Good morning, Jan, and welcome to DNO's first quarter 2025 earnings call. My name is Joosten Løvås, and I am the Communication Manager here at DNO. Present with me in Oslo on this beautiful day in May are Executive Chairman Bijan Mossavar-Rahmani, Managing Director Chris Spencer, and CFO Haakon Sandborg. At first, Bijan will give an introduction. It will be followed by a presentation of the results, which will be given by Chris and Haakon. After the presentation, we will open for questions in the customary Q&A session. Since this call is for investors and analysts, primarily press questions will be dealt with afterwards. During the presentation, the microphones of participants will be muted. 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 must unmute yourself. With that, let's get started. I will hand over to Bijan.
Joostein, thank you. Joostein mentioned who the call is primarily for. I should just add to that it's primarily for our shareholders and our bondholders. The analysts and the press come alongside those important stakeholders in DNO. I seem to be blocking the DNO logo, so I'll duck my head. That's what stands behind me as I welcome everyone to our 2025 first quarter earnings report and discussion with management, my colleagues, as Joostein mentioned, Chris, our Managing Director, and Haakon, our CFO. Of course, we'll then open the floor to any questions that you'd like to pose to us. Just a few words of introduction before we go into the results presentation, which some of you may have already had a chance to look at. I know the analysts in Oslo have before the meeting.
I'd like to again emphasize that the first quarter has been very exciting. In fact, a very important quarter for us, transformative in many important respects. First and foremost, with the announcement of our acquisition of Sval Energi, which we previously announced, and now we're in the final stages of the activities that will permit us to proceed with the closing, which is expected to occur in mid-June, so not too far from now. We've already said the obvious that there are many advantages to DNO from this transaction. Of course, it increases our size and scale considerably. As a result of the transaction, our production, our output in the Norwegian Continental Shelf will double, as of the completion of the transaction. That's significant. We will, together with the small assets, the DNO assets, total output averaging just over 80,000 barrels of oil equivalent a day.
That now puts the combined companies in the top 10 producers of oil and gas in Norway. That's a very, to us, a very significant milestone and one that we hope to continue improving on as we bring our discoveries on stream, hopefully at a more rapid clip. Also, as we perhaps do additional acquisitions, whether they're smaller bolt-on acquisitions in the North Sea to improve our portfolio and our positioning, or perhaps larger acquisitions that might become available to us. We hope and we expect on an upward slope in terms of acquisitions and additions through developments in terms of North Sea producers. There have been other, again, advantages to us. We expect having a larger North Sea production portfolio would reduce and improve the terms of financing for DNO, so reduce our cost of capital.
There are different reasons why we expect that to be the case, importantly because Norway is considered more safe, more secure, and more creditworthy than our other leg, where we have important production in Kurdistan. There are these strategic advantages to us. We will be able to access some of the hubs that have been more difficult for us to tap into, where Sval has been a joint venture partner in the blocks that have flown through these hubs. That will help us, again, accelerate the development of our impressive list of discoveries. As those of you who follow us know, DNO has been, over the last several years, one of the most successful explorers in offshore Norway. I think in one year, we probably became number one in terms of the cumulative size of the discoveries that we've made.
We have been very successful, and we hope to continue that trend as well. Importantly, also, with the merger position, but I think of it more as a merger of DNO and Sval, we will acquire a crack and very impressive group of Sval employees. The number is small due to some right sizing done recently. The group, I had a chance to meet with them yesterday in Stavanger, and it is a very impressive group. Importantly, they are coming from a high-tech group and ownership. They have a private equity mindset and private equity culture that has been importantly created and nurtured by the senior high-tech individuals, John Knight, and also Einar Jelsa, to whom both are friends and to whom we owe a lot of gratitude for creating and nurturing a private equity investors-first mindset at Sval. DNO has been moving in that direction more and more.
As you can see in, for example, our dividend policy, which over the last several years we've created and maintained and do so for this quarter, this is part of our announcement. Hopefully, we will even move more in that direction as well. We've also announced today in our annual general meeting notification that we are adding two new board members. At least we're nominating them for shareholder votes in June at our meeting on June 5th here in Oslo. One of them has been on the board of Sval and is very knowledgeable about Sval, the organization of the Norwegian oil sector, and knows the work with the management team and the rest of the team at Sval. That will be, I think, an important addition to our board.
The second is an individual who has an oil industry background and is a very active partner, in fact, in a major US private equity firm. He will also bring a private equity background and a private equity mindset that hopefully will help us pivot even faster towards that culture. I think we said in the press release today that we are driven by the need and the expectation that we will move faster, cheaper, and better in terms of bringing discoveries to market. In Norway, that process is very slow by international standards. Some of the discoveries that we have had, if these had been in, say, the Gulf of Mexico, these would have been on development in less than a year. Here in Norway, it takes three, four, five, six years sometimes to get there. We want to move that faster.
I think other companies of our size and scale would be very supportive. Hopefully, even the largest of the companies here in Norway would be motivated and more inclined and join with us in trying to accelerate the development of the many discoveries in Norway that are sitting, waiting to be monetized. I think that's very important. This moving faster, better, cheaper, of course, has served us well in Kurdistan, where we remain happy for the past 20 years or so, the most important in terms of volume of production. Company operating in Kurdistan. We've done it the DNO way. This is before my time at DNO. My predecessors going into Kurdistan were able to bring a lot of innovative, creative, and quite fast techniques and mindset to putting oil in production. We've continued that.
Another highlight of this quarter, which I'd like to also touch on, and I know Chris will in his remarks from the presentation and his own thoughts. We've surprised everyone, the market, maybe not ourselves, but we've surprised everyone how well we've been able to maintain and even inch up our production in Kurdistan without significant investments. We have not drilled a new oil in Kurdistan in at least a couple of years, but we've been able to maintain production at the current levels from reservoirs that typically have a natural decline of 15%-20% a year. We've arrested that decline.
In fact, we've inched it up a bit through creative workovers in the existing wells, changing out pumps, and managing production from the wells that has allowed us to keep our production at 80,000 barrels a day, a little bit higher now from where it should have been, in fact, a significantly lower figure. We would again like to continue to pivot DNO and the industry towards that kind of Norwegian Viking go get it done mindset. Hopefully, we will see results from that in the coming quarters. The second quarter, of course, will have a very different look and feel because of the addition of the small assets following our merger. The nature and character of our presentation and our financial presentation, operational presentation will change, and that'll be very exciting. I look forward to seeing many of you at the second quarter presentation.
I think we're going to have more calling in because prior to Sval, the callers are largely interested in Kurdistan because that was the core and most important part of our activity and our business. With the combination of Sval and the increase of our operations in the North Sea, I expect we will have an appeal to a larger group of investors. I expect hopefully all our current investors will still be with us, but I expect to see other investors who will find DNO an attractive opportunity for them because of our North Sea presence. With those comments, again, welcome to our presentation. I look forward to responding together with my colleagues to any questions that you have about the quarter and the future. Thank you, Chris.
Thank you, Bijan. Good afternoon to all who are joining this conference from me.
Let's dive straight into the slides following that helpful introduction from Bijan. As we often do, sorry, Jostein, maybe go back to the picture. We start with a wonderful picture from the DNO world. This time, after last quarter, I think we ventured into the North Sea. Here we are back in our heartland of Kurdistan and one of the operators there who's taking good care of the production. We'll be talking more about that, as Bijan has already mentioned. Let's get into the slides. Jostein, thank you. The highlights you can read for yourselves. I think we've announced this as another strong quarter for DNO. I think operationally, it was an excellent quarter. As you can see, we have increased production across the board. We've added two more discoveries to an incredible track record now in the North Sea.
We have maintained that 80,000 barrel plus of gross production that Bijan mentioned. We have done all that safely. We had no recallable incidents of any type in our operated activities despite drilling operated well in the North Sea and high level of well intervention activity in Kurdistan. For me, although the big news item, of course, from the quarter was the hugely important acquisition, I think it's really important to our investors that you see we continue to deliver operational excellence. With the great team that we'll be working within once Sval and DNO come together in the North Sea, I have no doubt we will continue with that level of performance.
Of course, apart from the transaction, which I'll talk about a bit more in the next slide, immediately on the back of that, we were able to take step one of what we're calling optimizing our balance sheet on the back of that transaction, returning to our happy hunting ground of the bond market. I hope there's many bond investors listening in today because we've had a great cooperation over 24 years now in the bond market. We certainly see that as a win-win. We're very gratified by the support for our latest and probably greatest bond that we've issued so far. Last but not least, as we always say, ranking just a little bit higher than our bondholders are our shareholders.
We are very pleased to say that the board of directors have once again approved the same level of dividend, which has given us the 1.25 per share on an annualized basis. If we go to the next slide, please. We are obviously all very excited that we are still naturally on track to close the Sval acquisition. It is coming up very fast. We are really looking forward to that. A number of these figures have been mentioned by Bijan, but it is worth repeating because we will quadruple our North Sea production. Having just re-entered the North Sea in, what, 2017, we are now going to hit 80,000 barrels a day some eight years later, which has been quite a journey. This will put us in the top 10 producers in Norway and interestingly positions us, we think, even better for further growth.
The combination of our set of discoveries and the upside opportunities within a number of the producing assets that Sval have gives us a great pipeline of projects and infill opportunities to maintain this 80,000 barrels a day in the medium term. Of course, we will keep aiming to deliver these exploration discoveries and incremental M&A to build even further on the position that we are getting. The other point we have been making, and Bijan touched on the important financial synergies in terms of potential improvement in cost of capital and the tax synergies that are well known to followers of the Norwegian Continental Shelf between having a development-heavy portfolio and a production-heavy portfolio. The other point that we have been drawing investors' attention to is what I call the operational synergies.
As we said on the Bond Roadshow, we feel that the portfolios fit each other like a hand in a glove. What we are alluding to there is that a number of Sval's positions are in the infrastructure our discoveries need to tie back to. We believe and we see from other situations that that gives you much greater insight. We expect that to enable us to accelerate development of our discovery portfolio. We are looking forward to driving that forward in the next year or two. Thanks, Hugh. Coming back to the DNO portfolio, we are really pleased during the quarter, excuse me, to announce yet another discovery, this time an operated discovery, second operated discovery we have announced within six months. This has the delightful name of Shirtkaka, which is meatball to those of you who do not speak Norwegian.
The creativity of our explorationists knows no end. What I'd like to draw everyone's attention to here, we often talk about trying to move faster and better. The example here is the way we've immediately appraised the discovery. We had a traditional vertical exploration well to minimize the financial exposure prior to showing you have a discovery. We immediately sidetracked that in order to appraise the structure. That was an extended reach near horizontal wellbore. Within that one campaign, we have compressed what is traditionally, I would say, an 18-month, perhaps two-year timeline into one well. We're very pleased with that. Now we are putting the team in place that we hope will drive this opportunity forward to development in a timely fashion.
That brings us to the next slide where we're putting up our revised draw program for the year. Most of this is known to the market, but in the same theme, I bring your attention to a page well there. This is the follow-up to Othello. I was just looking ahead of this call. I see that we announced the Othello discovery on the 2nd of December last year. We are back there on the next well too. That's not appraisal of the same structure. It's a nearby structure, which we see as an appraisal/expiration. It's certainly not frontier expiration. It's a follow-up to Othello. We're very optimistic about it. We're back there within nine months of announcing the discovery again. Very rapid movement, trying to build on success where we are operator.
Of course, we can't do that without the support of our partners, and in particular, Aker BP, who are the second biggest interest holder in that license, have been extremely supportive. Thank you. Kurdistan. I talked a lot about this in the Q4 presentation back in February. The team continued to do a wonderful job that Bijan has also described. We've got the gross production up to 82,000. We are able to maintain. That's been there in terms of production capacity for a good six months or so. We're still running at that type of level. The time, as in, I think it was Q3, we had a bit of a dip below that. It's more due to little small upheavals in the local sales market rather than any production issues. That's going back six months now.
That was, as you may recall, related to the elections in Kurdistan, where even truck drivers want to vote. We had a little bit of upset at that time. We have seen a bit of upset with Ramadan and Eid and so forth during this quarter. The production capacity remains. A lot of this was covered in Bijan's words, but I would just like to take this opportunity to thank our team for delivering another quarter of fantastic performance. I think the other aspect worth mentioning, which is not covered on the slide, is, again, the impact of our gas injection project. That has been running for four or five years now. Four years, I guess. We started up just as COVID was coming to an end. Of course, it has saved a lot of gas from being wasted through our flares.
We really see the impact on the Tawke field, and that's been very helpful. That, combined with this very active well intervention program, has been a key to the production performance that we've seen from the NCS. It results in a very nice cash flow from the Tawke license. Of course, still, we are not able to get our crude to international markets directly. That has to go through the hands of refiners and traders. We do not get the full value that we would hope to from those barrels. We hope that will return. Next slide. Let's go over to the financials. Again, just to conclude what I've been saying, for me, an excellent quarter operationally. We will have a very different business when we're sitting here presenting next time.
We're looking forward to joining forces with the Sval team and continuing to deliver this operational excellence in order to give return to our shareholders. The financial consequences of all that will now be set out by Haakon.
Yeah. Thanks, Chris. And again, hello to all of you on the call. I'll now do a brief review of our Q1 financial results. We'll start with these key P&L figures. You can see that our revenues are up by $11 million in the quarter to a level of $188 million. This time, the increase was mainly driven by higher oil and gas prices in both business units. The Q1 revenues were split between Kurdistan with $58 million and the North Sea accounting for $130 million. If you look at the operating profit in the middle here, you will see that there's a significant improvement from Q4.
Here, it should be noted that in addition to the revenue increase, we have no impairments in the first quarter, while we had significant impairments of $104 million in Q4, mainly from the Pachika license adjustment in Kurdistan. We have a stable cost of goods sold in Q1, but we had some higher expense expiration, mainly due to about $12 million dry well cost on the ratio well in the NCS. Going further on the slide to the right, you will see a net loss of $4 million in Q1. That follows primarily from higher tax expense in the first quarter that came from changes in deferred taxes. We will move on. We have cash flow. We show higher cash flow in Q1 at $100 million, up from $82 million in Q4.
Here, we also include a contribution of $5 million in positive working capital change in the first quarter. Otherwise, no Norway or Norwegian tax payments in Q1. Of course, looking ahead towards the end of this year, we expect to be in a tax-paying position following the acquisition of Sval Energi. You see that our net investments increased to $109 million in Q1. That was primarily for CapEx in the North Sea on development projects, but also continued investment in exploration with $39 million in exploration expenditures in the North Sea. Net cash from our West Africa operations in Côte d'Ivoire came in at net $5 million in the quarter. That was in line with our expectations. As has been mentioned, for our financing activities, we successfully placed a new $600 million bond in March, the week after we announced the Sval acquisition.
We were pleased to see that the new bond, now named DNO 06, was met with strong demand from investors. We secured a competitive coupon in this placement. In addition, we made drawdowns of $30 million on our bank RBL facility in this quarter. Again, under our quarterly dividend program, we paid a dividend of $27 million to our shareholders in February. Including some other items, we thereby had net cash inflow from financing of $583 million. On this basis, our cash balances increased to close to $1.5 billion at the quarter end. Of course, I think that looks pretty good, I would say. Quite a record for us in DNO. Of course, a key reason for raising the new bond was to refinance the short-dated DNO 04 bond. We did so by calling this bond in early April in an amount of $350 million.
The high Q1 cash balances have thereby been subsequently reduced by the call amount. I should note that following the repayment of the DNO 04 bond, our credit strength is now further enhanced by having a long maturity profile on our bond debt, with the first bond maturity coming only in 2029, and the second maturity is in 2030. Quite a good long horizon on our maturities now. Otherwise, with the high cash balances and mid-net cash of $43 million at the end of Q1, we are again maintaining a very solid balance sheet and a robust financial strength. We are clearly using this strength now to finalize the acquisition of Sval Energi. As you heard today, the acquisition will transform our operations and also our financial outlook through much higher North Sea production and revenues.
This will lead to a very substantial increase in our annual cash flow and our debt service capacity. As such, given the substantial size of the acquisition, we will have a higher leverage following completion. It should be noted that on a net debt basis, leverage will be fairly modest compared to many peer companies. In summary, these are certainly exciting times for us as we deliver on our goal and strategy of rebalancing the company through a much stronger position in the North Sea now. That really takes us to the end of the slide of the presentation. I think we're now at the stage where we hand over to Youssef to lead the Q&A session again.
Yes. Thank you, Chris, Bijan, and Haakon. Yeah, let's get started with the Q&A session. The first question comes from Tom Erik Kristiansen. Just unmute you, allow me. Here we go. Tom Erik, you will have to remember to unmute yourself as well.
Y`ou're muted, Kristian.
Thanks for taking my question. Can you hear me now? Yep. First one for you, Bijan. How pleased are you with the portfolio overall in DNO after the Sval acquisition? Is this kind of balanced now, and you will shift a bit focus from growing the North Sea to maybe more maintaining it and further lifting dividends? Or is it still kind of a growth focus on that part of the business? Secondly, does the increased materiality of Norway now imply that you're more open in Kurdistan to do strategic combinations there? Or do you expect to kind of stay with the same kind of structure there going forward as well? Thank you.
Thank you for that question.
You always ask interesting questions at these sessions. The answer to your question, I guess, is yes, in the sense that we're very pleased with the combination with the Sval assets. I'm pleased also that the Sval team is also very pleased with the combination with DNO. I think both sides are quite pleased that both sides now will become one side in next month. We want to grow more in the North Sea. We reached, again, a size of scale that we can or to do larger transactions. We are looking at opportunities where we not only get good assets, but we have gained, again, strategic value from the combination. When you receive strategic value, you put a price on it. That will allow us to be more competitive in making our offers.
Perhaps another buyer would not need or have those strategic advantages. I think that puts us in a better position. In fact, with the Sval assets, I think the price of the transaction was not just fair and firm, but I think it was rich because we knew their strategic interest and strategic value. We were prepared to put that into our offer price. We want to do more in the North Sea. Getting up to 80,000 plus is good. Better yet, if we get up to 100,000 barrels a day and then some. We are in a growth mode in the North Sea. Clearly, we are able to do it now as a result of the combination for the reasons my colleagues mentioned, both operational but also financial. In Kurdistan, we would like to do more, not necessarily by acquiring one of the other companies.
For those of you who followed DNO for a long time, we'll remember that there were long periods of time when we were producing at 100,000 barrels a day and more than that. We've reduced our spend, which we described, both Chris and myself. It was because of the closure of the pipeline, which meant that the wellhead price dropped significantly for us. There are still arrears where the money's owed to us by the Kurdistan government for volumes of oil that were picked up during COVID, but not paid on time and not paid since. That'll resolve itself. As those of you who follow this business and many who don't follow Kurdistan directly, you still hear about it because this is big international news.
The closure of the pipeline, the discussions between Erbil, the capital of Kurdistan, and Baghdad, the capital of Iraq, that involve also the U.S. government's very involved in those discussions and pushing hard for the pipeline to reopen. Once that takes place, the matter of the arrears and the certainty of payments will also be addressed and resolved. That'll allow us to spend more in Kurdistan. The best place for us to spend is in our own fields, Tawke and Peshkhabir. With greater spending, I expect our production will increase importantly. That is our ambition for Kurdistan, to resolve these issues, and then to start investing much more as we've done in the past and have had very good results on those investments.
On the question of price, this is also pretty well known that the price we received in the third quarter has been around $35 a barrel. Other operators may be a bit higher, a bit lower, depending on the quality of their crude. This is at a time these discounts at a time when Brent was quite strong. When Brent was at 70 or higher, our $35 figure looked meager. As Brent has come down, our prices are holding up. They have not dropped dollar for dollar. There has been a time when Brent at 60 makes our mid-30s number look quite good, especially because now we are receiving prepayment for our production. We're paid ahead of delivery once the payments are in our banks, international accounts, then we deliver the oil to the buyers. That by itself, that's certainly a payment.
Prepayment is worth, I don't know, pick a number, $8 a barrel, $10 a barrel. That then makes the figure a lot more comfortable in a difficult market environment. Chris has done some of the math, and it seems that under the current pricing of 35, or maybe our target is around 35, so less is a little bit more, our return on our barrels are the same in Kurdistan as they are in Norway. Norway has a very tough tax regime, tough in some respects, but supportive in other respects because of the explorer, the government still cuts you a check, not for the full amount, but for 78% of the cost. Norway has a tough tax regime, but our barrels, whether in Kurdistan or in Norway, we're indifferent to those.
That is a good position to be in, not-with-standing all of the turmoil in the market and the lower prices starting out. We can spend more money in Kurdistan. We can get more production from our own assets. We are often asked, "Do you have a third leg? What are your thoughts?" We have always said, "Yes." A three-legged stool is much more sturdy and stable than a two-legged stool. We have, of course, a presence in West Africa. We have looked at opportunities to do more in West Africa. We have not acted on those because we have been so focused on stepping up our North Sea assets and production, which we have now been very busy doing this year with Sval.
Also, we've been spending a lot of management time and time dealing with the situation in Kurdistan and trying to help alongside other international outcomes in Kurdistan move the system into a reopening of the pipeline and the resumption of payments with certainty for our deliveries into that pipeline and for resolution of the arrears issue, without which we, DNO, have said we will not be prepared to put any oil into the pipeline. I think the other companies have a similar sentiment, which is expressed through this company grouping called APOC that represents many of the international oil companies active in Kurdistan. Their voice is our voice, and I think our voice is their voice. Those have been very, very clearly. In terms of a third leg, I mean, the best place for us to spend money is Norway.
We have all these discoveries, some of a dozen discoveries or so, that are sitting there waiting their turn. That is not acceptable. This is a reflection of the slow pace at which things happen in Norway in the oil and gas industry for many, many reasons. The slowness of speed and the other issues that we face in trying to have a more Anglo-Saxon culture in the industry in Norway, the fact that this is a struggle, it explains why all the major international oil companies, many of them, have left Norway. They are happy to pick up Norwegian barrels and Norwegian gas. We are finding that enthusiasm that we have been approached by trading companies, by banks, and of course, by large oil companies is great.
That enthusiasm is not matched by their interest in spending time and money and management time operating in Norway because of these difficulties. We hope to push ahead, accelerate the monetization of our assets. We have a huge inventory here already discovered in Norway that we want to bring into the market. That will be an area of great focus and great opportunity for DNO.
All right. Thank you a lot. Can I have just a short follow-up question on your statements there, Bijan. Do you actually see a potential, or do you think it's likely that after all of this turmoil, you could actually come strengthen out of it in Kurdistan with, if SoMo is paying you, you have the second largest crude seller in the world, probably more reliable than Kurdistan has been historically, for instance, on payments, that the situation actually will be better than before the shutdown? Or is that too optimistic or too naive to think at this stage? Thanks.
I hope and expect that when the pipeline is restarted, when that takes place, either in the coming year, much less, but in the coming year, or not, because next year, the old contract that governed the use of these lines by Iraq will expire. At that point, some of the geopolitical issues will go away, and that we will come to market. So I'm optimistic.
I was optimistic very early on when I took this position. A lot of the questions in these sessions was, "What are you going to do when the Iraqi government cancels the production sharing contracts and you're left with technical services agreements that pay you, I don't know, a dollar or less to produce a barrel of oil?" I said, "I don't think that's going to happen. I think the production sharing contracts will survive." They have. In the past year, those of you who follow this have seen that Iraqi courts have ruled that the contracts signed in Kurdistan by the Kurdistan government with the international oil companies are, in fact, valid. That problem's gone away. I think there'll be a different regime in terms of the use of the pipeline.
Now that the U.S. is removing sanctions on Syria, perhaps some of the old Syrian pipelines in the Mediterranean, which were not in use, some of them may be in disrepair, will be repaired, and oil can flow in that direction. If the nuclear negotiations with Iran succeed, I expect some of the sanctions on Iran will be reversed. There will be another direction in which the oil can move. Perhaps the issues between Erbil and Baghdad are resolved. The oil can flow south into the Persian Gulf as well. I see opportunities, both without these geopolitical fixes, but I also see these geopolitical fixes happening very rapidly. That will be an opportunity. We are also interested in doing business in Iraq, in the south. Kurdistan has been very good to us. There is a lot more to be found than producing Kurdistan.
But the mother load, as they say, the big oil and gas reserves are south in Kurdistan. We have been successful in the north. We know the culture. We know the geopolitics. We know the reservoirs. We know the challenges. I think we are very well placed to also go south and explore and develop opportunities there. All very, very exciting.
Good. Now, Eric. Eric, Boston has been waiting for a credit analyst, I believe. Please go ahead.
Yeah, thanks. Can you hear me? Yes. Great. Congrats on a good quarter and successfully raising the bond. Two quick questions there on the sort of capital side. You have a very large cash balance now, and you still drew down on the RBL. Is that something specific, or was it more just to maintain the sort of facility limit?
Could you please shed some light on the RBL discussions with the Sval banks and how that's going? The oil price has dropped quite a bit since you acquired Sval or announced the acquisition. Has that impacted the amount the RBL banks are willing to commit to?
Yeah, I can address that and see if I get some help from others if I need. I thank Eric, that we sort of drew down on the RBL now, basically because we had discussions that we ran the treasury in our North Sea business on a sort of a ring-fenced basis in DNO. There was a temporary need to fill up on the drawdown on the facility. We had paid down some of it after, subsequent to the quarter.
It sort of will ebb and flow a bit, no specific reason, other than running this in a good manner between the treasury at DNO ASA and the same group, our subsidiary in the North Sea business. For the discussions with the RBL banks, we have had very good discussions, very strong interest. We have seen three banks that were on both the DNO RBL that we have not been having for ourselves, but also the same banks have been in the Sval RBL. These three banks we are talking to as lead banks on potential new RBL. There is also a fourth large bank that has been on the Sval side that is involved. We have four major leading EMP banks now as our lead banks on the RBL discussion.
We do not think that the sort of the drop that we saw in oil prices has affected the capacity of these banks to provide the RBL amounts that we have been discussing. That is not the—no, no, we are not affected by that at all. RBL financing is one of the options we are exploring for the refinancing of the debt in Sval when we take over and complete the acquisition. There are also other possibilities. We see very strong interest from, for instance, major oil companies that want to discuss with us on offtake agreements. Same thing goes for large trading houses around the world that see that we will have a very strong output to both oil and gas. In fact, we will have about an even split between oil and gas with our new portfolio in the North Sea.
You have some large entities wanting to do gas trading and some are more interested in Kurdistan. There are several potential offtakers that are so keen to get these agreements on the volumes in place that they offer very competitive financing. This is also something we are exploring as a very good option. I think it's clear that we are coming into new possibilities for financing now with the acquisition that we wanted to be sure we are picking the ones that are most effective, flexible, providing certainty of funds, and also the lowest possible cost of capital. It's not exactly determined as of yet which way we are going on the preferred options, but this is something that, believe me, we are working hard on at the moment.
We also have the bond market, where we have been successful for many years as one other possibility. We are assessing all these various options as we move ahead towards completion of the acquisition.
I can describe the situation and our ongoing discussions and options very, very well. I would just like to add that a year or two ago, the RBL facility was the obvious one for the companies. The first we go to and we get better terms from the banks through the RBL mechanism than we would otherwise. That seems to have changed now. The terms being offered by trading companies and by oil companies for financing are better than RBL terms. They are faster. The RBL side is slow to move.
I think there's a reluctancy, the large banks, to go beyond the old woke mindset that we shouldn't invest with, we shouldn't talk to, we shouldn't loan to, we shouldn't take the money of oil and gas companies. That changed dramatically in the United States, both with respect to funders and with respect to individual and large investors. In Europe, that culture, that mindset that we want to steer away from the oil and gas and fossil fuel industries has made it slower. The movement of the RBL lenders, they've been moving more slowly, offering terms that are not attractive relative to the alternatives. It's one of the arrows in our quiver, of course. My sense is that it may not be the one that will fire first.
I get the same response from other oil and gas companies that the RBL market is less attractive for them, with too many bells and whistles to make it their first priority or even any priority in terms of the funding of the oil and gas business, where, again, those who are the traders or the users of the oil have stepped up and are offering very, very attractive terms and conditions to producers. We are going to take advantage of that. The markets, the bond market's always been good to us. We have always been good to the bond market. The Nordic bond market will remain an important part of our financial package. It is quick. It is priced right. We have enthusiastic support from the bond market and all of the bond raises that we have done.
This is something, a business that Haakon, who is now the, and has been for some time, the DNO member who's been the longest of the company. I'm the oldest, and he's been most present here. He's developed this bond business for and been a great protector of our relationship with our bond investors. Again, thank you. Haakon worked with me so well at the beginning, long before I joined the company. That's another option that seems to be available to us.
As we are fast approaching the one-hour mark, I hope we can keep the last couple of questions short and sweet. There are two more people wanting to ask questions. The first one is Antonio Segura, I believe, from the credit side. Please unmute yourself. Let me just say one thing before you do.
You say we're going to ask a short question, but the short question demands a long answer. The answer's a lot because we want to explain. It's not because we don't want the time to run out, so you have time to ask the difficult questions, which in the past were always about Kurdistan. When will the pipeline open?
Hey, Eric. Can you hear me? Can you hear me? I'm going to make it very short and sweet. So my only question is, what's the impact of your new acquisition on your net debt to EBITDA ratio? What is the proforma leverage ratio for DNO post-acquisition?
Yeah, we have run some good presentations on that in our bond brochure that we did in March. And we ran various metrics. You're touching on one of the metrics that show that we will be moderately levered after the acquisition. Net debt to EBITDA X on a proforma 2024 number will be 0.7 times. We have some slides that we compare DNO on that level to several other companies in our peer group, including investment-grade companies. As I said in my presentation today, we are going to be moderately leveraged to ranking compared to some several of the other companies that we get compared to. The answer is 0.7 times on the combined Sval and DNO proforma 2024 basis.
Thank you.
Okay, the last question seems to come from.
Sorry, Peter, that was too short. I wasn't answering.
Yeah, there's one person raising their hand here, and that's Nick Coleman. Please go ahead.
Thank you for taking my question. I'm a journalist with Platts. You'll be aware that there's an election coming up in Norway in September, and there seems to be some sentiment in the air, an idea that the result could be more positive for the oil and gas industry. I wonder if you have any observations on opportunities that might arise as a result of such a political move. A bit more specifically, there seems to be discussion of holding numbered licensing rounds every two years. I wonder specifically if that's something that you are looking at, that it would kind of maybe create opportunities to explore outside the currently available areas, which I think are pretty extensive already, to be honest, as a result of the APA rounds. Your thoughts, I'd be interested. Thank you.
I can have a go at that one. We look back at the old numbered rounds and see that participation in those rounds historically actually has papered off. I think that's largely, as you point to, the fact that the APA round areas really are now the lion's share, not only of the North Sea and Norwegian Sea, but of course, this year, the ministry hugely expanded the area in the Barents Sea that is covered by APA. Whilst it would be welcome that numbered rounds returned, I don't think that will make a major shift to the business of many of the companies in Norway. I suspect it's in Norway's interest because that is the more frontier areas, and a country needs to be getting those areas tested whilst there's a good, healthy production to provide the support for such frontier exploration.
That's a longer-term view for the country, and that's entirely up to them. I don't think there'll be any major short-term change. The APA system has clearly been a backbone of Norway's success. Can you have one of the backbones? One of the important factors of Norway's success the last 20 years has been the APA. Of course, all of the major discoveries that have happened in that time or almost all have been acreage that have gone through that APA system. The government has been rightly building upon that. For us, that was a key element of coming back to Norway seven or eight years ago because you can access acreage without having to put hundreds of millions of dollars down, non-refundable.
Håkon, do you have thoughts on that? I have some closing thoughts as well.
Please go ahead.
With respect to the elections in Norway, the more interesting election for us is the one in Baghdad, coming up in the fall, because that could affect the tone and tenor of the discussions between Erbil and Baghdad. We are watching that with some interest because that will have an impact on the reopening of the pipeline and the international oil companies north and south in Iraq. With respect to the election results in Norway, the government here has been very supportive of DNO and our re-entry and growing away in the Norwegian Continental Shelf. DNO, some of you may know, is Norway's oldest oil and gas company and the first to go public. It is a well-known company here. There has been support for its return to Norway, not just from the government, but also from investors and some of the analysts as well.
Having said that, we've been active on the APA rounds. We've received a lot of the two or three or four or five largest recipients of APA licenses, and we've acted on them. We've had important discoveries. I think that's been we've been supported, and we've given back in terms of acting quickly and getting these discoveries made. We want to get the organization advanced. We will look to work. The current government has said that they want to see more of these discoveries coming on faster. I think very closely aligned on that. Any future government, I think, will have the same interest. What we want to do is get even more government support to act on this.
We need to get into the hosts more rapidly, and we need more government support, not just in terms of how to deal with the industry overall and industry practices, but we could also use greater tax incentives to go in and develop these smaller discoveries, which are still important, but they just happen to be smaller. The fact that they're smaller doesn't matter as much for DNO because we've taken larger interests. We've had larger interests in smaller discoveries. By smaller, I mean 30, 40, 50 million barrels are still significant. The developments are costly currently, and the government provides more support to us through tax structures and so on.
The entire industry, but certainly for the pursuit and development of these smaller medium discoveries, will get a lot more production in Norway in the coming years and try to reverse what is going to be an obvious decline in production by the larger companies today, but therefore by the whole industry, which will start, I think. Currently, DNO probably, because of these discoveries and because the small acquisition is one of the fastest-growing companies in Norway. Developments are going to be, I think, expected to be ahead of many of our peer companies. That is an exciting place to be and move on to get there as well. With that, thank you for everyone. Again, I take my time responding to these questions, but I hope at least it has been helpful to you and that my colleagues can stop kicking me under the table here. I'm kidding.
I'm kidding. I'm kidding.
Thank you. With those words from the Chairman, we'll conclude this call and see you again soon. Thank you for participating.