and one of the operators there who is taking good care of the production, and we will be talking more about that, as Bijan has already mentioned. So let's get into the slides. Thank you. And the highlights, you can read for yourselves. I think we've announced this a strong -- as another strong quarter for DNO. I think operationally, it was an excellent quarter. As you can see, we have increased production across the board. We've added 2 more discoveries to an incredible track record now in the North Sea. We have maintained that 80,000 barrels plus gross production that Bijan mentioned. And we have done all that safely. We had no recordable incidence of any type in our operated activities despite drilling operated well in the North Sea and a higher level of well intervention activity in Kurdistan. So for me, although the big news item, of course, from the quarter was the hugely important acquisition, I think it's really important to our investors that you see we continue to deliver operational excellence. And with a great team that we'll be working with on Sval and DNO come together in the North Sea, I have no doubt we will continue with that level of performance. Of course, apart from the transaction, which I'll talk about a bit more in the next slide, immediately on the back of that, we were able to take a step 1 of what we're calling optimizing our balance sheet on the back of that transaction, returning to our happy hunting ground of the bond market. We -- I hope that many bond investors are listening in today because we've had a great corporation over 24 years now in the bond market. And we certainly see that as a win-win, and we're very gratified by the support for our latest and probably greatest bond that we've issued so far. Last but not least, as we always say, ranking just a little bit higher than our bondholders are our shareholders, and we are very pleased to say that the Board of Directors have once again approved the same number of dividend, which has given us the NOK 1.25 per share on an annualized basis. If we go to the next slide, then, please. We're obviously all very excited to be -- that we're still naturally on track to close the Sval acquisition, and it's coming up very fast. So really looking forward to that. A number of these figures have been mentioned by Bijan, but it is worth repeating because we will quadruple our North Sea production. And having just reentered the North Sea in, what, 2017, we are now going to get 80,000 barrels a day some 8 years later, which has been quite a journey. We will put us in the top 10 producers in Norway and interestingly positions us, we think, even better for further growth. The combination of our set of discoveries and the upside opportunities within a number of producing assets that Sval have give us a great pipeline of projects and infill opportunities to maintain this 80,000 barrels a day in the medium term. And of course, we will keep aiming to deliver these exploration discoveries and incremental M&A to build even further on the position that we are getting. The other point we've been making and Bijan touched on the important financial synergies in terms of potential improvement in cost of capital. And the tax synergies that are well known to followers of the Norwegian continental shelf between having a development-heavy portfolio and a production heavily portfolio. The other point that we've been brewing investors' attention to is the -- what I call the operational synergies. As we said on the bond roadshow, we feel that the portfolios fit each other like a hand in a glove. And what we're alluding to there is that a number of our --a number of Sval's positions are in the infrastructure that our discoveries need to tie back to. And so we believe and we see from other situations that, that gives you a much greater insight. And we expect that to enable us to accelerate the development of our discovery portfolio. So looking forward to driving that forward in the next year or 2. Coming back to the DNO portfolio. We are really pleased, during the quarter, excuse me, to have announced yet we have another discovery, this time an operator discovery, second operator discovery we've announced within 6 months. And this is -- has the delightful name of Kjøttkake, which is meatball to those of you who don't speak Norwegian. So the creativity of our exploration is -- knows no end. But what I'd like to draw more attention to here, we often talk about trying to move faster and better. And the example here is the way we've immediately appraised the discovery. So we had a traditional vertical exploration well to minimize the financial exposure prior to showing we have a discovery, and we immediately sidetracked that in order to appraise the structure. And that was an extended reach near a horizontal wellbore. And so within that one campaign, we have compressed what is traditionally, I would say, an 18-month, perhaps 2-year timeline into 1 well. And so we're very pleased with that. And now we are putting a team in place that we hope will drive this opportunity forward to development in a timely fashion. That brings us to the next slide where we're putting up our revised drill program for the year, and most of this is known to the market. But in the same theme, I bring your attention to the Page well there. This is the follow-up to Othello. And I was just looking ahead of this call, I see that we announced the Othello discovery on the 2nd of December last year. And we are back there on the next well to -- that's not appraisal of the same structure. It's a nearby structure, which we see as an appraisal/exploration. It's certainly not frontier exploration. It is a follow-up to Othello. So we're very optimistic about it, and we're back there within 9 months of announcing discovery again. Very rapid movement, taking -- trying to build on success where we are operators. And of course, we can't do that without the support of our partners, in particular, Aker BP, who is the second biggest interest holder in that license, have been extremely supportive. Thank you. Kurdistan, and I talked a lot about this in the Q4 presentation back in February, and the team continued to do a wonderful job that Bijan has also described. We've been -- we got the gross production up to 82,000. We are able to maintain -- that has been there for -- in terms of the production capacity for a good 6 months or so, and we're still running at that type of level. The time as in -- I think it was Q3, we had a bit of a dip below. That is more due to little small upheavals in the local sales market rather than any production issues. That's going back 6 months now, but that was, as you may recall, related to the elections in Kurdistan, where even truck drivers want to vote. So we have a little bit of upset at that time. We've seen a bit of upset with Ramadan and Eid and so forth during this quarter, and the production capacity remains. A lot of this was covered in Bijan's words, but I would just like to take this opportunity to thank our team for delivering another quarter of fantastic performance. I think the other aspect worth mentioning, which is not covered on the slide, is again the impact of our gas injection project. That's been running for some 4 to 5 years now, 4 years, I guess. We started it up just as COVID was coming to an end. And of course, it's saved a lot of gas from being wasted through our flares. But we really see the impact on the Tawke field, and that's been very helpful. That combined with this very active well intervention program has been a key to the production performance that we've seen from PSC. And it results in a very nice cash flow from Tawke license. Of course, still, we are not able to get our crude to international markets directly. That has to go through the hands of refiners and traders. So we don't get the full value that we would hope to from those barrels, and we hope that, that will return. Next slide, let's go to the financials. So again, just to conclude what I've been saying. For me, an excellent quarter operationally. And we will have a very different business when we are sitting here presenting next time. We're looking forward to joining forces with the Sval team and continuing to develop its operational excellence in order to give a return to our shareholders. And the financial consequences of all that will now be set out by Haakon.

Yes. Thanks, Chris. And again, hello to all of you on the call. I'll now do a brief review of our Q1 financial results. We'll start with these key P&L figures, and you can see that our revenues are up by $11 million in the quarter to a level of $188 million. And this time, the increase was mainly driven by higher oil and gas prices in both business units. The Q1 revenues were split between Kurdistan with $ 58 million and North Sea with accounting for $ 130 million. If you look at the operating profit in the middle here, you will see that there's a significant improvement from Q4. And there, it should be noted that in addition to the revenue increase, we have no impairments in the first quarter, while they had a significant impairment of $104 million in Q4, mainly from the Baeshiqa license adjustment in Kurdistan. We have a stable cost of goods sold in Q1, but we had some higher expense exploration, mainly due to about $12 million dry well cost on the Horatio well in the NCS. Going further on the slide to the right, you will see a net loss of $4 million in Q1. That follows primarily from higher tax expense in the first quarter that came from changes in deferred taxes. We'll move on. We have cash flow. We show higher cash flow in Q1 at $100 million, up from $82 million in Q4. And there, we also include a contribution of $5 million in positive working capital change in the first quarter. Otherwise, no Norway -- or Norwegian tax payments in Q1. Of course, looking ahead towards the end of this year, we expect to be in a tax-paying position following the acquisition of Sval Energi. You see that our net investments increased to $109 million in Q1. That was primarily for CapEx in the North Sea on development projects, but also continued investment in exploration with $39 million in exploration expenditures in the North Sea. Net cash from our West Africa operations in Côte d'Ivoire came at -- come in -- came in at a net $5 million in the quarter, and that was in line with our expectations. As we mentioned for our financing activities, we successfully placed a new $600 million bond in March the week after we announced the Sval acquisition. We were pleased to see that the new bond, now named DNO 06 was met with strong demand from investors, and we secured a competitive coupon in this placement. In addition, we made drawdowns of $30 million on our bank RBL facility in this quarter. Again, under our quarterly dividend program, we paid a dividend of $27 million to our shareholders in February. And including some other items, we thereby add net cash inflow from financing of $583 million. On this basis, our cash balances increased to close to $1.5 billion at the quarter end. Of course, I think that looks pretty good, I would say, quite a record for us in DNO. Next. But of course, a key reason for raising the new bond was to refinance the short-dated DNO04 bond, and we did so by calling this bond in early April in an amount of $350 million. So the high Q1 cash balances have hereby been subsequently reduced by the call amount. I should note that following the repayment of the DNO04 bond, our credit strength is now further enhanced by having a long maturity profile on our bond debt, with the first bond maturity coming only in 2029, and the second maturity is in 2030. So quite a good long horizon on our maturities now. Otherwise, with the higher cash balances and with net cash of $43 million at the end of Q1, we are, again, maintaining a very solid balance sheet and a robust financial strength. We are clearly using the strength now to finalize the acquisition of Sval Energi. And as you heard today, the acquisition will transform our operations and also our financial outlook through much higher North Sea production and revenues. This will lead to a very substantial increase in our annual cash flow and our debt service capacity. As such, given the substantial size of the acquisition, we will have a higher leverage following completion. But it should be noted that on a net debt basis, the issuance will be fairly modest compared to many peer companies. So fine, in summary, these are certainly exciting times for us as we deliver on our goal and strategy of rebalancing the company through a much stronger position in the North Sea now. That really takes us to the end of the slide presentation. I think we're now in a -- at the stage where we hand over to Jostein to lead the Q&A session again.

Yes. Thank you, Chris, Bijan, and welcome. And yes, let's get started with the Q&A session. The first question comes from Tom Erik Kristiansen.

First one for you, Bijan. How pleased are you with the portfolio overall in DNO after the Sval acquisition? Is this kind of balanced now and you will shift a bit focus from growing the North Sea to maybe more maintaining it and further lifting dividends? Or is it still kind of a growth focus on that part of the business? And secondly, does increased materiality of Norway now imply that you're more open in Kurdistan to do strategic combinations there? Or do you expect to kind of stay with the same kind of structure there going forward as well?

Thank you for that question. You always ask interesting questions in these sessions. The answer to your question, I guess, is, yes, in the sense that we're very pleased with the combination with the Sval assets. And I'm pleased also that the Sval team is also very pleased with the combination with DNO. So I think both sides are quite pleased that both sides now will become one side in the next months. We want to grow more in the North Sea. And again, the size and scale that we can more -- or to do larger transactions and are looking at opportunities where we not only get good assets, but we have gain, again, a strategic value from the combination. And when you see strategic value, you put a price on it, and that will allow us to be more competitive in making our offers, and perhaps another buyer would not meet or have those strategic advantages. And so I think that puts us in a better position. In fact, with the Sval assets. I think the price of the transaction was not just fair and firm, but I think it was rich because we would renew the strategic interest and strategic value, and we are prepared to put that into our offer price. So we want to do more in the North Sea. Getting up to 80,000 plus is good. Better yet, if we get up to 100,000 barrels a day and then some. So we're in a growth mode in the North Sea. Clearly, we're able to do it now with the -- as a result of the combination for the reasons my colleagues mentioned, both operational but also financial. In Kurdistan, we'd like to do more, not necessarily by acquiring one of the other companies. But for those of you who follow DNO for a long time will remember that periods of -- long periods of time when we were producing at 100,000 barrels a day and more than that, we've reduced our spend, which we described, both Chris and myself. It is because of closure of the pipeline, which meant that the wellhead price has dropped significantly for us. And there are still arrears where the monies owed to us by the Kurdistan government for volumes of oil that were picked up during COVID, but not paid on time and not paid since. That will resolve itself. As those of you who follow this business and many who don't follow Kurdistan directly still hear about it because this is big international news. The closure of the pipeline, the discussions between Erbil, the capital of Kurdistan; and Baghdad, the capital of Iraq that involve also the U.S. government is very involved in those discussions and pushing hard for the pipeline to reopen. And once that takes place, the matter of the arrears and the certainty of payments will also be addressed and resolved. That will allow us to spend more in Kurdistan. And the best place for us to spend is in our own fields, Tawke and Peshkabir. And with the great spending, I expect our production will increase importantly. So that's our ambition for Kurdistan to resolve these issues, then to start investing much more as we've done in the past and have had very good results on those investments. On the question of price, this is also pretty well known that the price we received in the third quarter has been $35 a barrel. And other operators may be a bit higher, a bit lower depending on their -- the quality of their crude. At this is at a time of these discounts at a time when Brent was quite strong. So Brent was at $70 or higher. Our $35 figure looked weaker. But as Brent has come down, our prices are holding up. They have not dropped dollar per dollar. So there's been a time when Brent at $60 makes our $30 -- mid-30s number looked quite good, especially because now we are receiving a prepayment for our production. We're paid ahead of delivery. Once the payments are in our banks, international accounts, then we deliver the oil to the buyers. And that by itself is certainly the payments and prepayment is worth, I don't know, take a number, $8 a barrel, $10 a barrel. So that then makes the figure a lot more comfortable in a difficult market environment. And Chris has done some of the math, and it seems that under the current pricing of $35 or maybe hovers around $35, so there's a little less, a little bit more. Our barrels -- the return on the barrels are the same in Kurdistan as they are in Norway. And Norway has very tough tax regime, tough in some respects, but supportive in other respects because of -- you explore and the government still cuts you a check, not the full amount, but for 78% of the cost. Norway is -- has a tough tax regime. But our barrels, whether they're in Kurdistan or in Norway, are very different to those. And that's a good position to be in, notwithstanding all of the turmoil in the market and the lower price starting out. We can spend more money in Kurdistan. We can get more production from our own assets. But also in -- and we're often asked, do you have a third leg? What are your thoughts? We've always said, yes, that 3-legged stool is much more sturdy and stable than a 2-legged stool. We have, of course, a presence in West Africa. We've looked at some of the opportunities to do more in West Africa. We haven't acted on those because we've been so focused on stepping up our North Sea assets and production, which we've now been very busy doing this year with Sval. And also we've been spending a lot of management time and time dealing with the situation in Kurdistan and trying to help alongside other international oil companies in Kurdistan move the system into reopening of the pipeline and the resumption of payments with certainty for our deliveries into that pipeline and for resolution of the arrears issue without which we, DNO, have said we will not be prepared to put any oil into the pipeline. I think the other companies have a similar sentiment, which is expressed through this company grouping called Apikur that represents many of the international oil companies active in Kurdistan. So their voice is our voice, and I think our voice is their voice. And that's very, very clear. In terms of the third leg, I mean, the best place for us to spend money is Norway. We have all these discoveries, a dozen of discoveries or so that are sitting there, waiting for their turn, and that's not acceptable. And this is a reflection of the slow pace of which things happen in Norway in the oil and gas industry for many, many reasons. But the slowness of speed and the other issues that we face in trying to have a more Anglo-Saxon culture in the industry in Norway, I think that this is a struggle. It explains why all the major international oil and gas companies, many of them, have left Norway. And we're happy to pick up Norwegian barrels and Norwegian gas. And we're finding that with enthusiasm, that we've been approached by trading companies, by banks and accordingly by large oil companies is great. But that enthusiasm isn't matched by their interest in spending time and money and management time operating in Norway because of these difficulties. So we hope to push ahead, accelerate the monetization of our assets. And we have a huge inventory here already discovered in Norway that we want to bring into the market. So that will be an area of great focus and a great opportunity for DNO.

Can I have just a short follow-up question on your statement there, Bijan? Do you actually see a potential? Or do you think it's likely that after all of this turmoil, you could actually come strengthen out of it in Kurdistan, if someone is paying you, you have the second largest crude seller in the world, probably more reliable than Kurdistan has been historically, for instance, on payments that, that situation actually will be better than before the shutdown? Or is that too optimistic or too naive to think at this stage?

I hope and expect that when the pipeline is restarted, when that takes place, either in the coming year, much less, but in the coming year or not, because next year, the old contract that governs the use of these lines by Iraq will expire. On that point, the -- some of the geopolitical issues will go away, and that -- it will shut the market. So I'm optimistic. I was optimistic very early on. When I took this position, all the questions in these session was, what are you going to do when the Iraqi government cancels the production sharing contracts, and you're left with technical services agreements that pay you, I don't know, $1 or less to produce a barrel of oil. I said, I don't think it's going to happen. I think the production sharing contracts will be -- will survive, and they have. And in the past year, as you -- those of you who follow us have seen that Iraqi courts have ruled that contracts signed in Kurdistan by the Kurdistan government with the international oil companies are in fact valid. So that problem has gone away. And I think there will be a different regime in terms of use of the pipeline. And now that the U.S. is removing sanctions on Syria, perhaps, some of the old Syrian pipelines on the Mediterranean which weren't in use, some of them may be in sort of disrepair, will be repaired, and oil will flow in that direction. And if the negotiations with Iran succeeds, I expect some of the sanctions on Iran would be in another direction in which the oil can move. Perhaps, the issues between Erbil and Baghdad are resolved. The oil can flow South into the Persian Gulf as well. So I see opportunities both without these geopolitical fixes, but I also see this geopolitical fixes happening very rapidly. And that will be an opportunity. We're also interested in doing business in Iraq in the South. Kurdistan has been very, very good to us. There's a lot more to be found and produced in Kurdistan. But the mother load, as they say, the big oil and gas reserves are South in Kurdistan. And we've been successful in the North. We know the culture. We know the geopolitics. We know the reservoirs. We know the challenges. And I think we're very well placed to also go South and explore and develop opportunities there. So all very, very exciting.

[ Erik Volkner ] is waiting to our credit analyst, I believe.

Can you hear me?

Yes.

Great. Congrats on another good quarter and successfully raising the bond. Two quick questions there on the sort of capital side. You have a very large cash balance now, and you still drew down on the RBL. Is that something specific? Or was it more just to maintain the sort of facility limit? And also could you please shed some light on the RBL discussions with the small banks and how that's going? The oil prices have dropped quite a bit since you acquired Sval or announced the acquisition. Has that impacted the amount the RBL banks are willing to commit to?

Yes, I can address that and see -- take some help from others, if I need. I think, Erik, that we sort of drew down on the RBL now basically because we had discussions that we run the treasury in our North Sea business on a sort of a ring-fenced basis in DNO, and there was a very need to fill up on the drawdown on the facility. We have paid down some of it after subsequent to the quarter. It will sort of ebb and flow a bit, and no specific reason other than running this in a good manner between the treasury at DNO ASA and the same group for our subsidiary in the North Sea business. For the discussions with the RBL banks, we have had very good discussions where it's growing interest. We have seen 3 banks that were on both the DNO RBL that we have been having for ourselves, but also the same banks have been in the Sval RBL. And so these 3 banks, we are talking to as lead banks on a potential new RBL. It's also a fourth large bank that has been on the Sval side that is involved. So we have 4 major leading E&P banks now as our lead banks on the RBL discussion. So we don't think that the sort of drop that we saw in oil prices has affected the capacity of these banks to provide the RBL amounts that we have been discussing. So that's not -- no, we're not affected by that at all. So RBL financing is one of the options we are exploring for the refinancing of the debt in Sval when we take over and complete the acquisition. There are also other possibilities. We see very strong interest from, for instance, major oil companies that want to discuss with us on offtake agreements. Same thing goes for large trading houses around the world that see that we will have a very strong output to both oil and gas. In fact, we will have about an even split between oil and gas with our new portfolio in the North Sea. So you have some large entities wanting to do gas trading, and some are more interested on the crude side. There are several potential offtakers that are so keen to get these agreements on the volumes in place and that they offer very competitive financing. So this is also something we are exploring as a very good option. So I think it's clear that we are coming into a new possibilities for financing now with the acquisition that we wanted to be sure we are taking the ones that are most effective, flexible, providing certainty of funds and also the lowest possible cost of capital. So it's not exactly determined as of yet which way we are going on the preferred options, but this is something that, believe me, we are working hard on that at the moment. We also have the bond market, where we have been successful for many years as one other possibilities. So we are assessing all these various options as we move towards completion of the acquisition.

I can subscribe the situation and our ongoing discussions and options very well. But I'd just like to add that a year or 2 ago, the RBL facility was the obvious one for the companies, the first we go to, and we get better terms from the banks to the RBL mechanism that we would otherwise. That seems to have changed now. The terms are being offered by trading companies and by oil companies for financing are better than the RBL terms. They're faster. The RBL side is slow to move. And I think there's a reluctancy from the large banks to grow beyond the old woke mindset that we shouldn't invest with, we shouldn't talk to, we shouldn't loan to, we should take the money of oil and gas companies. That changed dramatically in the United States, both with respect to funders and with respect to individual and large investors. But in Europe, that culture and mindset that we want to steer away from the oil and gas and fossil fuel industries has made it slower. The movement of the RBL lenders, they've been moving more slowly, offering terms that are not attractive relative to the alternatives. It's one of the arrows on our quiver, of course. But my sense is that it may not be the one that will fire first. And I get the same response from other oil and gas companies that the RBL market is less attractive for them. With too many bells and whistles to make it their first priority or even any priority in terms of funding of the oil and gas business where, again, the -- those who are the traders or the users of the oil have stepped up and are offering very, very attractive terms and conditions to the producers. And we're going to take advantage of that. And the market -- the bond market has always been good to us. We've always been good to the bond market. And the bond -- the Nordic bond market will remain an important part of our financial package. It's quick. It's a priced right, and we have enthusiastic support from the bond market, all of the bond raises that we've done, and this is something business that Haakon, who is now the -- and has been for some time, the DNO member who has been the longest at the company. I'm the oldest and he's been the most present here, and he has developed this bond business and a great protector of the bond relationship with our bond investors. And again, thank you, Haakon, for beginning long before I joined the company. So that's another option that seems to be available to us.

As we are fast approaching the 1-hour mark, I hope we can keep the last couple of questions short and sweet. There are 2 more people wanting to ask questions. And the first one is Antonio Segura, I believe, from the credit side.

Let me just say one thing before you do. You say we're going to ask a short question, but the short question demands a long answer. It answers a lot. I guess, we all have to explain. It's not because we don't want the time to run out, so you don't -- you have time to ask the difficult questions, which in the past were always about Kurdistan, when will the pipeline open.

Can you hear me?

Yes, we can.

So I'm going to make it like very short and sweet. So my only question is, what's the impact of your new acquisition in -- on your net debt to EBITDA ratio? What is the pro forma leverage ratio for DNO post acquisition?

We have run some good presentations on that in our bond road show that we did in March and ran various metrics. You are touching on one of the metrics that show that we will be moderately levered after the acquisition. So net debt to EBITDA x on a pro forma 2024 number will be 0.7x. We have some slides that we compare DNO on that level to several other companies in our peer group, including investment-grade companies. And as I said in my presentation today, we are going to be moderately leveraged, the ranking compared to some -- several of the other companies that we get compared to. So the answer is 0.7x on a combined Sval-DNO pro forma 2024 basis.

Okay. So the last question seems to be going from.

It's going to be not much too short, unless I answer that.

There's one person raising the hand here, and that's Nick Coleman.

I'm a journalist with Platts. You'll be aware that there's an election coming up in Norway in September, and there seems to be some sentiment in the air, an idea that the results could be more positive for the oil and gas industry. I wonder if you have any observations on opportunities that might arise as a result of such a political move. And a bit more specifically, there seems to discussion of holding a number of licensing rounds every 2 years. And I wonder, specifically, if that's something that you are looking at, that it would kind of maybe create opportunities to explore outside the currently available areas, which I think are pretty extensive already, to be honest, as a result of the APA rounds, but your thoughts, I'd be interested.

I can have a go at that one. So we look back at the old numbered rounds and see that participation in those rounds historically actually had tapered off. And I think that's largely, as you point to, the fact that the APA round areas really are at a lion's share, not only of the North Sea and Norwegian Sea. But of course, this year, the Ministry usually expanded the area in the Barents Sea that is covered by APA. So whilst it would be welcomed that a number of rounds returned, I don't think that will make a major shift to the business in -- of many of the companies in Norway. I suspect it's in Norway's interest because that is the more frontier area and a country needs to be getting those areas tested, whilst there's a good healthy production to provide the support for such frontier exploration. But that's a longer-term view for the country. That's entirely up to them. So I don't think there will be any major short-term change to the APA system. It has clearly been a backbone of Norway's success. Can you have one of the backbones? One of the important factors of Norway's success for the last 20 years has been the APA, of course, the oil and the major discoveries that have happened in that time or almost all have been acreage that have gone through that APA system. And the government has been rightly building up on that. And for us, that was a key element of coming back to Norway 7 or 8 years ago because you can access acreage without having to put hundreds of millions of dollars down nonrefundable.

Do you have some thoughts on that? I have some closing thoughts as well.

Please go ahead.

With respect to the elections in Norway, the more interesting election for us is the one in Baghdad, coming from the fall, because that could affect the tone and tenor of the discussions between Erbil and Baghdad. So we're watching that with some interest because that will have an impact on the reopening of the pipeline and the international companies North and South in the [indiscernible]. With respect to the election results in Norway, the government here has been very supportive of DNO and our reentry in a growing way in the Norwegian continental shelf. DNO, some of you may know, is Norway's oldest oil and gas company and the first to go public. So it's a well-known company here, and there's been support for its return to Norway and not just from the government, but also from investors and some of the analysts as well. Having said that, even we've been active on the APA routes, we received -- we've been 2 or 3 or 4 or 5 large recipients of APA licenses, and we've acted on them. We've had important discoveries. So I think that's been -- we've been supported, and we've given back in terms of acting quickly and getting these discoveries made. And we want to get monetization advanced. So we will look to work and the government -- the current government has said that they want to see more of these discoveries coming on faster. So we're, I think, very closely aligned on that. And any future government, I think, will have the same interest. But what we want to do is get even more government support to act on this. We need to get into the host more rapidly, and we need more government support, not just in terms of the -- how to deal with the industry overall and the industry practices, but we could also use greater tax incentives to go in and develop these smaller discoveries, which are still important, but they just happen to be smaller. The fact that they're smaller doesn't really -- doesn't matter as much for DNO because we've taken a larger interest. We've had a larger interest in smaller discoveries. By small, I mean, 30 million, 40 million, 50 million barrels is still significant, but the developments are costly currently, and the government provides more support to us through the tax structures and so on. For the entire industry, but certainly for the pursuit and development of these smaller and medium discoveries, we will get a lot more production in Norway in the coming years and try to reverse the -- what's going to be an obvious decline in production by the larger companies today and, therefore, by the whole industry, which will start. I think, currently, DNO probably has these discoveries because the Sval acquisition is one of the fastest growing companies in Norway. And developments are going to be, I think, expected to be ahead of many of our peer companies, and that's an exciting place to be, and we want to get there. So with that, thank you, everyone. Again, I take my time responding to these questions, but I hope at least it has been helpful to you and that my colleagues can stop kicking me under the table. Thank you.

With those words from the Chairman, we'll conclude this call, and see you again soon. Thank you.