Okay. Good morning and welcome to this special investor call on the occasion of DNO's acquisition of Sval Energi Group AS. My name is Jostein Løvås, and I am the Communication Manager here at DNO. Present on the call are Executive Chairman Bijan Mossavar-Rahmani, Managing Director Chris Spencer, Chief Business Development Officer Erlend Einum , and North Sea General Manager Elisabeth Femsteinevik. Bijan is calling in from New York. The rest of us are in Oslo. Opening remarks will be given by the Executive Chairman shortly. Afterwards, Chris Spencer will give a presentation of the transaction.
Lastly, there will be a Q&A session. Do not hesitate to ask. You may also send questions our way after the call. During the presentation, the microphones of participants will be muted. If you want to ask a question in the Q&A, 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 remember to unmute yourself. With that, let's go. I will hand it over to the Executive Chairman.
Yes, thanks. Thank you. Welcome, everyone. Good morning and welcome to this video conference. I am pleased to begin the presentation from the DNO side. We have been saying for a number of years that we are on the lookout for acquisitions in the North Sea, and in particular, of course, on the Norwegian Continental Shelf. We have some bolt-on, smaller acquisitions that have been added to our production. We are really looking for something, a portfolio of assets that was more meaningful and of high quality.
We found those, of course, in the Sval Energi portfolio that was brilliantly put together by HitecVision over a number of years. We identified this portfolio of these assets as a target for a number of reasons that we'll go into during the presentation. Importantly, the synergies, but also the size and scale of the assets were obviously important to us.
We started the discussions with executives at HitecVision and Sval Energi and reached an agreement just not many hours ago to proceed with our offer, which they accepted. The offer we've made is a full-price offer, but we expected that the seller would take no less. They know the assets very, very well, and they are very brilliant at this and at negotiations. DNO also isn't in the business of trying to do tire-kicking or to try to come in with low bids that it doesn't work.
We are pleased that we reached a conclusion on the transaction, and we've signed, and now we're, of course, announcing and hope to close by sometime by mid-year and expect that'll happen again in an efficient and quick manner. We've said both in the press release and in our slides that this is a transformational deal for us.
Certainly, it is in terms of size and scale and the more diversification moving us into some really prized assets on the Norwegian Continental Shelf. We also said that there are synergies and that these two companies are sort of hand in glove in the sense that Sval's portfolio is largely producing assets and significant production. It increases our production significantly on the North Sea. There are other opportunities within some of the permits for additional exploration.
Exploration is something we do very, very well under Elisabeth's leadership. We've been one of the most successful exploration companies and the most active exploration companies on the Norwegian Continental Shelf. We have a lot of discoveries to show for it. These discoveries, things move very slowly, glacially in Norway.
These discoveries, many of them, had they been made in the Gulf of Mexico, would be tied back and on production within six months. In Norway, it looks more like four, five, or six years. We hope to work with other companies to try to accelerate this. I know the ministry in Norway is also expressing some frustration at the slow speed in which discoveries turn to production. There are many reasons for it, some good, some not so good.
I think with this size and scale, we'll be in a better position to make the case. In the meantime, we will have higher production. The HitecVision, the Sval portfolio has not been focused principally on production to some development and some exploration. Ours is not so much production and some development, but a lot of exploration.
The two come together and make this a more typical portfolio for a larger company. Lots of production and development opportunities underway and lots of exploration, which we will continue to do. We want to remain an active explorer on the Norwegian Continental Shelf. DNO has largely been, to date, a Kurdistan-focused company because of the early successes. DNO has had that long before my time or the time of any of us here on the call from the DNO side. We were able to take that to the next level. There are difficulties, as you know, in terms of the exports through Tawke. Those are being addressed now.
I'm not going to go into those now or hopefully not through the question and answer period because the focus this morning is on the North Sea, on the Sval assets, and where the synergies are as we see them and how we hope to take these assets combined with ours to the next level and up, up, up, up we go. DNO needs to establish itself as a major player, as Norway's oldest oil and gas company. I think the first to go public. We have a legacy there, and we want to, now we've come home, and we want to build on it.
Our investors have been supportive in Norway. I believe the government has been supportive of this company coming back and taking its rightful place in the pantheon of oil and gas producers and operators in Norway.
I think this acquisition takes us into that territory. We are very, very excited. Our team has done a terrific job bringing this together and countless sleepless nights. The Sval team too and the HitecVision team too, I think, had sleepless nights. They were their advisors to try to work with us together to make this work. We both believe that it was good for the two parties, and those are the best deals where each party believes that they have gotten a good transaction. I think that is our thought, and I believe that is HitecVision's thought too. It has been a very tough, but I think fair conversation with them and negotiation with them. I am very, very pleased about that too.
With that, I'll ask Chris, who's been greatly engaged throughout all of this, as have my other colleagues. Erlend, Business Development Leader, has been very, very active in carrying the water on this. Elisabeth, of course, will be dealing with these assets and managing the integration of teams and assets in the portfolio. It is going to be exciting times. We've hit the ground running, and there's a lot to do between now and closure. We are fully committed and have our plans well in place. You'll hear more about that as we go through that process of setting up the financing arrangements and the integration arrangements as we bring this closest deal. With that, Chris, I turn to you.
Thank you very much indeed, Bijan. To repeat your welcome to everyone who logged in this morning on what is a very special day for us in DNO. As Bijan mentioned, the company has been around for more than 50 years, and I think this is clearly a milestone day for us as we announce the acquisition of Sval Energi Group from HitecVision.
As many of you may know, Sval has rapidly built up a very attractive portfolio on the Norwegian Continental Shelf, some 16 producing fields, with the most significant assets being in the greater Ekofisk area, in the Gjøa area in Martin Linge, and the Kvitebjørn fields. As you see on the slide, last year they had over 60,000 bbl of oil equivalent a day. Of course, it is about 50/50 oil and gas and substantial 2P reserves.
Importantly, for the fit with DNO, this is a highly cash-generative portfolio with low production costs and relatively low CapEx, i.e., near-term investments for the size of the portfolio. That makes it a great fit with our DNO North Sea portfolio, which I'll come back to on the next slide. I've read in a couple of the analyst reports already this morning that they recognize the opportunity that we will have here to adjust the cost of capital in the company.
That's really, I guess, what the last points are talking to. Of course, we have carried this large war chest on the balance sheet for some time now. It's great to be able to put those funds to work. We're opening up. We've had a lot of interest from the RBL banks.
We have a lot of overlap between our existing RBL and the one that Sval have. We have a strong interest in that area. Moving to the North Sea, we have other options such as this offtake-based financing that, of course, as a Kurdish producer, those types of facilities or indeed RBL are simply not available to us. That is the other aspect of this project that as we go towards completion, we will be working hard to optimize the capital structure of the company.
Next slide, please. As Bijan said, I think it is one of those transactions where the complementarity is obvious. We put it into bullet points here, but I think the storyline is compelling. That is why we try to sum that up by saying that Sval Energi's portfolio fits like a glove on our hand. It is a very high-quality set of oil and gas assets.
For those who've seen me at investor conferences recently, I've mentioned we like to consider ourselves a bold and nimble company. Having recognized the fantastic strategic fit of this portfolio, we lived up to that headline, and we moved very fast to take the opportunity. Why did we do that? First and foremost, it brings scale to DNO and diversification. We get a big boost to our production and a 50% increase in our 2P reserves. It transformed a lot, but in particular in the North Sea, we see a substantial step up with production quadrupling.
As followers of DNO know and as Bijan touched on, we've had excellent success with the drill bit in Norway. The acquisition of Sval provides what I'm calling both financial and operational synergies to make the most and generate the most value from that portfolio.
Financial because one needs a good strong cash flow in order to fund the CapEx program that we will have going forward. Of course, in Norway, that provides for tax optimization as well. Operationally, because as we've touched on in previous presentations, having found the oil and gas is just step one. We see that it's a great advantage to have working interests in either satellites that are already in production and tied back to infrastructure, or even better in the production hubs and facilities themselves.
Sval Energi's portfolio has all of that. Numerous of these hubs are flat bang in the middle of our existing core areas where we found lots of oil and gas. That's going to be Elisabeth and her team's job to put this together and make the operational synergies work.
Of course, and then you have a sort of bread and butter of any acquisition of this scale. There'll be tax synergies beyond the Norwegian trade tax synergies that I've touched on already. We will look to optimize G&A. I've mentioned the variable borrowing costs already. Putting a bit more color on that, you see here the scale aspect. For us, it's a huge leap. We've talked repeatedly over the years about the importance of scale in the North Sea. Offshore business is a capital-intensive business as the common liabilities and so forth to be handled. I think everyone in the business understands the importance of having that scale that we achieve in a single step here. Next slide, please.
And this series of donuts is just trying to visually illustrate this complementarity of the two portfolios where Sval Energi is 2P heavy, which means a lot of production. DNO North Sea is contingent resource heavy, which means a lot of developments in the future. That goes together very well indeed. Of course, that's not to downplay the contingent resources in the Sval portfolio. They have not been as active as we have in exploration, but they're in several what we used to call in Shell legacy assets that will go on for a very long time.
Those types of assets are characterized by significant contingent resources, which will be gradually moved through the E&P pipeline into reserves as the years go by. Next slide, please. So this is quite a fun slide, we think. We thought we were doing well building up DNO North Sea.
As you see, this makes a huge step change. But, It also provides us with a whole pipeline of opportunities to maintain the new level that we're stepping up to. From our own portfolio and the Sval Energi portfolio, we will have numerous ongoing field developments, which you can see coming in on the chart on the right. There's a huge pipeline of discoveries and the infill type opportunities I was just touching on in the Sval portfolio, which the teams in both companies are working hard on to get to project sanction.
In addition, although you can't expect one of these type of transactions every week, we will continue to try to grow the company through acquisitions. Of course, we're very happy with our exploration performance. We're going to be carrying on seeking organic growth through exploration too. Next slide, please.
Let's just pause for a moment for everyone to understand the sheer diversity of the Sval Energi portfolio that we have bought, or subject, of course, to customary government approvals. I shouldn't get ahead of myself. I guess this is something to study after the call if you're particularly interested. The map, you can just see from the red and the blue how the pre-existing DNO areas overlap wonderfully with the production hubs and satellites that we're picking up through this acquisition.
Next slide, please. Now, we've been focusing on the North Sea, which of course is a huge part of this deal. In addition, it's substantial in the context of the whole DNO group. Over the years, and especially our bondholders, I think, are familiar with looking at this chart. They compare us to other European listed independent oil and gas companies.
And as you see, we're making a substantial step up in that peer group with this transaction. Another way of looking at that is presented on this slide. The red on the right is what Sval is bringing to the table. The blue on the left is what DNO pre-existing business was contributing. You see the huge impact on all these metrics. Of course, the EBITDA impact is perhaps exaggerated because of the lack of exports from Kurdistan to international markets last year that Bijan touched briefly on.
We are all, of course, hoping that that situation will be resolved and you'll get a better balance between the Kurdistan and the North Sea business. That will give us an even higher number on EBITDA and cash flow from operations if we manage to get back to that situation.
The other point here, I think, is that the diversification of the portfolio, which has sort of two elements. First, of course, it's the rebalancing to the North Sea. We're not turning away from Kurdistan, but we just developed now our North Sea business to be on par with our Kurdistan business. In addition, within the North Sea, the Sval portfolio, one of the attractive elements of the Sval portfolio is the sheer number of assets that provides diversification and robustness. Thank you. This is what I'm touching on with the rebalancing.
Again, hoping that a picture paints a thousand words. The red and the blue kind of speak for themselves here. On the left, both in terms of production and the 2P reserves, we were a Kurdistan dominated company. Post-Sval, we have two equal pillars underpinning the DNO company. Thank you.
I hope I've touched on all the highlights. If not, I'm sure we'll pick some more up on the Q&A. We're very pleased that we were able to move fast and capture the opportunity to pick up Sval Energi's portfolio of high-quality oil and gas assets. Of course, I'm very pleased with the DNO team and our ability to do so. It would not have been possible without a counterpart who could move equally fast in HitecVision. We're very grateful for the process we've been through.
The deal brings scale and diversification to us and gives us a big boost on global production and reserves, but particularly in the North Sea where we're quadrupling our production and setting up for these financial and operational synergies with the discoveries, which we plan to continue to feed with our exploration machine. Not least, keep an eye out for further acquisitions. Thank you.
Okay. Thank you, Chris, for the excellent presentation. With that, I think we are ready to start the Q&A session. And the first question comes from Tom Erik Kristiansen. You are allowed to unmute.
Congratulations on a great deal and a good market reaction as well. Can you say a bit more about the process here? It has been rumored for sale, Sval, for a while, also at much higher valuations than where you are acquiring it. Can you talk a bit about kind of how this come together at this point in time? The second question is more on the development of the portfolio you are acquiring. It's quite a lot of 2C resources there. How fast do you think you can bring some of that into the 2P category? Thank you.
Good questions. If I take the development portfolio, I can't give an exact answer, but we're very excited by the buffet of opportunities we've got ahead of us. As I mentioned during the presentation, one feature of a lot of the 2C in the Sval portfolio is it's associated with large already producing assets, which is a different challenge to developing new satellites, which has been, of course, the main component of our 2C.
Those, in my experience, identifying further upsides in big fields as we do in Tawke and Peshkabir all the time, if you can identify it and mature it geologically subsurface-wise, that is pretty simple to bring on stream compared to a satellite tieback. I would hope that we can maintain the sort of conveyor belt of opportunities to development, which I think Sval themselves have achieved. When it comes to the process, maybe I can ask Erlend to comment on that.
Sure, I can do that. Obviously, as both Bijan and Chris have touched upon, this is an ideal acquisition for us as such. It is something that we have been interested in for quite some time. We have been in dialogue in the past without succeeding. When the opportunity arrived now, as Bijan mentioned, we seized the opportunity and went on it with pace. We had a counterpart that was constructive and allowed us to get a deal done in a short period of time. Besides that, I think it's up to HitecVision to really comment on the process that they may have had. I can confirm that we have not participated in any auction process for this.
If I could say one thing, I think you asked about the prior price and the price we pay. The price is lower. This is a different Sval Energi. I think last year when there was a process in place, I think there was a wind farm that was part of the package, and there were some assets that were subsequently sold to Equinor. The package is not the same package as last year. The pricing is a fair and full one. I'm sure I know HitecVision would have nothing but that. We're very pleased with the outcome. I hope they're pleased with the outcome. It's really been a win-win given, again, their requirements and the way they conduct themselves as a private equity firm.
For us, a longer-term player and one where some of the synergies mattered more to us than they did, perhaps, other companies. I cannot speak for other companies. It has been a win-win. We are pleased with the outcome.
Thank you very much. Just a short follow-up, if I may. You are still saying North Sea, but it is now 99% Norway, it feels like. Are you considering doing larger acquisitions on the U.K. part of the shelf as well, or is it politically too difficult there to see that happening in the near term?
I have been saying for some time in answer to that question that the priority has always been Norway, given that portfolio discoveries and the way our exploration team keep feeding more discoveries into the funnels, including the Mistral discovery we announced only this week.
Norway has always been a priority, but it is a competitive market, and there's limited opportunities. We have opportunistically picked up opportunities on the U.K. side. I don't think that's ever been as central to our strategy as Norway.
Okay. Thank you very much.
Okay. The next question comes from Nikolas Stefanou . Nikolas , please unmute.
Gentlemen, congratulations on what looks like a really good deal. I want to ask you three questions, please. The first one is kind of like on the overall strategy. Is this kind of like a culmination of what will have been sort of like a policy of diversifying away from Kurdistan, or should we expect more deals in the next coming years? That's kind of like a bit more on the strategy side. And then a couple on the assets themselves. There's quite a bit of.
Yeah, w hich you will take, or will you try to refinance that? I think you'll have to repeat the last part because we lost you.
Sorry. On the Sval debt, is that one RBL you will try to refinance? I just want to have a bit more details on the financing side for the debt of Sval. Finally, on Kurdistan, there have been some updates trying to reopen the pipeline and consultant coming in. Can you give some comments there, please?
Let me take that. Again, we're not here to talk about Kurdistan, but Kurdistan is getting a lot of press, a lot of attention. And I think a lot of that press reporting reflects the reality of what's going on on the ground.
You know our conditions and the conditions of some of the other international oil companies about when we would restart production and through the recovery of our arrears, through certainty of payment, and the honoring of our production sharing contracts. Our position hasn't changed. I think at some point, there'll be a breakthrough, and I think the companies will be pleased with the outcome. If not, we won't export.
We're happy to keep selling. We're not happy, but our local sales strategy and pricing have kept us going. Improving of that, we'll step up investments again in Kurdistan and ratchet up our production beyond where it is now, which we've maintained very well. We drilled no new wells for a while, and we're still keeping production going at around 80,000 bbl a day in fields that have natural field decline of 15%-20% a year.
We have done a stellar job. We are very thrilled with the success of our team on the ground in Kurdistan and also run out of our Dubai office. That is with respect to Kurdistan. We have really nothing more to add, in part because there is not much more to add. There is a daily, again, update in the trade press on what is going on in Kurdistan, and that has become a global issue now.
Many of you may know that the American Secretary of State called the Iraqi Prime Minister and said, "Get to the program and deal with the companies and honor their contracts, and let's get exports moving." It is now a lot of participants in those discussions, a lot of interest in the outcome. In terms of strategy, we want to do more. We are in a growth mode, but we will not grow; we will not do a crazy deal.
We want to make sure the deals we do work for us and have synergies or otherwise have other synergies and other complementarity for us. Those are not easy to come by. We have looked at a number of other asset sales in the past. Some were purchased by others who paid a higher premium than we were prepared to pay for their own reasons. They may have other synergies. Others pulled the deals. There have been a lot of broken sales. We are on the lookout to grow. Certainly, more growth in the North Sea, the U.K.
The process now with the government's looking at their tax rules, and they may get even harsher, or they may let up a little bit. We will see. We are looking at other countries as well. Norway was an obvious one, and this transaction was an obvious one.
When we first came to Norway, I was asked by some of our investors, "What are your ambitions?" I said, "To get up to 50,000 bbl a day." It has taken a while, but we've gotten there and more. We will do deals as they come. Our strategy is to keep growing. Does that answer most of your questions?
It does, yes. The other one was on the debt of Sval and what that is and how you can refinance that?
The debt was Sval's debt. We are going out and finding the right package of, as we've said, as Chris said, to and we have lots of opportunities available to us, some combination of RBLs and bonds and perhaps financing repurchases. We have to find the right mix that works for the company.
We will be spending the time we have between now and closing to work that out. I expect if we push, we can work that out within the next week. There is a lot of interest in this size portfolio, this size of a company, but also one that has so much production that another entity in trading could really create great value that is not available to us. We are not a trading company. There is a lot of interest. I think we will have no trouble putting together our own package. As Chris said, some of the banks in the Sval RBL package are also in RBLs. I am sure there will be others knocking on the door to get in on that side. Certainly, the volume of our production is such that there is a lot of interest.
If Kurdistan production ever is exported under our control, and that's been raised that if we can't find resolution with Baghdad and Kurdistan, certainly a payment they've offered us, I'm sure you've seen in the trade press again on several occasions. Maybe we'll just give you a share of the oil in Ceyhan, and we'll resolve the issue of how the payments come and when they come and whether you're satisfied with them or not. That could be quite exciting for us as well.
Thank you so much.
I think the next one is Erik Christian Borthen . Please go ahead. unmute yourself.
Yeah. Hi. Eric Borthen from Fearnley Securities here. Congrats on a great transaction. You touched upon it already, but obviously, on the debt side, you're using cash now. You're moving from a net cash position into more of a net debt position. I appreciate it's early days, but could you give any sort of comments on what sort of leverage you're looking at and what sort of appropriate strategy, given that your majority production comes from the North Sea now?
I mean, the cash didn't fly away. The cash was transformed into assets, or will be transformed into assets that will generate even more cash. It is not like we're going to net debt. Why not? If we have on the other side of this assets that are generating significant cash flow from operations, and that's the business we should be in, it doesn't help anyone for us to have $900 million on the balance sheet that we're not doing anything with. Our investors want us to spend that money and create even greater value, and so do we.
Our debt has not been terribly expensive because through this period, interest rates suddenly came up. Three years ago, interest rates were zero. If our bond, the coupon was 8% or so, it was 8% cost of money. With interest rates now at higher levels, we've been very active, the Treasury Group, in putting these funds in deposits, earning 3.5-4%. Our cost of debt has been whittled down to half of what the bond coupon rates have been. We think we can do better than that, obviously, with these assets. As we borrow, we're converting those borrowings into assets and hopefully be able to pay down the borrowings and generate another pool of cash that we use for our other acquisitions.
Okay. Next one up is Lars Heltne, journalist from Energy Watch, I believe. Please unmute yourself.
Thank you so much, and congratulations on the deal. I just had a question about the organization after the deal is done. You briefly touched upon the staff transfer too. I was just wondering, is every Sval employee going to go to or have a place in DNO, or will it be necessary with some staff reduction? Specifically, the current CEO of Sval Energi, Mr. Engebretsen, will he also join your team? If so, in what capacity?
We have not been. I have not met any of the Sval management team or employees. I'm sure my other colleagues have. They spent more time in Norway and dealing with other companies and management teams, but I haven't. Our preference would be that everyone stay put. We don't close until again mid-year. Until then, these individuals will all remain Sval employees and not DNO.
The numbers are not great. I think there are 92 individuals in the Sval team. That's not a large number. If there were thousands, that'd be a different issue. I expect that if the team is as we've been told by HitecVision, we can find room for everyone who wants to join us. Some may decide not to do so, and some may be looking for other opportunities before then.
It's not a large number to integrate into our group, and it will allow us to—who better to manage these assets than those who know them very, very well. So we'd be excited to have an opportunity to sit and have a discussion with those who choose to move over and find the right spot for them. In the larger DNO portfolio, it doesn't have to be the North Sea portfolio.
We're always looking for good people. In Oslo, DNO's main operational or executive office, we have a big office in Dubai. I know a lot of Norwegians like to go to Dubai because then they don't have to pay taxes there, and then they pay taxes in Norway, and the weather's nice. There is always a big push by Norwegians to go to Dubai for understandable reasons.
We have exciting positions in Kurdistan for those who like daring do and like to be in exotic places and be part of that story, which is quite an exciting story. We are looking forward to meeting and discussing with the Sval employees and hope that there will be a lot of them still there with closing and that we find a place for them in the organization.
We will need people looking and working these assets who've done it before and have the relationships with the joint venture members and the relationship with the operators of the hubs. There is no plan yet. We have our own North Sea team. I'm sure there's some nervousness on their part as much as there's nervousness on the Sval side as to, well, what happens next? We'd like to keep everyone in place, but maybe do some moving around of people and improve our organization.
Every acquisition that involves a team coming over provides an opportunity to move people around and put them in positions where they can contribute more. If the Sval employees didn't come over, some of them and many of them and again, I hope that's not going to be the case we'd have to go out and hire new people to do this. You can't quadruple your production. With the team that was doing 20,000 bbl a day, you can't do the same with 80,000 bbl a day. We will be in a hiring mode as well anyway.
It looks like there are a lot of questions. We will try to round to give it another 15, perhaps 20 minutes. Marius Lorentzen, journalist with Finansavisen, I believe you are next.
Thank you so much, Jostein. I hope you can hear me. Congratulations on a very interesting deal. Given the exploration success Elisabeth and her team have had in Norway, what is your view on your own future growth through M&A beyond this deal that you have secured now with Sval Energi? We have not seen that many deals on the NCS. This is obviously a major one. Do you see further growth potential for DNO through the M&A path?
Yes, is the answer. I think if you look at the recent history of Norway, I guess the oil industry in general, consolidation and growth through acquisition has been the feature of many companies. We have seen several examples on the regional continental shelf. Why could not DNO be the next one? I could say that is one of our ambitions. That is not to downplay the exploration side of it because that has been a very important growth engine for us.
Of course, the bigger you get as an oil and gas company, the more reserves you have to find just to stand still, let alone grow. I mean, I know Elisabeth is looking forward to joining forces with the Sval team. Maybe you can make some comments on the opportunities we are looking at in the portfolio, Elisabeth? Yeah.
I think we know Sval quite well through both exploration and producing assets that we have. They have a strong technical team. That's going to be a good addition and knowledge sharing within the company. We know their portfolio quite well as well. They have a lot of producing assets where we have had exploration success and have discoveries. It's going to be really a great contribution and a good value creation for us to see that we can tie back to infrastructure that we sit in. That's where you get a better understanding also of the infrastructure. I'm really looking forward to work with the strong portfolio that we are getting now with the Sval and DNO merging together.
Also, again, there's a reason we have this team in Oslo on this call.
We've said before, and we say now, we're going to grow through organic growth through exploration, development, and production. We've launched that. We've been very successful on the exploration side. That's really Elisabeth's area of responsibility. Find the stuff, get it on production, develop, get it on production. In the meanwhile, we're going to chase acquisitions where there are synergies and where the price is right. Erlend is responsible for business development. He's chasing acquisitions.
We're doing both organic growth, but also acquisitions to take us to the next level. As Chris says, we're on a treadmill. We've got to run faster just to stay where we are. We're committed to doing that. I think our track record on the exploration side speaks for itself. We hope to prove we can do both of these and do them effectively. Our challenge is going to be getting some of our discoveries into production sooner than is the case in Norway. More Gulf of America kinds of practices. [crosstalk] That is a challenge we have to deal with.
Okay. Next. Sorry, Marius, did you have a follow-up?
Yeah. I'm glad you're on top of your geography there. Just a quick follow-up then. Given the financial profile you described combining these companies, does your ability and willingness to allocate more capital to exploration on the NCS change with this deal?
No, I think we want to keep going. We're successful. We want to keep going. It's an expensive enterprise, but every time I say this is expensive, I'm told, "Well, this is pre-tax." That drives some of the mindset. No, I think we have no reason to stop that now.
The additional, again, cash generation through the acquisition will allow us to do more. We have funds for that. The key is going to be that's going to help us bring these to development faster because development is also usually capital-intensive, pre-tax. And so will be in a better position to push harder and to act faster on those.
Could I just add to that again? That is one of the reasons, the fundamental reasons that we came back to the Norwegian sector. First of all, it's quite amazing the amount of discoveries that that so-called mature basin turns out. That is, of course, the most important reason to explore somewhere because you and your competitors are finding oil and gas in commercial quantities. The second is, as Bijan's touching on it with the Norwegian, it's a very supportive Norwegian tax system.
It reduces the financial risk of the technical risk. Does that make sense? It reduces the financial risk associated with exploration compared to pretty much any other basin in the world. That is one of the fundamental reasons for being in the Norwegian oil and gas space. I think you'll see us continuing to invest, particularly given our track record.
We've got three more people wanting to ask questions, and I think we'll stop it after those. Nasir Iftikhar, I think you'll have to introduce yourself first. Please unmute your microphone.
Yes. Hello, everyone. Just a private investor.
I think you have to speak out louder. It's hard to hear.
Yes. Just a minority shareholder from Norway. Can you hear me?
Just about. Speak louder, please.
Yes. I'm just a minority shareholder.
Welcome. Welcome.
Thank you. And congrats, Chairman Sir. I had actually questions relating to the debt restructuring, but I think you've covered some of it. We could actually just jump over to the strategy plan, road plan for this year with regards to dividend, etc.
This year, we have two challenges. One is trying to put the train back on the track in Kurdistan. That's taking up a lot of our time. If we're successful at that, it'll make a significant difference to the company. Our activities will ramp up. Our drilling activities will ramp up. The cash flow will be significantly enhanced. We have something over $200 million in the arrears that we hope to get back under these arrangements. That'll make a big difference. The other challenge in Norway and the North Sea side is to keep going with our exploration activities.
There are a lot of these wells and programs that have been committed in advance, and we want to pursue them. At the same time, to integrate the assets and the teams into the DNO organization. That is going to be tough too. We already have plenty of challenges ahead of us with these two projects. Still, we'll be looking for other opportunities. Erland likes to travel around the world to some exotic places sometimes, looking for opportunities. We'll be in that mode as well. It will be all hands on deck and longer days and shorter nights for the team. I think many of us are committed to make that happen. This work is fun. We have fun working together. We have fun doing what we do.
We have even more fun when we have discoveries and good transformational acquisitions like this one. It just makes it more pleasant, exciting, adventurous, challenging company to be in and the line of work. I mean, the oil and gas industry is among the most challenging. It was not for two, three years, but we are back. Never went away. We never changed our name. We never claimed to be what we were not, a renewables company or a wind company or a sun company or otherwise.
We said we are an oil company, but we are a responsible oil company. We have in Kurdistan, for example, where we operate and control how things are done, I think, the cleanest oil and gas company in Kurdistan, in all of Iraq. We do not flare very much, some sort of field flaring for small amounts of gas.
We take the gas out of one field, Peshkabir, and we put it into Tawke. It's helped us get more oil out of Tawke, but it's also meant that we've stored the gas for the use of future generations of Kurds long after we're gone. We will not have wasted their gas. Their gas will be theirs to use. In the meantime, we haven't polluted the air, and we haven't choked people and made them ill. We're very, very proud of that as well. We've been very, very responsible tenants, in a sense.
That's Kurdistan to the Kurds. We're there for several decades, and we want to contribute. We enjoy contributing as well. We have a very strong program of engagement with local communities, including on one of our fields. We ordered a trash truck. We were told that they use donkeys to move trash around.
We bought them a brand-new branded trash truck, and that was appreciated. Some of these things are maybe small for us, but very, very large for them. It is a sign of our commitment, our engagement, and a sense of social responsibility. We all take that seriously, some of us in our private lives and the rest of us in our corporate lives.
Okay. We have two more people. We are trying to wrap this up in a couple of minutes. So please, Bernhard Arntzen, you can go ahead and unmute yourself. All right. Now we can do it.
Okay. Hey, guys. My name is Bernhard Arntzen, as you just mentioned, and I am a small shareholder from Norway. Congrats on the acquisition. Seems like markets like it as you do it.
And I wanted to just wrap up a little bit about since I just wonder since DNO grew as much as it grew after this acquisition, can we expect lower rates on the financing after that? Not sure if someone spoke about it, but I think there was a thing about dividend. Why is it paid in Norwegian kroner? Is it possible that we can be paid in US dollars since Norwegian kroner, as we all know, is kind of like sinking? One more thing, if you touch the Baeshiqa oil field, I'm not sure because I read about it, I'm not sure if you mentioned it, but I tried to figure out how is the production possibilities there when the ITP situation is loosening up. Those were my kind of thoughts.
Let me start. I'll respond to the Baeshiqa one and then ask my colleagues to respond to the cost of money and borrowing and financing. I will also say that, of course, you can always take the NOK, the NOK is freely convertible to dollars. I think the tradition is we've kept dividends in NOK terms. Obviously, if we continue to grow and grow profitably, we would be in a better position to enhance our dividends. All of us on the team have shares or phantom shares that pay dividends. We'd all love to see dividends go up.
We've made an effort for several years now to have predictable quarterly, timely dividend payments. Our dividend yield has been about 10%. It fluctuates, sometimes 9.5%, sometimes 10.5%, but it's been steady. We'd like to see more, yes, but we have other responsibilities. We want funds to grow.
We want to make sure that we're good clients of bond investors. And we've had, I think, what, 20 years of borrowings. We've never defaulted, never asked to change the terms. We borrow, and we pay back in time. The bond borrowings have been a tremendous vehicle for us to grow. We want to continue to tap into that market for many reasons. On borrowing costs, I'll ask Chris, Erlend, to talk about why we think borrowing costs will go down.
Yes, sure. I can try to cover that. Obviously, as we have discussed, this transaction has rebalanced our portfolio with a much greater weighting towards the North Sea. We believe that represents a significant enhancement of the credit and the risk profile of the company. As such, we also think that will come with a lower cost of capital.
That is one of the synergies that we believe in and that we have discussed in this call. As part of having a much larger portfolio and more production weighted in the North Sea, it also provides further opportunities for us in respect of financing, opportunities that may have not been available to the same degree previously, which again provides us with more flexibility, which is always great when you are looking to optimize your cost of capital. As Bijan touched upon earlier, we see lots of demand from different sources of debt. We are very confident in that respect.
We have not touched the Baeshiqa oil field. If you could just mention what we could expect from that oil field in future when the Tawke, Iraq situation loosens up.
Let me try to answer that. I mean, there are a number of technical issues and discussions we can have. I think the most important one is that with the stoppage of the exports at closer to international prices, we decided that capital discipline mattered, that we were not going to make major new investments, and that we would focus on keeping production going at Tawke and Peshkabir, our two fields that are already developed under production.
The Baeshiqa drilling we have done to date has been expensive. The wells there cost three, four times those of the Tawke wells, for example. We have gotten talking down today maybe $5,000,000-$6,000,000 a well. Baeshiqa has been much more challenging in terms of the cost. We have put it a bit on the back burner.
The appraisal wells we've drilled, some of them, this is all in the public domain, have not been as successful or not as easy as we had hoped. We've tested in earlier wells considerable flows of oil and gas, but we don't have the certainty of what we've tapped into, the size, and so on. We are still scratching our heads about Baeshiqa, but aren't prepared to put more money into it, a lot more money into it, until there's a resolution and where our revenues from Kurdistan will pay for the work that we're doing there.
So far, I think capital discipline suggests that while we want to keep Baeshiqa, we need to cut down on our spending there, on capital spending. I think the government understands that.
The Baeshiqa, our partner Baeshiqa, owns also the Turkish Energy Company, which is an arm of, I think, BOTAS, which is an arm of the Turkish government. It is good to have Tawke as our partner. They have been terrific partners of us in Baeshiqa. That relationship, that connection, is also obviously very, very important to us because the relationships we have established with our counterparts, Chris, myself, and others, and they are willing to go along, be on the ride with us, and see where this goes next.
Okay. Since we are past the one-hour mark, the last question, the very last question goes to David Mirzai. Please introduce yourself.
Hi. Morning, Bijan, Chris, and team. David Mirzai, SP Angel here. I will try and keep my questions to the point. Firstly, you will appreciate Sval is a fairly opaque entity for most research analysts. They previously talked last year of reaching 100,000 bbl a day from their portfolio. Aside from the sale last year, what else has changed that that's now looking more like 60,000 bbl a day steady for the next few years?
Secondly, just on operatorship, given you're an 80,000 bbl a day producer in Norway, what are your ambitions regarding operatorship of assets in Norway going forward? Just lastly, given that you're moving above 120,000 bbl a day, I'm aware that the ratings agencies have a step up above 80,000 bbl a day where you have potential to have a lower rating. Is there another level that you need to reach, or what's the next level, shall I ask, above 80? Thank you.
Here, Let me go at that. First of all, I'm interested to hear that you heard Sval talk about 100,000 bbl a day last year. I guess that's a question you'll have to address to that. You've seen what we've presented this morning. Operatorship, Bijan may have some comments, but I think we've always in DNO, and I think that goes back through at least 40 years of the 50-year history. We've always felt it natural to operate. We like to have that control. That, of course, or I should say, however, one of the realities of the Norwegian sector is you have one very dominant operator, the national company.
And then Aker BP and Equinor that have picked up several others. We like to get operatorships in our exploration portfolio and work with it. We'd love to grab an operated asset if we could, but they're even harder to come by than deals like this, I might say. We make the best of what's in front of us. We're very active technically in the licenses we participate in, and we believe that's appreciated by the operators, and we believe it adds value to our business.
We do have a number of operatorships on exploration assets. Elisabeth, whether it's a number, about half a dozen or so of our licenses are operated by us. More and more in the APA rounds, the ministry gives operatorships to us. At first, it was none, and now it's starting to grow. Every round, we pick up several operatorships. That, as Chris says, is part of our ambition. We've seen what a difference it makes in Kurdistan. We operate. We're nimble. We're quick. We're bold. That's had great returns for us and for our partners. When you're in control of your operation, that's a—you can make a difference. And I like to operate.
I think we all do. We have set up an organization that is capable of doing so. We have proved that in Kurdistan. We have to meet certain standards and criteria to be recognized as an operator in Norway. We did that, I think, several years ago. We are recognized operators of capabilities in the organization. Hopefully, some of these discoveries will bring into development and into production quickly or sooner rather than later. And then w e operate those so we can end up being operating assets organically as well as operatorships through certain acquisitions where that is a possibility.
I think with the price we have paid on this deal and the speed with which we have done it, sellers of assets will probably give us a call when they consider selling it, where they might not have done so before. So w e' ve also positioned, one of the synergies is we' ve positioned ourselves to be recognized and maybe a desirable buyer, and that is a terrific place to be in. So another synergy.
Okay. Thanks to everyone for attending on this. I think we had a record attendance today and a record amount of questions. Yeah, we will look forward to seeing you again soon.
Thank you .
Bye.