DNO ASA

Good morning, and welcome to DNO's Second 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 August 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 a Q&A session.

And as always, shareholders first, but analysts are also welcome to ask questions. Please -- press questions will be dealt with afterwards.

[Operator Instructions] With that, let's get started. I will hand over to Bijan.

Good morning. Thank you, Jostein, for that introduction.

Before we start with the presentation of the operations -- operational results, financial results for our second quarter, I just wanted to say a few words first of welcome and to say that we have had, of course, for those of you who have had a chance to see the release or the reports this morning, we've had a very, very exciting second quarter at DNO on the back, importantly, of the acquisition of Sval Energi and the bringing together of our assets and our teams. We've had now tremendous results in terms of revenues, in terms of operating profit, in terms of production, in terms of reserves.

And it's really truly been transformational for the company, and we are all very, very excited. Those of us who've been in DNO longer and the new colleagues that have joined us from Sval.

It's a terrific combination of assets of people, of mindset of strategic redirection of the company, importantly, with an even stronger emphasis on distribution of dividends to our shareholders. Those dividends announced today have been, now the quarterly dividends have been increased by 20%.

I think that's a reflection of the confidence we have in the company, in our results and our results moving forward and the growth path that the DNO and the growth trajectory that we are on. Post the quarter, we, of course, had an unfortunate drone attack on our fields in Kurdistan, and these are not just limited to the DNO's fields, but other fields.

It's -- we were all very lucky, very blessed that no one was injured and that there are no casualties. But of course, there were damages to our facilities and our operations, and that's a setback.

It will take us some time to recover in full, although we have started to -- the Tawke field, as we have previously reported, is now back on production. The damages that were limited to one of our storage tanks or storage tanks at our other field, the sister field, Peshkabir, there was damage to facilities, service facilities and importantly, to 2 of our coalescers, which deal with water treatment and removal from our -- of our crude stream.

I was -- I've had an opportunity to visit our facilities, our fields in Kurdistan and meet with our teams there. And we decided to -- on a test basis, open up the number of the wells and see the condition of the pipeline and how the wells would react and how the facilities could be at least on a test basis, tweaked to allow us to start moving oil from the Peshkabir field to our terminal and bring facilities for sales to the local market that we've been doing as well.

The ramp-up has been impressive, although we've been very cautious in terms of which wells to open and how rapidly to open them to make sure we don't trip up during this test period. But we have already ramped up to about 35,000 barrels a day from the Peshkabir field, which combined with 25,000 barrels a day from the Tawke field puts us -- at the time of our release, we were at 55,000 barrels a day.

This morning, we were at 60,000 barrels a day. Again, I caution that this is on a test basis.

Permanent repairs will take time. And of course, we have a difficult security situation, and we will keep a very close eye on that.

And as the -- if there are additional security threats in -- we will, of course, revisit our operations. But for now, again, the good news is that there are no casualties, no injuries and also that we are recovering -- begin to recover from the shutdown of the fields and back producing.

We'll also talk a bit more about what plans we have to resume investments in these fields to try to get production up. We haven't drilled any wells for the last several years.

We've maintained production at about 80,000 barrels a day through tweaks, through workovers, but drilled no wells. And we are now confident enough in our revenue stream currently from the local sales to begin to invest and to raise production, not just to pre-drone attack levels but to the levels we had before the shutdown of the Iraq-Türkiye pipeline.

So with that quick introduction, I'll ask Chris to start the presentation and the slides.

Thank you, Bijan, and good morning from Oslo. So Bijan has touched on the key points of the quarter.

And it's -- as you said, it's a very exciting quarter with the completion of the transformational acquisition of Sval Energi. And therefore, this is the first quarter where you start to see the impact of the acquisition on our results.

There's only 1 month of the quarter included, as we say here. But as you'll see throughout the presentation, that makes a big difference.

And at the top line, it's a huge jump in revenue, 37% up quarter-on-quarter, and that's despite us being in the summer shutdown season in the North Sea. At the operating profit level, also a huge jump of 200% to $86 million.

That's on the back of increased production across the portfolio and that was obviously flowing through into those revenue and operating profit figures. Also during the quarter, we continued the refinancing of the balance sheet on the back of the acquisition.

We discussed that both in the presentation that we did when we announced the deal and in the last quarters that we are trying to put in as effective financing package as we can. And we made great progress during Q -- just before the last quarterly results when we came out with DNO06, our $600 million regular bond.

During Q2, we put in place the $400 million hybrid bond, which is new for us and relatively new product in the bond market. It is treated as equity on the balance sheet and it is covenant free essentially and gives us a lot of flexibility in the balance sheet.

Since the end -- and then since the end of the quarter, in July, we are very pleased to agree a gas offtake and financing facility arrangement, which provides $500 million of liquidity at interest rates well below what we've achieved in the past. Operationally in the North Sea, the highlight was yet another discovery in the Vidsyn prospect, which is very close to our Fenja producing field, a very nice discovery there, could be easy tieback and is clearly commercial.

And then happily on the back of the transaction and view going forward, once again, our Board of Directors have felt that we're in a position to increase the dividend. That is as last time we increased overall assessment of the sustainability of that type of dividend level.

And as you know, we are splitting our shareholders, prioritizing our shareholders. And so we're very pleased to be able to share the success of this transaction by increasing the dividend.

Next slide, please. So we move to first the Kurdistan side of the business.

And as we mentioned in the quarter-on-quarter, we had a little bit lower production on a gross basis. A lot of that was due to some disruptions in the local market.

But of course, the quarter has kind of been put in the shadow by the events that Bijan touched on, where we -- for the first time in our 23 years of operating in Kurdistan were hit by drone strikes and that was really a watershed moment for us, unfortunately, in the region. Thankfully, no individuals were injured, but we did sustain some quite serious damage to processing equipment, particularly at the Peshkabir side.

So we're working and the teams are back to work now. Of course, it took us a bit of time to assess that it was actually safe even to go back to work.

And it's unknown to us who launched these attacks. So it's very difficult to put your finger on why we were targeted, which leaves one with a lingering security concern.

Nevertheless, we are back to work. We've made changes to our operational procedures.

We've put in place passive protection measures and our people are happy to go back to work. And we're now back on stream as Bijan outlined in his introductory remarks.

We see this as a test basis, both with respect to the security situation, but also the pots and pans of our hardware, which obviously, we've tested before restarting, but you never quite know until we operate in hot mode as we call with oil and gas running through it, what damage may have been hidden from these attacks and the pressure waves that go through the equipment on the back of such an event. We will turn to the final point.

We've now been in the local sales environment for 2 years or so. That has been working very well.

We've maintained strict capital discipline and the team has done a remarkable job keeping gross production up at around the 80,000 barrel a day mark. If these conditions continue, we are now planning to get back to drilling, and we hope that we can ramp up production with a target of getting back to the pre-shutdown levels.

Next slide, please. Moving on to the North Sea business.

And I guess we'll be repeating this over and over in the presentation that, again, the impact of Sval can't really be overstated. Here's the production chart that shows the difference of our DNO portfolio we had in the North Sea or we have in the North Sea before and after Sval.

Now that is -- of course, everyone quickly puts that in the past and starts to look at the future. And the future is also bright.

So the red wedge where we're bringing contingent resources into reserves has already started. That's the point of the comment about the Maria Revit or revitalization project that came on in May.

We've got an interesting second half coming up with new projects coming in the Norne area. And then we have 6 ongoing developments that are expected to come on stream in the next 4 years, which will help us keep this 80-odd thousand barrels a day of net production to DNO in the North Sea.

Then we're working on the next wave, which is the [indiscernible] discoveries here, which we are hoping can get to project sanction in the next year or 2 -- sorry, during the next '25 and '26, as I said on the slides. And then we have our rank of our own operating discoveries we're working on.

So really opportunity-rich in our North Sea portfolio. And we are going to have to make tough decisions and high-grade our portfolio.

We're happy to be in position of being able to make [voice] both in terms of our exploration opportunities, but also probably the projects we sanctioned in order to pick the best ones moving forward. Next slide, please.

Coming back to exploration, another lovely success with the Vidsyn that I've already mentioned, puts us a hit rate of 3 out of 4 this year. And -- but still, I guess, the standout is our Kjøttkake operated discovery in Q1, where we not only drilled the discovery well, but drilled a near horizontal sidetrack to appraise the discovery at the same time, putting us rapidly in -- putting us immediately into a position to work on serious development plans, and that is ongoing now.

Looking ahead, I am very excited about the Page well. I have my fingers and toes crossed on that one that I think the rig is moving into position today, whether -- if the weather calm down, and we should be studying that well next week.

So looking forward to that one. Next, please.

So as we're rolling up our sleeves on the integration of our 2 businesses in the North Sea, we thought it would be useful to set out the key priorities that are guiding us as we put the new business together. We've got tremendous growth initiatives.

At the same time, we want to make sure that as we go along, we are generating sufficient cash flow both to service the debt that we have, but also to maintain the dividends out to our shareholders. And obviously, we believe that, that will provide us with sustainable ability to service the dividend increase that we have announced today.

We've had tremendous success with the exploration drill bit. We've talked about that several quarters that our focus now is to reduce the time from discovery to investment decision and first well on the NCS.

Happily, we have -- there are other companies in the industry that are like-minded. And I think we'll see the whole industry working on this, and we intend to be a leading player in that new approach to developing discoveries.

We've got a lot of high grading to do with the combined portfolio. That's going to be a key focus in the next month.

And that's going to be combined with working on additional growth both through drill bit and bolt-on acquisitions. We've talked a lot in the past about the financing cost synergies, also the operational synergies of the Sval Energi acquisition.

And those are clearly a key focus as we put the organization together. And last but not least, we need to combine the 2 companies, the legal entities of Sval and DNO.

That's a requirement in Norway, but it is also a key step in realizing the tax synergies that we can get by combining the strong positive cash flow from the Sval portfolio with the investments that are being made in the -- from DNO portfolio. Thank you.

Next slide. Okay.

That's my segment. Over to Haakon to take you through the financials.

Yes. Thanks, Chris, and thanks again to all of you on the call for attending our quarterly presentation today.

I will now do a brief review of our Q2 and year-to-date financial results, but let me also first start by commenting on the strong progress we have made so far this year. As you have seen and as we have discussed, the Sval Energi acquisition clearly transforms our operations and financial outlook through much higher North Sea production, and that will lead to a very substantial increase in our future revenues and cash flow generation.

But to close this acquisition, we have also put our substantial cash balances to good use to pay for the shares in Sval, and we have successfully refinanced most of the debt in both DNO and Sval through a series of capital markets transactions, all done this year. The outcome of these transactions is a much transformed capital structure in DNO with a long-term maturity profile and with access to new and diversified funding sources.

And while we have moved to a net debt position, it should be noted that our leverage is still fairly modest compared to many peer companies. So again, we are very pleased with these significant achievements and the repositioning and strengthening of DNO in many respects.

Okay. Let's now focus on the key Q2 P&L results, where we show revenues of $258 million.

That's up from $188 million in Q1. This revenue increase was mainly driven by the inclusion of Sval in our accounts for 1 month only for the month of June with some offset -- actual offset from both lower oil and gas volumes and prices in Q2 for the other North Sea assets.

The Q2 revenues were split between $204 million for the North Sea and $54 million from Kurdistan. On the cost side, our lifting costs and DD&A increased in Q2 with the inclusion of Sval, but expense exploration was reduced with no dry wells in this quarter.

We thereby show a significant increase in operating profit to $86 million in the second quarter. We have an increase in net finance expense in the quarter from higher debt, but tax expense is also high, mainly due to changes in deferred tax.

On this basis, we end up with a net loss of $7 million in Q2. Next one, please.

We move to cash flow and with higher revenues, we show a substantial increase in EBITDA in the second quarter. That leads to a strong increase in our cash flow from operations to $135 million, up from $100 million in Q1.

This is also net of $24 million in negative working capital changes in Q2. Otherwise, we had a North Sea tax payment of $114 million for the acquired Sval assets in Q2, and we will see an increase in NCS tax payments now going forward due to the strong earnings from the combined North Sea portfolio.

Net investments were high in Q2 at $294 million, mainly driven by the $450 million in cash consideration paid for the shares in Sval, less $259 million of cash held in this company at the acquisition date. Other investments include $96 million for North Sea development projects.

As you can see for finance, we had a net outflow of $412 million in the second quarter as we repaid $1.050 billion in bond debt, RBL and prepayment financing. This was partly offset by the new hybrid bond at $400 million and a bank bridge facility at $300 million.

Further, we also paid our quarterly dividend at $30 million in Q2. So primarily due to the high investments at $294 million and the significant net debt repayments on a cash basis at $350 million.

Our cash balances were reduced by $685 million to $788 million at the end of the quarter. When you look at this movement in cash balances, it should be noted that we had a very high cash position at the end of Q1 that came after we completed the $600 million DNO06 bond in March.

And then the proceeds from this bond have as planned been used to cover debt repayments and investments in Q2. We move to the next slide.

And as I discussed already, our balance sheet and capital structure has been substantially changed in Q2 through the Sval acquisition and the financing transactions. And for this reason, we thought we could do more detailed explanation this time of our changes in the capital structure.

And we look at this table and start at the asset side. The acquisition leads to a materially higher property, plant and equipment value at $2.7 billion.

That's up from $1.2 billion in Q1. Goodwill, as you can see, increased significantly to $1.4 billion.

Most of this is a technical goodwill at close to $1.1 billion. That comes from the requirement to recognize deferred tax liability on the difference between the assigned fair value and the tax base of assets acquired in the acquisition.

On the other side of the balance sheet, equity increased to $1.4 billion in the quarter through the $400 million hybrid bond as this bond is accounted for as equity due to its unique features. Under interest-bearing liabilities, we redeemed the $350 million remaining balance under the short-dated DNO04 bond in Q2.

And this was, as mentioned, with proceeds from the new DNO06 bond that we completed in Q1. For our bank debt, for RBL debt, we had $80 million outstanding at the DNO RBL at the end of Q1, and we assumed $522 million of RBL debt from Sval in Q2.

Further, we repaid all of this RBL debt and canceled the facilities with an amount of $602 million in combined RBL debt at the end of the quarter. So that's all now repaid.

Further, we assumed $446 million in prepayment or offtake-based financing from Sval in Q2 and reduced this by $98 million to $348 million at the end of the quarter. And finally, we added that $300 million in the bank bridge loan.

And all in, interest-bearing debt increased by $219 million to $1.6 billion at the end of the second quarter, as you can see in the table. When we move to deferred tax liability, the increase -- sorry, go back again.

In Q2, as mentioned, primarily due to the difference between the fair value and the tax base of the acquired assets. The income taxes payable at $420 million mainly include the NCS taxes due for the Sval portfolio for 2025 and also tax provisions for prior Sval transactions that are covered by tax indemnities.

And the other liabilities at $1.8 billion, consists mainly of long-term asset removal obligations and also short-term trade and other payables, and you will see that detailed in our quarterly report. In summary, we have had a very busy and successful first half of this year, and we have carried out many of the steps in our extensive financing plan for the Sval acquisition.

And naturally, following the significant acquisitions, we moved to a net debt position at the end of Q2 at the level of $860 million. But importantly, using a pro forma first half 2025 EBITDAX on an annualized basis, our net debt-to-EBITDAX leverage ratio is still quite moderate at 0.5x, thereby maintain the modest net debt level that I mentioned, but also relative to earnings in the enlarged DNO group.

Further in July, as Chris mentioned, we announced the completion of the DNO North Sea gas offtake agreement with the related $500 million financing facility at very attractive terms. This facility will be used to refinance existing DNO debt and also to lower our cost of capital and will be an important part of our future debt financing.

I could mention also that in addition, we have already repaid $150 million of the $300 million bridge loan in Q3, and we will continue to reduce debt levels and optimize our capital structure going forward. Fine.

And on that good note, I will now hand back to Chris to complete our presentation today.

Thank you, Haakon. And it's great listening to you actually because it takes us back through all of those transactions.

And as you say, we're very pleased with where we sit today and the extent to which we've implemented the plan for financing the transaction. Still some optimization to go, as you say, and an important step of that was to make the first $150 million repayment of the bridge loan, which, of course, is a bridge loan.

It's to bridge during our financing project. And we hope to see the next steps on that by the time we're sitting here in 3 months' time.

I mentioned -- I repeat the point on the bridge loan because, of course, that's also in the Board's mind when they decide to increase the dividend. We are, as always, conscious of our need to service debt as well as provide an attractive return to our shareholders.

But the shareholders are our priority. And since we have the cash flow to manage the debt that we have, the Board was happy to increase the dividend by some 20%.

And we now have a very nice track record of shareholder returns building up that we can proudly show in these presentations. And although there's been a bit of fluctuation due to exchange rate in the last 5 quarters, you'll see that we've had a nice increase over the last couple of years in the dividend level also.

Next slide, please, because the final point made on the slide I've just moved on from was around streamlining and trimming expenditures. This is a good illustration.

Once again, the transformational impact of Sval hits on every metric, including operational spend. And this is where we will be generating synergies going forward '26 and beyond.

Of course, we start off as every company, we have the revenue we generate from our assets. We have to pay OpEx to get that revenue.

And at the corporate level, we have to pay interest and so forth on our debt. After that, we have our choices to make between expect CapEx -- reinvestment in the business, expect some CapEx and dividends.

And that is the optimization process that we're working on as we integrate the Sval portfolio. Then to close the presentation, a quick outlook.

Obviously, the biggest thing in the next quarter is going to be that Sval will be integrated for the whole quarter. So that's going to make a huge difference to all metrics.

Operationally, we're looking -- we're expecting to have a better second half in the North Sea than even we had in the pro forma first half as we bring on these new developments. We're hoping we're guiding 80,000 to 85,000 BOE per day through H2.

We talked in some detail in Kurdistan. As we say, we resume near normal operations at both the fields now.

And we hope that we'll be able to maintain that, but that depends on how the equipment performs and how the security situation develops. And lastly, which I've already mentioned that we've taken the last couple of steps of the plan that we have in place for financing the Sval transaction and the aim of this will be to reduce the cost of debt that we have going forward.

That concludes our presentation. And do we hand back to you for Q&A, Jostein?

Thank you, Chris, and thank you, Haakon, for the presentation. And at this stage, I think we are ready to start the Q&A.

[Operator Instructions] I put this exciting new illustration on the screen. So to set the tone.

No question raised so far, but I'll give you a couple of more minutes. There are a lot of attendees, more than 200 people listening in today, which I believe is a new record.

[Operator Instructions]. So I'll have [Satya].

Yes. Thank you, everyone.

I think it's a great presentation, and you guys are performing very great. Myself is Satya, I'm from a retail investor in Oslo.

And I'm very great fan of how the company is performing. A quick question for me to the export pipeline opening possibilities coming quarters.

That's my question.

Let me respond to that. Yes, there's been a lot in the press about the ongoing discussions between the international oil companies, the government of Iraq and the government of the Kurdistan region.

And as for those of you who follow these, you'll note that those discussions have intensified and that there's been some agreements, broad agreements on what a reopening would look like. Those discussions have not been concluded.

But so far as DNO is concerned, our position is clear and it's been stated many times. We would be thrilled and excited to participate in a reopening of the pipeline through Turkey and access the global markets.

But we've also said that there are a number of conditions that we have. One is that there'd be certainty of payments to us under any new arrangement.

They have -- these issues are not new, some 10 years or so ago, much the same dynamics were at play. We participated in exports, and we were not paid in full by the exporting entity at the time, which was the State Oil Marketing Organization and bank debt, but also the Kurdistan regional government was part of those arrangements.

But due to a lack of firm arrangements at that time, DNO and the other -- many of the other intangible companies were not paid, and there are still significant sums outstanding from that period. We've also had -- during the COVID period, we were delivering oil to the Kurdistan regional government forward sale.

And because of the economic difficulties at the time, we were asked to agree to defer payments or receipts on our part, payments to us, and we did so, and there are still significant outstanding receivables that we fully expect to be paid and the government at the time and repeatedly since then has said that these arrears will be covered. So we're looking to have firm arrangements in place where there is certainty of payment to us for our contribution to the pipeline.

Our production in Kurdistan historically has been and will soon be the highest among the international oil companies. I believe among the international oil companies, we represent 40% of the production in the Kurdistan region.

So we are key to the full export of Kurdistan produced oil. We would be again, thrilled to be part of that, but we don't want to repeat the situation in which we deliver the oil but aren't paid correctly according to our contracts in a timely fashion and in full.

So that is a requirement on our part. Another requirement is that we revisit the issue of the arrears.

The payments that were not made to us in the first period that I'm referring to on the order of $300 million. And our payments -- our arrears from the COVID period are a similar sum.

There have been other arrears during the ISIS crisis. Those were paid to us by the Kurdistan mutual government at the time in full.

And we're always confident that we would be paid, and we're still confident that we will be paid. These areas will be addressed.

In the meantime, we have been, as Chris also referenced, successful in working with the local Kurdistan traders in moving our crude at a discount to international prices, but at prices that still allow us to cover our operating costs and with additional free cash to DNO and to the contractor and to our partners like Genel Energy. And based on the successful implementation of those local sale arrangements, we are prepared to increase our spend on drilling of wells.

As I mentioned, I was in Kurdistan several days ago, met with our subsurface and operating teams, and I've asked them to dust off our drilling program and to identify where we would drill and how much we'd hope to recover. And my hope and my expectation working with our very, very strong team is to restart drilling and get us back up to the pre-pipeline closing levels several years ago of 100,000 barrels a day from the Peshkabir and the Tawke fields and to do so, again, on the back of local sales.

If we -- if the pipeline reopens and we participate in it, we expect that our revenue stream based on our production sharing contract, which ultimately is the only fiscal framework for our sales, whether we sell the local market or the export market, we would expect with the opening of the pipeline for our revenue stream to be significantly higher. And on the back of that, we would hope to do even more in our fields and our license in Kurdistan.

So we're hopeful all these export discussions will come to a quick fruition, but they must be done in a manner with respects to our contracts, activity of our contracts, our contract terms and addresses the areas that need to be addressed to satisfy our requirements to participate in the export of our oil through the pipeline under the arrangements that have been discussed and appear to be close to being finalized, but have not yet been finalized, but we hope they will be finalized. We hope that they will -- that the structure will be such that our very, very legitimate and clear requirements will be met and be part of that program as well.

Okay. If there are no further questions, then I think we wrap up our -- last question coming in here from Mehmet Dere.

This is Mehmet Dere from Deutsche Bank. Just a few questions.

First, on the export, which you have just recently mentioned on the production levels of 100 kilo barrel. If you were to increase the current levels to 100, what kind of additional investments would you need here?

And then the second question on this one, given that you are just at the moment, ramping up production in the Kurdistan region of Iraq, and I guess you are doing some repairs at the Peshkabir field, do you expect any disruptions -- production disruptions in the coming quarters?

On your latter question, Dere, you're asking me if I expect any more drone attacks? I hope not.

No, no, not drone attacks, don't get me wrong, sorry. Any -- because of the repairs, are you expecting any disruptions in the field production?

I don't know. We are still examining what repairs need to be done.

We know what facilities have been damaged. There may be other parts of the system that have been damaged that we have not yet identified, as Chris mentioned.

So that's why we described this as a test production period, certainly at Peshkabir, and we'll see how well we can sustain production at this higher level, which is still not the full level that the Peshkabir field can produce at. So we're proceeding cautiously.

I mentioned that hope we don't have any more drone or any other attacks or surprises of this nature, but we are in a better position now to protect our staff. We have fewer people in the field.

We've erected some concrete barriers and some enhanced security protocols to protect our people. That's our #1 priority.

And as we look at repairs and at drilling, we will keep security very much in mind. The repairs at -- either replacements or repairs to our coalescers, which are the principal equipment that we've identified as having a damage.

It's very visible. That will take quite some time to locate coalescers and then bring them and install them.

That will take some time. We've done workarounds around the coalescers using other temporary fixes that we felt were safe.

We focused on opening up wells that have lower water cuts to reduce that problem. And I think at this level of the current level of about 35,000 barrels a day at Peshkabir, we can sustain that unless again, we see other surprises.

So we can, I think, sustain that, but the repairs will not be done in a matter of days or weeks or even a month or 2. But in the meantime, we are doing things the DNO way is finding fixes that are safe, environmentally sustainable, but create the opportunity to move oil to market.

And I mentioned the DNO way when my predecessors at DNO came into Kurdistan over 20 years ago, there was very little infrastructure or infrastructure in Kurdistan. There was no diesel to run the facilities, all the fields.

DNO purchased a small used refinery and brought it down and installed it at the Tawke field where it still sits today and it still provides diesel in support of our operations. They brought in their own diesel-making facilities.

And so they found ways to develop the Tawke field and produce quickly and effectively by doing what others would call unconventional things that have made it happen, and we're now doing that again here. But we are -- we're following the work on the ground very closely.

How long we can sustain at these levels? I think we can sustain these levels.

And hopefully, we can move them up. But we are watching the skies.

We have sky drone watchers, and we have put into place, again, protocols to be able to get early warning. And so that if the -- hopefully, in the event of not drone strikes, we can keep going.

So we're very security conscious. And I'm confident that we'll be able to maintain these production levels and hopefully increase them also at Tawke because the Tawke field has performed well.

The decline in -- the natural decline in the fuel production has been stopped in the last several years, notwithstanding the drilling of no wells because we've been injecting Peshkabir gas into Tawke. Peshkabir field went down.

We had no gas to inject at Tawke. And -- but now we are moving gas to Tawke and hopefully, the Tawke production will be boosted a bit.

On the issue of what sort of spend we are looking at, some of these statistics are known. We have 3 kinds of wells in Tawke license.

We have the Geneva shallow wells, which are still producing. Those wells cost under $1 million a pop, and are drilled quickly because, again, the Geneva formation is quite shallow.

Our own rig, Sindy rig that we use for workovers and the deeper wells will be used to drill at least a couple of Geneva wells that will contribute hopefully a few thousand barrels a day of production. Our Tawke development wells cost around $5 million.

At Peshkabir, the cost is twice that, but the Peshkabir wells are expected to produce more than the Tawke wells. So we have a number of targeted drilling sites that we prepared years ago, and we're dusting those off and deciding the current production situation and the current security situation, which wells we want to drill when there are rigs available in Kurdistan.

There's a rig that's been stacked on Tawke. And so we can move rapidly in the DNO way to put these wells down and add to production, I think, pretty quickly.

And again, our teams are terrific. They're dedicated and they are rearing to go as all of us are to get wells drilled and production up and our revenue stream up.

Can I just ask one last question. On your last comments in the presentation, you're saying that you're working to establish similar arrangements with regards to the financing for the North Sea oil production.

Can you give us some color what kind of arrangements those would be? Is it something like, again, like an offtake agreement, RBL facility, a bond and maybe some color about the size of it?

Please, Chris?

Thank you. Yes.

We are considering all of the above, Mehmet, thanks for the question. We're now in a situation where we have time.

We've got the deal done. And we've been very pleasantly surprised by the strong interest from trading companies to secure both gas and oil streams.

And they are being very creative and making various offers of financing packages together with -- to secure the rights to marketing of the oil or gas without us having to take a haircut on the prices of those products. So it's been so far a very interesting and positive journey for us.

So how that will look, we'll come back to, I think, next quarter, but whether it's debt or more prefinancing, whether it's sort of $300 million, $500 million, that's the sort of scope we're looking at. And then we should be able to reduce some of the higher cost debt that we have on the balance sheet.

Have you mentioned $300 million to $500 million?

I think that's the order that we're looking at. But we've been surprised.

We were very pleased with the deal we've done on the gas side. I think when we were going into that, I wouldn't have thought we would get $500 million.

And the other beauty of that facility is it's the right word, on demand or not, but we can use it or not use it, it's there. There's no holding cost to it.

And if we obviously reduce the amount of financing on it, then the interest rate comes down. Interest rate in itself is very attractive.

So it's a lovely source of capital. My point is it's very, very flexible.

So in good times, we can let it run down. It still provide the company with a liquidity buffer going forward.

We're approaching the 1-hour mark. So I think it's time to wrap it up.

And thanks all for participating and see you around next quarter. Bye.

Thank you.

Thank you.