Good afternoon, and welcome to DNO's Q4 and Full Year 2023 Earnings Call. My name is Jostein Løvås, and I head up communication here at DNO. The plan for today's call is to start with a brief presentation, which will be held by DNO's Managing Director, Chris Spencer, and our CFO, Haakon Sandborg. After the presentation, we will open up for questions in the Q&A session, where our Executive Chairman, Bijan Mossavar-Rahmani, will be available to take questions. Please note that the Q&A session is for investors and analysts, and any media requests will be dealt with separately. During the presentation, all other participants in this call will be in a listen-only mode. If you want to ask a question in the Q&A session, please click on the virtual hand on top of your screen.
When you are selected, you will be notified on your screen that you are allowed to unmute, after which you will have to remember to unmute yourself. With that, let's start the presentation, and I hand over the word to Chris.
Thank you, Jostein, and good afternoon, everybody, from a cold and wintry Oslo. This is, of course, DNO's 2023 interim results. So as well as reporting Q4 of last year, we take a look back over the last 12 months or so, and gives us the time to reflect on a very interesting year. As the headline, the first chart summarizes that last year we had our challenges in Kurdistan, but it's clearly the year was characterized by a very strong rebound in production from our Kurdish business, and of course, fantastic success in the North Sea with our exploration program. In addition, throughout all the turmoil of last year, we have maintained our dividend payment to shareholders in line with our previously announced pivot towards shareholders.
So running through this slide, obviously, Haakon will come back and talk more about the financials later. But I think that really the story of financials is spelled out by the production to a great extent, where of course Kurdistan is a lower production year-on-year compared to 2022. But given the circumstances that I assume most are aware and who joined this call with the Export pipeline being shut and our fields being closed in for most of Q2, a tremendous result to end up with 35,000 bpd of production from Kurdistan for the full year and a running rate of 80,000 bpd as we came out of the year. On the North Sea side, our production actually pleasantly surprised.
I think that was above guidance, somewhat, and a very nice contribution for our first full year with our Côte d'Ivoire position, the West Africa, and a very nice additional cash flow coming in from that asset in 2023. As we discussed in the previous quarterly call, the ability to ramp up production in Kurdistan, it comes from sales to what is called the local market. That means that we are selling our oil at low-to-mid-30s per barrel, which is uncomfortable for all. On the other hand, we are being paid in advance, so we don't release any of our oil until the money's in the bank. And so we have extremely high payment certainty. You can get much better than that.
And that gives us great comfort that the any costs that we spend in the region will be coming back through to us through the cost recovery mechanism in the following month. And of course, as we always do, we have reacted to a downturn in the Kurdistan business very rapidly and quite a remarkable reduction in operational spend from if you look at Q1 of last year through to Q3, Q4. And of course, a great recognition to our team in Dubai and Kurdistan that have made that happen. Regrettably, we've had to let go a number of colleagues in that process.
I think because this year of turbulence in Kurdistan has highlighted the importance of the strategic move the board made a few years ago to pivot towards the North Sea. And following the move back in 2019, I think last year was a standout year for us in our North Sea, given the organic value creation we have achieved through the exploration successes. And we've reported on those previously, but it's still very gratifying to look back on the year. And of course, we're not resting on our laurels. We have plenty more to come.
Then, this week, we're also pleased to announce what we expect to be inorganic value creation by acquiring a 25% in a U.K.-producing field that I'll talk to a little bit more on the next slide. Finally, through the thick and thin of 2023, we stuck with our commitment to our shareholders and maintained the dividend throughout the year. Next slide, please. As I touched on there, clearly, a real bright highlight for the DNO Group last year was our sort of breakthrough success last year on exploration. And there's a very, very nice chart from Woodmac for us, where we are placed as second in all of the explorers in Norway in terms of resources discovered.
And this is a really a great validation of the Norway strategy of DNO, where we—and I think that's also recognized in the same Woodmac report, that Norway itself remains a top destination for exploration in the globe in terms of the volumes that are discovered. And it is great for us that we're a leading player in that basin. In particular, what was great fun last year was to have to be involved in the biggest discovery for quite some years, which is the Carmen discovery, that I think we talked in more detail in the last quarter. Equally important is moving forward what we found towards development, and both the Berling discoveries and Ofelia discoveries took important steps forward in that regard with appraisal drilling that confirmed the pre-drill expected volumes.
In Ofelia's case, led to a small, additional discovery in a shallower interval, which will be extremely helpful, for the development concept of that asset. As I'll come back to on the following slide, we are not over yet. We have a lot of attractive, exploration opportunities still in our portfolio and a good drill queue coming up, and the engine is still running. We've recharged with 14 licenses in the latest APA round. As we go through the year, we not only take drill decisions, our team's very focused on high-grading our portfolio prior to the drill season. So there's a lot of drop decisions in the background, and I think that 14 means we're largely flat in terms of the total portfolio of exploration licenses.
Very pleased that we were able to sign this week the deal with ONE-Dyas to acquire 25%, their 25% stake in the U.K. field Arran. In the U.K. we have a sort of mini oil and gas business. We've had decommissioning, we have some exploration permits. One in particular we announced recently, where we're an operator with Aker BP as a partner that is just across the border from the Alvheim area. And so to have the production that complements the rest of the business there, small piece of production is great. And in addition to that, we have historical tax losses, which means that that asset is of more value in our hands than it would be in the previous owners.
That gives you an opportunity to do a deal, that both sides are happy with. The other aspect we have been looking to enhance our production in the North Sea business generally, and that's alluded to in the next point, that we are exploration and development heavy, and we would like to balance that up with a bit more near-term production. Having said that, we have gonna have nice contribution from Andvare coming on later in this year to boost our North Sea production, and Trym restart, which is dependent on the Total, the huge Total project in Denmark. So it's currently slated to restart around March, April, I believe, is their latest announcement. Next slide, please.
So what we've been very strong on recent years, Norwegian exploration and that acreage is still producing great opportunities. As you'll see, six out of the seven firm wells that we have this year are in that Troll area, where we've had tremendous success the last few years and will be helping us move the existing discoveries towards development, as well as being interesting in their own right. A couple to highlight, I think, are the two numbers one and three on the chart, where we've got the opportunity to appraise our Heisenberg discovery. At the same time as targeting very valid very robust exploration prospects in the form of what's called Hummer and Angel.
So we have two key objectives for both of those wells, which is a very nice position to be in. And then the one other I thought to highlight on this slide is Falstaff. That is a DNO-operated well, and is the only one here not in that core area. And you will see from the numbers what then we are looking for, that you'll see from the volume and the potential numbers, that clearly we have the potential of a much higher upside should this one work. And I think that gives you the context of what it is we demand from opportunities that are not in the core areas where we've had success so far. With that, it's time to turn over to financials and my colleague and CFO, Haakon Sandborg .
Thank you, Chris. Yeah, hello, everyone, and thanks again for attending this earnings call for our Q4 and full year 2023 results. I'll be doing the financial review, of course, and, let's start looking at these key P&L figures, focus for 2023, compare those to 2022. As Chris noted, the shutdown of the export pipeline in March last year resulted in both lower production and lower realized oil prices in the local market in Kurdistan. So our Kurdistan revenues consequently dropped by $567 million from $820 million in 2022 to a level of $253 million last year. As it was, North Sea revenues also declined last year by $143 million from 2022, and that was mainly due to lower oil and gas prices.
In sum, group revenues were thereby down by 51% to $668 million in 2023. As you can see on the slide, the operating profit also dropped by close to 50% last year. That was on the lower revenues, but also offset by reduced depreciation and a much lower impairment last year. Tax expense was up in 2023, and this also then contributed to the low net income of around $19 million last year. I will revert to these points over the next slides. Next one, please. Lots of numbers on this slide, but to the left to comment briefly on the Q4 P&L results compared to the Q3 last year. We show a substantial increase in Q4 revenues.
That was driven by much higher production and local sales in Kurdistan. There was also some increase in quarterly North Sea revenues on higher oil and gas prices. On the cost side, our cost of goods sold increased on the higher production in Q4. Exploration expense was up on purchase of seismic data, while impairment charges also increased in the quarter to $18.9 million, and that was due to revised estimates for the Vilje and Ula fields in the North Sea. As you can see, the Q4 operating profit is thereby pretty flat from Q3. As we move down on the P&L statement, net finance was high in Q3. That was due to the time value adjustments of the KRG arrears that we took in that quarter.
So you can see net finances, net finance expenses are back to a normal level in Q4. The drop in tax expense in Q4 is basically on change in deferred tax, and in sum, our net income improved significantly in the quarter, and that is very good, of course. If you look at the right on this slide, you will see the full year figures, and again, the lower revenues, revenue is the main driver. But there are also some major cost changes, including a lower expense exploration last year. That was due to basically a higher expensing of dry wells in 2022. As mentioned, we had no significant impairment charges last year, so there is a big reduction in impairment compared to 2022.
Now, net finance for 2023 includes the $45 million in financial expense from the time value adjustments of the KRG arrears in Q3. So if you net out that item, there is a big drop in net finance expense. That comes with a strong support from much higher interest income in in last year. Again, under tax expense, the impairments in 2022 provided significant tax income, while we had high deferred taxes in 2023. That means that we moved from tax income in 2022 to tax expense last year. So, all in, net income thereby dropped to a to a fairly low level at $18.6 million last year. Thanks.
We are now moving to the cash flow, and, as you can see, our 2023 operational cash flow fell substantially to $295 million, down from $1.1 billion the year before. This, large reduction was, again, primarily due to much lower revenues. Just to mention that as, as well, we also had, negative working capital changes of $64 million last year, including a decrease in payables in Kurdistan and other items, and this compares to $66 million in the other way, positive working capital changes the year before. Further, we had, high tax installments of, $90 million in the H1 of, last year, while we kept net investments to $280 million.
That net number includes $20 million in cash inflow from our new assets in West Africa. As you can see, under finance, net finance outflow was to $160 million, primarily for our quarterly dividend program at $92 million, and also for our share buybacks in the Q1 of last year at $51 million. Thereby, in total our cash balances dropped by $234 million in 2023 to $719 million at the year end. But most of this reduction was in the challenging Q2 last year, when we had no production in Kurdistan.
It should be noted, I think, that our cash position remained basically flat in the H2 of the year, as we gradually then strengthened our Kurdistan operations again. So it was mostly the Q2 that was the problem. So as I said, we maintained solid cash balances at $719 million, and with a net cash position of $153 million at the year end, so our balance sheet strength remains very much intact. The slight reduction of our strong equity ratio to 47% at the year end is mainly, you know, mostly due to shareholder distributions that we made last year. Next one.
But to comment a bit further on our capital structure, we have now fully redeemed the remaining balance of $131 million on our DNO 03 bond. That was done on the fifth of January this year, and thereafter, we now only have the DNO 04 bond remaining. This is outstanding at $400 million with a 2026 maturity. In addition, we currently have $35 million of bank debt outstanding under our RBL facility. With that, I think I would like to note that we have reduced our gross interest-bearing debt from close to $1.1 billion at year-end 2019, to the current level of $435 million.
So combining that also with high cash balances and increasing rates on deposits, the net interest expense in this period has also declined significantly from $80 million in 2019 to a net interest of only $8 million last year, as you can see on the graph to the right. This substantial debt reduction and concurrent drop in the net interest expense, I see those as key components of the buildup of our financial strength over the last 4 years. And I'd like to note also that the reduced leverage has also freed up the capacity to pay dividends to our shareholders that we are now using in our quarterly dividend program.
Okay, for our operational spend, we reduced our actual total spend significantly last year to $561 million, which was pretty close to our revised guidance from Q3 last year. This reduction reflects the spend cuts in Kurdistan following the export pipeline closure. Again, as we've noted before, this confirms our flexible cost structure in this region. When we look ahead, we increase our work program for 2024 by 15% to a spend level of $645 million, and the increased spend is mainly within CapEx and exploration.
The planned CapEx of $205 million this year is primarily focused on the North Sea, and that reflects a broad development activity on several fields and projects, if you want, including Berling, Brasse, Tambar East, Brage, and Andvare, and other projects and fields we are working on. Kurdistan accounts for around 1/4 of the planned CapEx this year, and this is mostly focused on drilling of the upcoming Bashika-3 well and on the minor facility projects in the Tawke license. Building on our successes over the last years, we continue our broad exploration program in the North Sea. As Chris discussed, the total exploration expenditures increasing to $180 million this year.
This is again, an exciting, exploration schedule, includes the seven exploration and appraisal wells that were presented earlier today, which we think have a significant upside potential towards new resources. With the successful completion of most of our UK DECOM work, planned, DECOM, expenditures this year is limited to $20 million. North Sea net production is projected to increase to 15,000 to 16,000 BOE per day this year, and we have production starting up at Trym and Andvare. The acquisition of the 25% license interest in the U.K. Arran field will add additional net production of 2,000 to 2,500 BOE per day after closing, of the transaction. So, we are very pleased with that, very positive, transaction in our view.
We currently expect gross production at the Tawke field in Tawke license in Kurdistan to continue to average around 80,000 bpd . On that volume, we should again see significant free cash flow generation from our Kurdistan assets. As we note here on the slide, this production level could, however, change depending on the outcome of discussions with the KRG on the recovery of the outstanding arrears for past deliveries, and also regarding payment terms and conditions for future oil exports from this region.
As such, the IOCs, the oil companies in Kurdistan, have stated that the need for clarity on how these issues will be resolved prior to resumption of our oil exports. This in turn will drive investments in new wells and thereby in future production. Okay, with that, I want to stop here and then hand back to Chris.
Thank you, Haakon. Our last slide is just to sum up that, as we've been stating for a few quarters now, we are putting investors first. So we continue to grow DNO as what we like to think of as a bold and nimble international oil and gas company. And we are now into our second semi-centennial, and we're all working hard to see if we can get to a full century. Of course, the whole purpose of a stock-listed company is to provide a return to our shareholders, and therefore, they rank highest amongst our stakeholders. And I believe in 2023, we showed our commitment by maintaining a dividend despite the turbulence in the Kurdistan region.
Since resumption of dividends, as you see, we have now returned $187 million to shareholders, and there's been opportunistic share buybacks in addition. Our other very important investors are our bond holders, and we're very proud of the track record we have here. Once again, entering a tricky situation in Kurdistan with a very strong balance sheet has meant that we were able to call ahead of time the remainder of the DNO zero three bond. So summing up, reflecting on 2023, where it's brought us to, we believe that DNO is well set to go forward. We have very low-cost production in our heartland of Kurdistan.
We've been adding value, a high amount of value organically through the drill bit in the North Sea, which is giving us attractive growth prospects. We still have a robust balance sheet to maintain a combination of attractive project slate and returns to shareholders. Thank you very much.
Thank you, Chris and Haakon, for presenting, and we are then ready to start the Q&A session, and we'll be joined by Bijan, as you can see. Again, if you want to ask a question, please click on the virtual hand on top of your screen. I believe we already have a couple of participants wanting to ask questions, and I think the first one goes to Teodor Sveen-Nilsen. Please go ahead. Have you unmuted yourself?
Yes, I'm unmuted, but you didn't unmute me. Can you hear me?
We hear you.
Yes.
That's great. Okay, thanks for the update. Three questions from me. Regarding the first on the U.K. acquisition, which looks exciting. As far as I remember, you have some tax loss carried forward on the UK shelf. Can you use some of those tax loss carried forward, and are you in position to guide on a cash tax rate for that production? So that's the first question. Second question is on the guidance that Haakon presented. What kind of scenario for pipeline opening or potential pipeline reopening have you baked into those estimates? And then following on that, given the scenario where the pipeline actually opens today, how will the operational spend and CapEx develop in that kind of scenario?
Thank you, Teodor. I can start with question number one. Well, thanks for the congratulations. We're very pleased with the deal. As I mentioned, it's we have a group of small interests. We've had a group of small interests in the UK related to decommissioning, exploration, et cetera, so it's great to put production on top of that to make a more financially sound entity. Part of that is definitely the tax losses that we've had. You're right, and I think those have been noted in the relevant annual reports. We haven't offered cash guidance on the cash tax from the asset. That's maybe something we can take away and think about.
That's maybe a point you can mention here.
Okay, yes, sorry. Could I just ask, it's fair you don't have the numbers, but, but is it fair to assume that you actually can use some of the tax loss carried forward? There's no ring-fence.
Correct. That's the case.
[inaudible]
So, for at least this year, maybe next, we're not expecting to pay tax.
Okay, thanks.
Then the second question was for some of your numbers, Haakon, I believe?
Can you repeat that question again, please, Teodor?
Yes, absolutely. It's regarding the guidance for operational spend and CapEx. What kind of scenario for pipeline opening is baked into that assumption? I guess with a fully opened pipeline and a credible payment mechanism, that guidance would look different. And then the third and final question was that in the scenario, a full pipeline reopening today, how would the guidance look like in that scenario?
Well, I can maybe have a go at that then, and then Haakon and B.J. may have something to add, but I think where we're at, Teodor, is we are planning for the worst and hoping for the best. So those figures assume local sales throughout the year, and really, that is what we've been focused on and tried to communicate the last couple of times as well. We are very focused on what we can control. We have an asset with a very low production cost, so we are making money from the production, and we're working extremely hard to maintain a very high level of local sales and extremely efficient operation to ensure that goes forward. So we aren't including any speculation in those figures.
It's all based on the future as we see it. Of course, we would welcome reopening of the international pipeline and the exports to the international markets. That'd be wonderful, and we're ready through DNO and our industry association to contribute in any manner that will move such discussions forward. As was pointed out by Haakon on the second last slide, most definitely, investment levels would be impacted by such a development, as long as we, as one of the international companies, can understand how we will be remunerated in such a scenario.
In addition to that, as Haakon touched on, there is the issue of the arrears, which the Kurdistan Regional Government still owe us, and we also see that there is potential for, i f arrangements can be made for some repayment of those arrears, then that could also lead to restart of some investment in the region. But all of that is speculation and in the future, so for the guidance, we have based it on the way things are today. B.J. and Haakon, anything to add?
No, as I mentioned, the indication of around $50 million of CapEx in Kurdistan this year is basically for the new well, Bashika 3, and some otherwise just the maintenance and minor projects on the two producing fields in the Tawke license. So as Chris said, naturally, when we are happy with the resolving of the outstanding issues on arrears and payments going forward, we will step up CapEx and drilling and you know, go back to the normal operations in Kurdistan once all those issues have been agreed. B.J., is there something you maybe you want to add?
Just that, the impact of the opening of the pipeline and a doubling effectively of our per barrel revenue, it would be very substantial to DNO when you consider the volumes that we produce and our net entitlement figures, and then our ability to ramp up production even further with that confidence. We're currently doing quite well at 80,000 bpd . We had expected that when we opened up the field without additional wells and additional spending, that our production would be lower than this. So it's held up at 80,000 bpd , which is quite something, but to maintain that level going into the future, we need to make some probably modest investments initially.
So there's this huge potential for a very significant injection of cash into DNO. The other, of course, as I mentioned, is the arrears, which are something in excess of $300 million. That's a lot of dollars. To put that in perspective, our current market cap is under $900 million, somewhere. This is about a third of our market cap, and to the extent we can recapture that and some combination get better pricing on the oil, the difference it'll make to the company is huge. This is not the first time, as you know, that we've had an arrears build-up.
This happened during the ISIS period, where the pipeline closed off, and we started trucking oil, as we're doing now, into the two local buyers, even larger volumes. We were then trucking about 120,000 barrels of oil a day, so it was a significant trucking. But we, you know, our netback was lower, but we did fine, and the arrears that had built up, we converted into a much larger piece of Tawke. And, you know, with the government's 20% stake going to us and some other obligations that we had under the contracts disappearing, in exchange for some of the arrears, I think we did quite well.
All was going well until this, again, the latest crisis a couple of years ago, economic crisis, because of the drop-off in funding from Baghdad to Kurdistan, and then the legal resolution of the [inaudible] maybe. I'm not sure all the parties agree it's been resolved yet, but w ith the ruling of the arbitration panel against Turkey on the matter of the use of the pipeline for Kurdish oil, the situation changed. So we've been hit, but both of those, but it's not the first time we've been hit in Kurdistan.
We've always managed to find a way through the fog and, through the storm and come back on the other side, and that's our expectation, fully, fully our expectation that we will do the same this time. But as Chris says, we're not counting on it. We're taking a very conservative approach and planning around a conservative approach, but, we, we expect things will, will improve and will impact us, our business in Kurdistan, significantly. And we're working very hard towards that t o the extent we have any ability to make a difference, we're working very hard to make that happen.
I believe the next question goes to Øyvind Hagen. Please, unmute yourself.
Thank you. Øyvind from Arctic here. I have a question regarding the local market and the volumes that you're guiding for Tawke in 2024. When you're saying around 80,000, how, how good visibility do you have on, on the local market actually being able to absorb that? Have you, have you managed to sign some longer-term offtake agreements or could you just elaborate a little bit on how you arrived at that 80,000 guiding?
If I could answer that. This issue came up the last time we were trucking large volumes. The question was raised, "Well, how large is the local market? Where is all this oil going?" When we say the local market, that doesn't mean local consumption. It means a purchase by local trading companies. At this price difference, where Brent is in the $80 range and our oil is in the low $30s range, the market for that oil with those margins is unlimited. It'll find its way to every corner of the world. If we're producing 300,000 bpd , that oil would move. The constraint are trucks, but we've found that trucks appear from nowhere or from everywhere and move this oil. That would've normally been a constraint.
Constraint would be the trucks. That doesn't seem to be the case. So, again, we have to be careful to distinguish between the local consumption versus local trading companies picking up this oil and moving it, and the trucking and purchase of this oil is importantly governed by the Ministry of Natural Resources in Kurdistan. They select for security and other reasons certain buyers that are authorized by them to buy the oil. We negotiate pricing with those buyers, and we move it.
But some of the oil sometimes does go into local refineries if some of the oil is cut off, but for the most part, the local market are local traders moving this oil to wherever the oil will find a market, and at these margins and these prices, it'll find a market.
Okay, so the restriction on volumes is more set by DNO and the production capacity on Tawke rather than limitations in amongst local buyers?
Exactly, or limitations in trucking. Again, those trucks show up. I don't know how many trucks come in every day now. Must be in the hundreds. And during the ISIS period, when we were doing 125,000 bpd , we were, I think, filling a truck every two minutes. We likened it to a Coca-Cola bottling factory. These trucks would come, they'd load, they'd go, the next truck would come in. It was just an amazing operation to watch and I think that constraint is not one that we face. If it was, it'd be a problem, and there'd be more competition among the international operating companies to see who gets the limited number of trucks, but trucks are not a limit.
Limit is, how much can we produce, and how to do so in a responsible fashion as an operator, so we do no harm to the fields and the natural reservoir pressure and so on. To continue to act as a proven operator. That matters to us as well, and but we felt that 80,000 is a comfortable number. On some days, we're up at 90, some days a bit lower, but we thought 80 is a figure that's achievable in 2023.
And again, some of these other issues are resolved. We can go higher with the drilling of additional wells, and we're already doing some light work. We replace pumps that go out, and so on, so on. But we thought 80 was prudent and achievable, and we don't want to plan for, you know, much more than that, so that we maintain our ability to control our own fates. And we have the support of our partners, like, you know, of course, in our strategy and in our sales program and so on. So it's a contractor position, contractor being the foreign oil companies who are the parties to the Tawke license. Chris, do you have anything to add to that?
I think that's a good answer. I, and I think, you mentioned our partner, Genel, that's, I agree, they've been very supportive. Also, the, the buyers, it's, unusual for us to have such direct interaction with buyers in the oil business, and so it's been a great partnership with those buyers who, Bijan saying they've got a great opportunity, and they've managed to develop their markets very rapidly. And of course, the Kurdistan government, who have, controlled the whole regime.
Okay, with that, I think we can go to the next question here. That would be Kristofer Bäck . Yeah, please unmute yourself.
Hi, everyone. Kristofer from Securitas here. Thanks for taking my questions. First of all, congratulations on another strong quarter, given the circumstances. Could you please talk a little bit about the capital allocation strategy going forward? How do you think around further M&A and also the trade-off between dividends and buybacks? Secondly, while I know this is a difficult question to answer, can you say anything about the recent development in Kurdistan, in terms of pipeline reopening, and what expectations do you have for reopening in the coming months? And lastly, when do you plan to drill the B-3 development well on the Bashika license during 2024? Thanks.
Okay, on the capital allocation, if I could just comment on that. We have repeatedly confirmed that we want to maintain our dividend program. We have reduced our debt, as I said in my comments this afternoon, and we have capacity to maintain that. Our focus is on the dividend. We have done share buybacks in the past, but we're not sort of focusing as much on that at the moment. That could change, but we want to certainly have a priority on the dividend program. Otherwise, we want to keep our strong balance sheet intact, so we have always said we will keep a good cash balance at the bottom of our balance sheet to be sort of prepared for any sort of unknown that could come our way.
So we will have that as well. But, we have a pretty good program in the North Sea for capital investments in development several projects, as we mentioned today, and also exploration, of course, supported, you know, in the back by the Norwegian tax regime, where they actually refund some tax losses, et cetera. So, I think, we will continue and go as we have done successfully now, and we have strengthened our position substantially and want to keep that intact, at the same time as we grow the business, with the use of our cash and our cash flow.
So once we're back to a more, more normal situation in, in Kurdistan, and we are seeing some of the same income and cash flow that we had in the past, then these comments might change. But for the time being, that's, that's kind of where we are. Any add on to that?
On the issue of Bashika, I think that's significant, that I believe we're the only company among the international oil companies in Kurdistan that's investing. And the Bashika well is an expensive well relative to the development wells on Tawke field, which we're running well under $10 million a pop. This Bashika well, I believe, is, I don't know, in the range of $40 million or so. Some of that money's been spent in terms of supplies that were required before, but we decided to continue with the drilling program. The rig is now on location. We're rigging up, and we should be ready to go in in several weeks' time.
With that, that's a sign of our commitment to, but also, continuing great interest in the opportunities in Kurdistan, to be able to bring the Bashika and a sister field to production. Interestingly, as many of you who follow us know, our partner on Bashika is the Turkish Energy Company, and of course, they're the ones who operate the pipeline through Turkey. So it's interesting that we have a partner in Bashika that also is a key driver and decision maker in what happens to the pipeline reopening. So it makes it intriguing.
I think there was one more question in between, wasn't there?
Yeah, the question we get every time we have a quarterly presentation or go to investors, so when's the pipeline opening? And I think we aren't in a position to shed any wonderful light on that. I wish we were. As Bijan's touched on, we lobby and influence as best we can, and we're certainly here to engage constructively to help that happen, but we're not a key player. It's clearly the governments who are in the driving seat on that.
So I think what our shareholders and other investors are looking to us is to make sure that we run the company as well as we possibly can through this period, and that's what we're very focused on, and that's what you've seen in front of you today. That, as Bijan said, there's a great opportunity for additional income if that happens. In the meantime, we are working very hard to ensure we have a profitable company and build a future for DNO.
Great. We have a couple of more questions before we wrap this up, at the one-hour mark. The next one is Nick Stefanou. Please unmute yourself.
Hi, guys, it's, it's Nick here. Can you hear me?
Yes.
Just a couple of quick questions from me. The first one is from the subsurface performance of both fields. When you guys shut them down, the initial expectation was that production initially would have some flush production, just basically because the fractures were recharged by the matrix. Is this what you saw from both fields? And in general, you know, are the reserves performing as you have expected them? So that's the first question. And the second one, I think it's more of like a strategic question about the capital structure going forward. You guys called back the 2024s, you know, which was expected. You've got the 2026s in a couple of years' time.
So, you know, perhaps in a few months or a year's time, you're going to start thinking what you're going to do with them. Now that interest rates are higher than, say, you know, maybe a couple of years ago, is your thinking basically to kind of like have that liquidity there, just, you know, maybe, you know, refinance them at maybe a very hard interest rate, or just kind of like call them back? Or do you think you might be able to find cheaper sources of, of funding? So just to kind of like get an understanding of how you think of the capital structure going forward.
Right. Let's start on the subsurface.
Happy to.
Yeah.
Yes, well, after the two fields were shut in for three months, or a bit longer in the case of Peshkabir, we have indeed seen flush production. We've since restart, there's been several ups and downs. So, although we have grown production nicely quarter by quarter, that hides quite a few fluctuations in the meantime, as we built up the market and the production matching the market. And so it's a bit difficult to say whether we're through that what you might call flush production. We need a bit more time to understand that. At the same time, as Bijan mentioned in his comments earlier, we are treating the fields with kid gloves at the moment. We have a lot of ESPs, for example.
We have three phases in Peshkabir, gas at the top, water at the bottom, and all in between, and we have the same now at Tawke, following our successful gas injection scheme. So, you know, at $30, $30-odd a barrel, we don't have the same economic incentive to push these fields, so we're making sure we look after them.
Thank you.
Okay, and now on the capital structure, Nick, good to meet up again. As we have talked about, talked about in our recent meetings, we basically have only the one DNO 04 bond remaining with a one long-term maturity, September 2026. But, as you know, we have been very busy and very, you know, repeat issuer, repeat issuer in the bond markets for many years. We, at least I kind of see that as a favorite, debt market for DNO, one that naturally fits with our profile and where we are, with our operations, and we have appreciated the strong support of, of many investors.
We are looking for acquisitions and chances to grow the business, and when that happens the next time, and if it's a more sizable transaction where we need to go to the capital markets, I think the bond market is where we would go again, and finance some or a big part of that acquisition. We are basically prepared to come back to the bond market, preferably when we have a new deal to fund, together with what we have already on the balance sheet in terms of cash. If it's one of the North Sea transactions that we are being, you know, focusing on, then we also have the support of our reserve-based lending facility with the seven banks. It has a limit of $300 million.
So, we see that as partly as an acquisition financing instrument that we can use to add on, depending on the size of the deal. So, if it's a North Sea deal, we could use both banks and bonds. And, I think you asked about cheaper source of financing. Well, bank funding has also become expensive with increasing rates and the margin up, so it depends on the difference, of course. But, I think we would basically stay with where we are with adding new bonds and using the banks and having a strong balance sheet as the basis, and use some of the cash in a given transaction. So, I don't see a big change in our strategy in that respect. We will do what we have done successfully for many years and do that for the next investments as well.
That's very clear. Thank you.
Okay. Then I think we are getting closer to the end here. I'll remind the press that you can post your questions to us directly after the meeting, and the last question here will be Steen Schmitz. You can unmute yourself. Go ahead.
Hi, gentlemen. Hi, can you hear me?
Yes.
Yes.
All right. Thank you for the opportunity to ask my question. Message loud and clear on the difference on a priority, but still a question on share buybacks. You have purchased back $62 million in shares since 2021, of which $51 million dollars was done in 2023, when the valuation of the company was, of course, significantly lower. Now, my question is regarding the role of valuation in your decision-making process between choosing between dividends and share buybacks. Perhaps you can share a bit of your thought process behind this. Thank you.
Yeah, well, we have used both options, as you know, as we talked about already in this meeting. We are now, again, focused on having a foreseeable and long-term quarterly pro-program that we want to try to maintain in a good way. So on the dividends, I mean. So, that's the priority basically at the moment. As I already said, I don't think we will, in short term, engage in more share buybacks, but that could change if there's a reason to do so, and we're flexible in that respect as well. But the real focus now is on maintaining the dividend program. But that could change. I just, you know, but it's been, that's been our priority.
I think it's always, I wish there was a simple formula. I think it's, we're always trying to balance, providing return to shareholders with investing in the business and ensuring that there's also a longer-term, return to shareholders. That is the classic, evaluation for any oil and gas company. And, I don't think there's a simple formula there. It's, something we work with, B.J. and the chairman and the board on, quarter by quarter.
I think we can safely say that the first priority is to maintain our dividend policy. What's left over, then, of course, we have options, share buybacks, other investments, and so on. But the dividend is becoming more and more sacred at DNO, as it is at other oil and gas companies. So once those are taken care of, then share buybacks would, you know, are also very attractive, certainly at these prices, place to put our funds. I do wanna just end by responding to this question that keeps coming up, is that when will the pipeline open? Now, the pipeline next month, the pipeline will have been closed for a year.
How time flies. We do know that the pipeline will open within the next two years sometime because the contract between Turkey and Iraq for the use of that pipeline ends. At that point, Turkey can do with the pipeline what it wants without any further exposure on the legal side that may be a factor in their thinking. So, it won't be shut in forever. Once the existing arrangements end, and they will end, the pipeline will reopen. So you can sort of a nd I think it's about two, I think it's about two years. There's another argument is whether it's a little less or a little more, but you can count on that.
And two years may sound like a long time, but it really will come pretty, pretty quickly. And in the meantime, again, as Chris mentioned, there's a lot of value to us of getting paid in advance. It's been no use to us to have prices in the $60-a-barrel range after all the adjustments in the past, when we're getting paid $0 for them, effectively. I'd rather have $30 in the hand rather than, you know, the promise of $60 somewhere where I can't quite reach it or grasp it, or it can be taken away from me. So, you know, it's so we're resilient, we're flexible, we're trying to work around that.
I think we're comfortable with this $10 million a month sum. We'd like to see it higher, of course, and we'll be fine. DNO has been first in Kurdistan. It's been the most successful international oil company in Kurdistan, both among all the entrants, whether it's Exxon or Total, or others who came and went, Chevron, or the smaller companies, we've outperformed all of our peers. And so, you know, we've found a way to deal with it, as we think of it as a Norwegian way of doing it. And we're proud of it, and we're still standing, where a lot of others have left the battlefield. And it is a bit of a battlefield.
So with that,
Or chessboard. So not being too,
With that battle cry, I think we're done for today. Thank you all for listening in, and don't hesitate to get in touch with us for any further questions, if you have any. We look forward to reconnecting in May, but we will pres-