DNO ASA

Good morning. My name is Bijan Mossavar Rahmani; I’m the Executive Chairman of DNO ASA.

I’m joined at our Interim Presentation for the Company’s Third Quarter 2016 Results by my colleagues Bjorn Dale, our Managing Director and Haakon Sandborg, our CFO, who will do the presentation of the financial section of our presentation. First with respect to our corporate overview and operational highlights.

The third quarter was a strong quarter for us. It was our third consecutive quarter of operating profits and this underscores DNO’s financial recovery this year and after a couple of difficult years for the oil and gas industry worldwide and for our own company as well.

But we are pleased to have that behind us now and we are pleased at the Company's performance this past quarter and so far this year and looking forward to continuing strength operationally and financially moving forward. We've had stepped up investments in Kurdistan in 2016 with the drilling of four wells at our flagship field in Kurdistan the Tawke field.

We’ve added with these wells about 10,000 barrels a day of new production. At our current production level of about 118,000 barrels a day, the Tawke field now exceeds the combined production of all the other fields operated by the international oil companies in Kurdistan.

So we do stand apart and have a solid field performance. As those of you follow DNO and the companies operating in Kurdistan know the recent export payments by the Kurdistan Regional Government to the companies for oil that has delivered for export through Turkey to global markets.

These payments have been more irregular and sometimes it delayed, but notwithstanding this Tawke payments to date have totaled just over $250 million, $255 million to be exact of which the next share to DNO was $184 million and the balance to our partner on the field and again this is the total sum of payments received to date for 2016 sales. We continue to respond to the challenging oil market environment by focusing on low-risk, low cost really and as we said in the past by continuing rationalization of our portfolio and the shedding of non-core assets.

With respect to the operational highlights in the past quarter our production averaged just under 115,000 barrels of oil a day equivalent in the portfolio of which of course Tawke represented the largest portion just over 109,000 barrels a day on average. Our Tawke production is periodically constrained by pipeline closures in Turkey.

So that does continue to impact our daily average production levels. The average wellhead sales price of Tawke oil was during the quarter on average $34 a barrel which was unchanged from the average price in the prior quarter Q2.

And as we said before the export price is tied to the price of Brent, monthly Brent prices with a discount on the order of $12 a barrel so this is easy to calculate for those of you track Brent prices and have an interest in the DNO netback price at the Tawke field. Our Oman production represented balance of our production during the quarter and that was on average 5,300 barrels a day of oil equivalent.

In terms of the company working interest share of our production last quarter the average figure to DNO was just over 70,000 barrels a day of oil equivalent With respect to financial highlights for the quarter and Haakon will go into more detail in these numbers and other numbers. Our revenues during the quarter were just under $50 million that translated into an operating profit of $9 million for the quarter resulting in the year-to-date numbers that was our operating profit of $33 million.

Our capital investment program in 2016, we had previously given guidance on the order of $100 million. Our new projection for capital investments for the year and now down to $70 million.

We continue to strengthen our balance sheet and we exited the quarter with cash of $266 million which was up from $238 million at the end of 2015, so we feel good about that as well. With respect to our drilling activity, as I indicated we've completed four production wells in 2016 to date, utilizing two rigs.

The Tawke-31 Cretaceous the deeper well into the main producing horizon was completed at a cost of $7 million and again our drilling costs in Kurdistan have historically been low and are now lower and we certainly drill the cheapest wells in Kurdistan across the Tawke block itself. We've also accelerated the drilling of the shallower horizon in the Tawke well, the Jeribe horizon and we've had the encouraging results from our drilling program there so far.

These wells are quick to drill by any standard, if we drill these wells in 10 days they are low cost, we drilled at an average cost of $2 million. And three of these wells are now on production and contributing 6,000 barrels of oil of new production of oil a day.

And this is again a very encouraging and positive result from our drilling activity in Tawke. We separately spudded the Peshkabir-2 well in early October to appraise the both the Jurassic reservoir and to explore the Cretaceous horizon on a previously made discovery west of the main Tawke field.

This is still on the Tawke license. And at the time of this report yesterday we are drilling at a 2,000 meters, this morning we were at 2,200 meters and we expect to reach our target depth of 3,500 meters in January 2017 and we're of course looking with great anticipation and hope and expectation with respect to the results from that well, but we’ll know in January.

We have a drilling program set tentatively for 2017. The first half of the year that includes two Cretaceous wells and we are currently firming up plans for additional wells, additional Cretaceous well and additional Jeribe wells.

We’d like to do more at Tawke and there was more to do at Tawke, greater or more opportunity more that we'd like to do, more that we need to do and are also had plans earlier this year and which we now reviewing for 2017 of engaging a third drilling rig to drill additional wells. But of course as we've said repeatedly in the past, our drilling program and investment program in Kurdistan is very much driven by and contingent by receiving export payments for crude that we delivered to the Kurdistan regional government and the continuing and accelerated drawdown of our of significant receivables for prior deliveries of oil to the Kurdistan regional government.

So as revenues come in, the best place we can spend them is Kurdistan. And we will do so, but we are also mindful of the need to balance the incoming revenue with spending so that our spending is limited to the cash from our operations it's a position we were in two years ago and earlier and I would like to go back to that position, so that we spend what we earn and again our spending in Kurdistan is great, is a very capital efficient way to deploy these revenue streams.

This chart I won't go into detail on it, but it describes a bit more fully and provides a calendar for the drilling of the wells that I indicated are both [indiscernible] and contingent the contingent ones in the yellow. This is a 12-month drilling program that starts in July of 2016 in terms of what it shows and runs through June of 2017.

So indication of our current drilling program which again we would hope to accelerate revenue and received what we paid in conditions or permits. Just a quick slide and note on the proposal that we had made in the July 2016 about a possible transaction involving your Gulf Keystone Petroleum.

We had indicated at the time that we have made a proposal and indicative proposal that we have valued at $300 million that included both cash and DNO. We have set a certain limits to that proposal.

We had indicated we want the response ahead of the financial restructuring that Gulf Keystone was engaged in. That’s proposal is now expired in part because an important respect because certain conditions precedent to the financial restructuring that have been set out by Gulf Keystone itself apparently were not met and those were conditions that we have taken into consideration and both looking at this opportunity, but also in setting a valuation for it.

Since the end of July the other developments have occurred first because of these conditions precedent apparently have not been met. There are continuing and persisting questions about Gulf Keystone assets about its commercial outlook and its future rights and obligations at the Shaikan field.

So that creates certain - a lot of uncertainty, but also we've had a chance to carefully review a so-called confident persons report or reserve report issued by a third-party on the Shaikan field. We have got a chance to review that now and also based on that review the DNO has performed.

We are prepared to revisit a proposal for Gulf Keystone and there have been some indication of a preference for cash. So we are now indicating that we are prepared to consider a transaction in cash, but it would have to be at a meaningful discount to the prior $300 million equivalent followed by the shares proposal.

And of course any transaction involving Gulf Keystone would have to meet and receive approvals from the Kurdistan Regional Government and we're mindful of course of that. But we continue to believe that there are clear operational synergies and efficiencies that can be obtained in a combined DNO Gulf Keystone entity operating in Kurdistan.

Thank you and I’ll ask Haakon to proceed.

Okay. I hope you all are having a good morning.

And let's now move to focus on the financial review. To get started, I would just generally comment that the third quarter results are down from the second quarter this year and this in turn is due to the - that the recorded revenues are affected by payment delay in Kurdistan over the last two months.

Year-to-date, however we continue to see that higher revenues and costs reductions contribute to sell the profits improvements and we see a stronger cash flow compared to last year. We otherwise still actively manage and adjust our CapEx spending to make sure that investments are aligned with our actual cash flow.

And then also that we maintain our balance sheet and our financial strength. So consequently in light of the payment delays, we have deferred and adjusted some of our drilling program for the second half of this year.

So I’ll be going into this and other points in my presentation. Here for our key figures we show fairly steady quarterly revenues around $50 million to $55 million on average since Q3 last year.

As we have discussed before we recorded revenues in Kurdistan based on cash export payments and that is recorded net of payments towards past receivables that we have received from the Kurdistan Regional Government. It should be noted I think that without the payment delay that accrued in this quarter.

DNO’s net Q3 reported revenues would have been around $70 million for the third quarter and that is $21 million higher than what we show here. So that's the effect of the payment delay.

You see here that our netback cash flow is also remarkably stable around $25 million, $26 million per quarter. That reflects the stable recorded revenues and also netting out of non-cash impairment charges in the netback.

And for these quarters the other cost exploration of the cost balance out in general for this period. Our quarterly operating profit on the other hand fluctuates more and that's been really again due to the impairment charges, but I think year-to-date the improving trend that this year is very clear that we are showing much better results.

Of course we are very pleased to see that the earnings visibility and the regularity of the payments in Kurdistan have improved over the last year and since September 2015 the Tawke license partners have been paid $345 million and of that $249 million was net to DNO. Year-to-date through the third quarter 2016.

DNO’s share of payments amounted to $162 million that was split between the entitlement payments of $144 million and the payments towards receivables at $18 million. But again unfortunately in the short-term the payment delays that occurred in Q3 still then resulted in the recording of only two monthly payments in this third quarter and that's $50 million net to the company to DNO.

While the third and monthly payments of $22 million net to DNO slipped and will be booked into Q4. Obviously it has been mentioned today but also pointed out before restoring and maintaining regular monthly export payments is requirement for DNO to be able to maintain our momentum in both the investments and keeping up the production levels in Kurdistan.

There is a more detailed slide looking at our third quarter P&L. I'd like to say that other than the revenue reduction that I have discussed or something already there are really no other major P&L items or developments for this quarter.

Still I think it's worth mentioning that the lifting costs are further down in the Tawke field in Q3 and that's a level now on a per barrel basis of only a $1.50 per barrel. So I personally think that's quite amazing improving the supreme cost efficiency of this field.

Expense exploration a bit special this time it's positive by $0.6 million and that's due to the reversal of the previous cost provisions but taken on the impairment charge of $2 million against inventory in [indiscernible]. Those are the main items.

And on this basis, we show an operating profit of $9.1 million for the third quarter. Finance and tax are at normal levels and with that totally we show a net loss for the quarter of $3.2 million.

As I mentioned, we show a solid improvement in our year-to-date results the revenues are up by 20% while our cost of goods sold have been reduced by 46%. This cost reduction reflects a significant reduction in both lifting cost and DD&A.

The year-to-date admin costs that are shown here consist of salary and G&A cost and the year-to-date increase in these costs is mostly due to a combination of some one-off cost items this year and cost reversals for the same period last year. I’d like to say on a normalized basis, we continue to run an efficient net admin costs around $20 million per year.

After lower impairment charges this year, we show a year-to-date operating profit of $33.3 million and that is now up from a loss of $92.6 million last year, so there by clearly recovering from pretty weak results in 2015. And for the investment program, as I mentioned the deferral of drilling activity in the Tawke field, contributes now to a revised spending forecast over $70 million for the full-year 2016.

On a year-to-date basis, the expenditures were $29.9 million as we see on this slide, that drilling at Tawke was $12.4 million in Q3. In Oman, we have expense to $11.8 million in Q2 on the Block 36 exploration well.

Looking ahead, in Q4 the main investment projects in Kurdistan will include the drilling of Peshkabir-2 the well that’s ongoing now and drilling our Jeribe wells in the quarter as well as more facilities, other types of projects facilities work at Tawke field. Our special interest is that we are now in Oman starting up the work again at the offshore West Bukha field and this is to prepare for a drilling of a sidetrack well that will start in the December and the drilling of this the well will carry over into the first quarter next year.

And we do expect that this new well will contribute significantly to the Oman production when it is put into production. Turning now to cash flow, we show a solid operational cash flow over $30.2 million in this quarter.

And that contrary to the previous quarter, the second quarter there are only limited working capital changes now in Q3, but we did further reduce the booked local sales receivable by another $4.2 million in this quarter. With limited investments of $12.8 million and no finance activity as we can see here, we show a further increase in our cash of $17.2 million to a level of $266.3 million at the end of third quarter.

Our capital structure remains stable and we maintain our solid balance sheet with a substantial cash balances and low leverage and that's through net interest bearing debts at a level over $134 million now. The equity ratio is also stable at a solid level of 43% at the end of the third quarter.

So to sum up today, we are pleased with the solid improvement in our financial performance this year and now while we have adjusted the work program for the second half of the year, we still have important new drilling ongoing at both the Tawke field and at Peshkabir and we are stepping up drilling operations in Oman very soon. So I think we will have good activity levels and also a broad - thereby a broader new slope to follow over the next several months in our Company.

With that, I think we're done with the presentation, we’ll now prepare for the Q&A now.

Anders Holte, Danske Bank. Couple questions if I may.

First of all regarding Tawke and implications I would have to pursue is a delay on the raising the production output will have on the reserved booking for next year. And second of all bit around your thoughts on the West Bukha-5 sidetrack especially related to the expiry date of the license in 2019?

Thank you.

Good morning, Anders. Your first question was with respect to the 2016 reserves report and what is the progress towards that is that the question?

Well yes, it's more related to that - you pushed another target of lifting the outputs on Tawke from June on past New Year's. So I'm assuming this will some indication on general statement of reserves for the field?

Anders I don’t want to comment on the ongoing work that is being done and which will be completed I think by the end of the year and particularly we announced the I think the new numbers early next year, so I don't want to comment on that, but I think based on the work we've done in the field and the information we have in the field so far this year I don't think we are expecting any unpleasant surprises or pleasant surprise. I think it's the information is supportive of what we have known and what we have previously reported.

But I don't want to I get ahead of the work that's it needs to be done both internally, but also then reviewed externally. With respect to the West Bukha-5 sidetrack, obviously we've done the - we know what the calendar of the contract is and we've done a very careful look at the cost of it and the expected production and revenue and we believe that this makes a great to us economic sense to proceed.

So we have obviously considered the term of the contract as you recall from your earlier work with us and your review of DNO’s activities. The cost recovery percentage on that contract is quite high.

So the recovery of cost occurs very, very rapidly in prior year as the price of oil was higher in production from some of the wells was high, the cost recover, the cost of those wells in less than a year and that's also a factor that needs to be considered in our decision to proceed with this re-drill.

Teodor Nilsen, Swedbank. Also a question on the CapEx I guess, the CapEx reduction [indiscernible] expected, but is it possible to quantify how reduced investments in Tawke will impact 2017 production not necessarily resource, but production compared to your previous plan.

Very, very good question. Our current drilling program that we've shown as a firm, the expectation is that we would drill a sufficient number of wells to maintain production at current levels give or take.

And of course an accelerator program that we have said is contingent on greater transparency on payments and the drawn on the receivable would permit us to drill more which would hopefully if all works drive production higher. So there's a range of what our production will look like in 2017 and that's driven by how many - how many wells we drill and we will continue to do workover that easy things we will continue to do.

These shallow wells are quick and they're cheap and they have been surprisingly productive. So obviously as we can do and I expect there will be payment coming, the question is how regular and how much comfort do we have with respect to the timing and the amounts.

So I haven't answered your question fully, I don't have a firm answer, but you can certainly expect that we want to maintain production levels where they are and they don't require that much capital investment. The best place for DNO is what its money is Tawke.

There are many other opportunities we have in our portfolio or in any portfolio we can assemble quickly that will have the same return on investment in terms of both the rate and the speed. So you can rest assured we want to do more at Tawke and what Tawke produces will be importantly driven by how many wells we drill?

So at $70 million annual investment is it too aggressive to assume that Tawke production will remain flat.

The $70 million figure is for 2016?

I will not be assuming that for 2017 as well.

2017 our expectation is we’ll be spending more at Tawke, we would receive more - we continuing to receive revenues and we will invest more at Tawke.

Okay. And that’s fair.

And then a couple of actually on one question on the Gulf Keystone proposal acquisition, will that be from the - or how do you plan to fund that cash acquisition [indiscernible] minimum cash requirements on the balance sheet?

We would like to maintain a minimum cash balance on our balance sheet. I don't want to go into the details, but obviously we've thought through this and we believe we can harness the cash with which to do the transaction, but I don't want to do go into very detail this is still a proposal it's - but obviously a lot of thought has gone into it from our side and for some period of time.

And there is about looking at the value of the potential transaction to us and looking at the assets and having a plan to close a transaction should it come to pass from our side. So rest assured we have - we feel comfortable putting this forward and also that we will want to maintain a minimum cash balance on our balance sheet this is important to the company to the Board to Executive Management, because the continue uncertainties in our markets we think the worst is behind us.

But there is a surprise a day later surprise yesterday the U.S. elections so we’ll be mindful surprises do happen and the biggest surprise would be no surprise and we want to be prepared and we've been conservative in so many respects at DNO in the past and one another level of conservatism is to make sure we have a cash cushion in the company to get the right off some of these short-term shocks if they occur when they occur.

Okay. Thank you.

Henrik Madsen, Arctic Securities. Three questions if I may.

Firstly, you mentioned 4,000 barrels per day roughly production from the recent Cretaceous well and roughly on average 2,000 barrels per day from Jeribe wells is that a representative level of production expected for new wells drilled into 2017 and onwards as well? Secondly, there was some talk on marketing and exporting oil independently from each company some time ago is that still something that's being discussed in terms of - potentially also improving revenue streams directly to DNO.

And lastly I was hoping you could comment some on recent reports that really the risk of instability in the region is potentially higher post-ISIS and pre-ISIS as parties normally opposed to each other have come more together during this period. And the risk is sort of post-ISIS.

Thank you.

Thank you. On the well rates - I think all I can say is that these rates are the rates of these wells, the Tawke Cretaceous wells have - productions have been all over the place from 2,000 barrels to 20,000 barrels or more and each well is a bit of a surprise and each well is different.

So I can't say that the 4,000 barrel a day rate of the latest Cretaceous well is indicative of well production rates moving forward. It could be higher and it could be lower that happens to be the rate on this particular well.

With respect to the Jeribe wells again that's an average of 6,000 barrels for three wells. That doesn't mean each well is producing 2,000 barrels a day one well is producing much more as I think we put in our press release today it's 3,000 barrels may be bit more and we are at the early phase of the production of these wells and we're learning more about them, so we'll see whether these rates are retained and for what period of time.

So we're learning more about the Jeribe, but so far we've been very, very pleased with the results. Again these are wells we're drilling into several hundred meters.

These are wells we are competing in 10 days at $2 million, I mean this is terrific. As I think we said in our press release 3,000 barrels a day that's about $3 million a month worth of oil for well that was drilled for $2 million, so these are terrific results.

We hope to learn more about these wells and the performance and about the reservoir, but so we're quite excited about the Jeribe contribution. We've known about the Jeribe in the past, but we are focused on the deeper Cretaceous and we didn't have the service facilities in place to deal with the Jeribe oil, but we do now.

But what I can say is that each well will be different and some will be surprised on the high side, some will surprise on the low side. But as you look at the history of the Tawke field and look across the wells you get some indication of how this field does.

And this field again is by any standard the giant oil field, the wells are very, very productive, the cost of drilling for DNO has been low by all standards, we focus on operational excellence in Kurdistan, we have a track record that no one else has met in terms of its operational excellence, in terms of the cost of drilling, in terms of the efficiency of operations. We are very proud of our people and of our operation, so this is all the terrific what we like to see far greater production yes and some of that is related to the field, some of that is related to how much we invest and how much we invest is driven by the incremental revenue.

With all the problems of Kurdistan revenues have been coming in and will continue to do so, but this is a challenge, this a challenge driven by reasons everyone here understands about the geopolitical situation, ISIS. So I'll jump to your third question about ISIS.

The ISIS threat is expected to go beyond the region and as these victories occur in Mosul and other locations as an expectation that people write about these things, think about these things that some of these forces will now become a post event and increasing threat externally. That's a global issue.

With respect to DNO and its operations, the ISIS threat was real when it first occurred, when ISIS first came to the Kurdistan, it didn't affected our operations, but as you know a lot of oil companies left, we stayed, that we thought we could manage that risk by having contingency plans and so on and we continue producing. We’re the only company that stayed and produces because we felt we could manage that risk with a reason by putting into place and have security.

We remain on alert, we continue to have enhanced security in place, but we feel that our people are safe, our operations are safe. I go to Kurdistan myself regularly; other members of our management team go in.

I was in Kurdistan several weeks ago. So I feel it’s safe enough under the circumstances for me and therefore I don't feel that there is a security risk to our people that I have not personally and my colleagues personally prepared to take, but we can anticipate every possible outcome, but as ISIS is pushed out of Iraq, obviously the region becomes safer for the international oil companies.

So I think that's positive from our point of view operating in Kurdistan, what it means within the larger region and beyond the region is a very different matter. With respect to independent sales, we have always sold Tawke production; sometimes it's been to the local market, sometimes very, very large volumes, and other times to the external market through Turkey.

Obviously, pipelining these volumes of oil is cheaper per barrel than putting them in trucks, tanker trucks and moving them. We are getting a better netback price for crude today than we would - I expect yet from tanker sales.

And as long as that's the case, as long as we have a higher netback price for the oil, higher price per barrel and as long as we're getting paid. That is the better way to go and as long as that pipeline is available indicated of in times as you know that the pipeline has been shutting for different reasons.

And when that happens if it's on a - we first fill the tanks and once we can’t fill the tanks anymore we then shut in wells, start to try to get the wells and the field if necessary. If these disruptions to the pipeline for whatever reason whether it's a security issues or other issues.

If it's on a prolonged basis both we and the Kurdistan government want to see revenues from that shutting production, our oil and other oil and other avenues would open up. The local sales avenue is a proven avenue and again local sales doesn't mean to local refineries it means to the local buyers who tend take this oil and move it in many different directions and some of that oil find its way to international markets rather through other channels.

That isn't available channel. What we'd like to do as we've said this before is to have direct access to the buyers or the crude whether it's at Turkey, that Shaikan or whether it's through the local tanker movements that is something companies are expected to do and required to do under contracts.

Government stipulates a lot of the business setting oil on behalf of the companies, companies do it because they know how to do it, well they've had better prices and it's a reformed under the contracts. The situation in Kurdistan has been a complicated one because the pipeline through Turkey has - there are political commercial other factors that have - as a result of which our pipeline has not been available as a common carrier to commercial companies, perhaps those conditions will change.

But we would like to be able to sell the oil directly and are required contractually to do so whether it's a Shaikan or another location in Turkey or in some other country or including in the Kurdistan itself that’s want we want to strive to. That will give us greater control over the timing of payments.

It allows us to get back contractually on where we need that to be. We believe can get a better price as a result and that will happen, but that's very constrained because of geopolitical security and other political conditions in the regions.

And I think we're moving towards resolution of some of those hopefully, but there may be other surprises. What I can assure you it's not something that DNO want to see or the governments want to see that top new fields which is as I've said the largest contributor to Kurdistan in terms of the international oil company's revenue stream.

It's not in anyone's interest for that production not to be sold into the market.

Okay. Thank you.

Trond Omdal, Pareto Securities. You're talking about adding a third rig contingent on regular payments.

Can you shed any light on how many monsters that have to be or have you put on the requirement that you catch up so that I mean you've increased the delay now due to the [indiscernible] in the downtime on the pipeline. Is that one of your contingencies and what could we expect, is there any chance that you'll be able to catch up in the fourth quarter.

So you get full payments or is that three payments we can expect. And if you add to third rig, what would be the plans to drill deeper Tawke, what kind of scenarios are you looking at for the third rig?

Trond it's very difficult to answer your first question in terms of - it was two parts. I think the second part was when do you expect the next payments to come.

I can't answer that. There was a plan in place.

Those would place in February where we would invoice at start of every month for the prior month and we get paid within 10 days. That worked for a while, but Kurdistan's ability to make these payments is driven by how much revenue - in part by how much revenue they receive.

How much revenue they receive is driven by how much oil sold into Shaikan and what the price of oil is and those numbers seem to change sometimes weekly. With the last arrangement between Baghdad and able to split part of the area production between SOMO and the Kurdistan Regional Government.

Production and our sales by Kurdistan have moved up I think couple of days ago the figure was on the order of 650,000 barrels a day going into that sales channel and even at current Brent prices that’s more revenue than Kurdistan was earning previously. They understand very well that to maintain these production levels maybe even move them up a little bit.

The international oil companies need to invest and the companies have now said, we say with one voice we can't invest unless funds are coming in. Part of that because the companies operating in Kurdistan tend to be smaller and medium sized companies among the international companies operating in Kurdistan DNO is now the largest by far company in terms of its market capitalization we weren't three years ago, we are today so the other company.

But even we have to manage our cash position carefully and even the largest companies the majors are having withdrawn from Kurdistan or have certainly hit the brakes on their operations because some of these uncertainties, it’s not just because we’re smaller and medium size all companies in Kurdistan are very concerned about payments issues and the larger context. The government understand this, they understand that we have to receive revenue and that we will deploy that revenue to increase production.

When we increase production four-fifths of it or two-thirds of it depending on contracts and so on go to the government. It's in their interest for us to invest they can do it themselves.

They don't have the financial capability the management setup, the technical capability to do this we have to do it as companies they understand that and we will do it when we have certainty of payments without certainty means we get paid that 10 days after the end of every month or whether we get paid 45 days at the end of the month is an issue that we have to watch very closely. But we have to keep reminding them that we need revenues to be able to create revenues for them as far ourselves.

But each month the situation is a bit different it depends on the oil prices and how much oil is going in and how many days of pipeline will shut in - and for what reason. So it's hard to answer that and you have to give us the room to make those judgments internally.

We're in the regular contact with the government either our people on the ground or ourselves, I am in touch sometimes strange hours of the night, on weekends. But you have to assume that we - but also the other companies operating there are regular discussion that we follow the production from the other fields, we follow export loadings, as with some of our shareholders and they share that information with us and we're grateful for that.

So we're watching and we have to make some judgments, it’s not always based on very specific criteria, but on judgments as to this, but we feel good about it. Again even in the most difficult times of Kurdistan DNO has been there for over 10 years now, there have been difficult times, but for different reasons, but always revenues have been coming in, that have allowed us to make the investments and to sustain the business.

So it will happen, but we have to be mindful of that not to get ahead of ourselves, we're making commitments, taking on rigs and drilling without the certainty that the payments will be there to support it. So how many wells will be drilled in the next year?

How much of our contingent program will become firm? And how many other wells we add to the program will depend on some of these factors again which are fast moving, but carefully watched.

We want to do more. A heavy rig would allow us to drill the deeper wells into the Cretaceous which we want to do, we need to do.

We have a heavy rig now drilling at Peshkabir, if the Peshkabir well - Peshkabir-2 supports a more rapid development of a commercial size discovery than we want to drill more wells. A heavy well rig would be required to do more drilling at Peshkabir, maybe a couple more wells next year.

The third well, the current well, the reverse well is the DNO owned rig. This is the rig we use for workovers after drilling the Jeribe.

So we have our own well, it's available to do workovers in Jeribe. We have now a heavy rig drilling Cretaceous wells on Peshkabir and hopefully with more visibility uncertainty on payments which could happen because the price of oil goes up.

OPEC has a lot of push, within OPEC they raise - cutback production to raise the price. If the price of oil goes up to $60 a barrel, which is not inconceivable, who knows, but if it does that means Kurdistan’s revenue now would jump up significantly 30%, 40%, 50% that would be a big boost to their ability to them pay the company.

So we will have both the direct impact of higher prices, but we will also have the indirect impact because Kurdistan have its ability to meet its obligations to us both in respect to ongoing payments, but also in terms of pulling down our receivable. Their capability to do that would increase, so we benefit both ways from higher prices as the way we've been impacted both ways by lower prices will grow revenues to us, but lower ability on the part of Kurdistan to meet its own obligations internally, but to the companies.

Just one follow-up because as you said September and October exports have been significantly better, and in September KRG reported paying back $180 million to the traders in Shaikan. So is the fact that they pay that.

Is that the reflection of the current levels of exports and revenues KRG is able to cover their own expenses and then some. And then second is that reflection that they will continue to prioritize the traders ahead of the international oil companies when they have surplus cash.

Kurdistan needs both, the need the traders to pick up the oil and that good prices and sell it. But the traders have also provided a service in a sense of extending payments upfront basically short-term loans and those loans I would expect to carry interest and the government is mindful of the interest component almost loans and trying to service not to keep the traders lifting the oil.

And if the traders aren't getting payments I would expect then they would want to offer a bit. They would demand the greater discounts.

So more regularity or payments means that discount would be reduced. But at the same time on the other side of this and without our oil there is no oil to give to the traders at least with respect to the fields that are operated by the international oil companies.

And also our receivable carries interest as well. So I'm sure the Kurdistan Government has to weigh these, but their relationship with us is long-term with the traders it's short-term.

Sometimes it's for cargo. But we've been there for more than 10 years, we will be there for another for decades and so long to relationship which means it's a partnership.

That's more enduring and the two sides are more mindful as to how to manage a longer-term partnership which involves investments. And people on the ground that originally were traders who are they say it sort of a hidden run sometimes, sometimes there is more enduring relationships, other times it's on per cargo basis or a month basis.

So they're trying to manage this, but in fact it shouldn't be the role to do this. The dealing with traders is the role appropriate to companies not to governments.

And we expect as normalization continues we'll be in that position to do that. The government will step out of the way and that we will be doing this because we believe we can get better pricing and we can maintain normal commercial relationships with the traders.

And again as normalization continues, we hope to get there. We were on a stronger path a more rapid path towards normalization a couple of years ago until ISIS came along and then everything was turned on its head.

But that issue is not being addressed we hope to get back on normalization that’s critical for Kurdistan. It needs to be a normalized place.

So oil companies will come in and will make commitments and expect to get the returns that are baked into their contracts, so normalization is a good thing. It's been disrupted, but we hope to get back on that track in time.

Okay. And I think we need to say thank you for today and look forward to seeing you next time in January and February.

Thank you.