Welcome to DNO's first quarter earnings call. My name is Jostein Løvås. I am the Communication Manager of DNO, and I will share some practical information. Earlier this morning, we have published the quarterly report and presentation. In this call, we will not do a detailed walkthrough of the slides. Instead, our CFO, Haakon Sandborg, will share some initial reflections before opening up for questions. Please note that all participants in this meeting are muted by the organizer and will not be able to unmute themselves, chat, or share their screens. If you want to pose a question, please raise the tiny virtual hand on top of your screen. With that, Haakon, the floor is yours. Thank you, Jostein. Hello, everyone. Welcome now to this earnings call. As you heard, a bit of a different format this time. We think the reasons are partly because we have a good quarter with fairly uncomplicated financials this time. We wanted to keep it now on a different level with not a formal walkthrough or a full presentation, but just to mention some of the highlights and the main points. We'll quickly move on to a Q&A session, as we've heard. For the quarter, we have a release out this morning, a stock exchange release. In that, we are making the statement that oil and gas are back, but you know, never left. You might ask you, "Why you're saying this?" It's basically because we as a company have stayed the course and remained true to our commitment to the E&P industry. This is despite the challenges we've seen to the industry over the last couple of years, and despite the challenges from COVID and supply chain constraints, etc. We are just re-affirming that commitment to the industry in the release and in the heading on our presentation. When we look at the quarter as such, it's a very strong quarter, I think. We have good cash flow. We have an increase in operating profit. With again very high activity in Kurdistan, where we have been spudding five wells in the Tawke license in the first quarter. This is both at Tawke field, at the Peshkabir field. They are working on the Baeshiqa new development. Here we are doing drilling on the Zartik-2 development well, and we are basically more or less ready to start production once we have all the approvals we need from the government in place. For the North Sea, we have a very good start of the year with a new promising discovery at the Kveikje area. This is the first well we drilled this year, and it comes in with a good discovery. Again, a positive start to our exploration program. With the improved profits that we have, we are now basically, as you've seen maybe from our announcements and the presentation, reducing our gross outstanding debt, and we have increased the proposal or the request to the upcoming AGM to increase our dividends significantly for the coming year. That's a very positive development, as well. In our release material this morning, we discussed the production numbers as we normally do. I won't go through all that, but basically say that for the Tawke license, it's a fairly stable production. For North Sea, it's a bit down. Most of that is due to one field called the Tambar field, where there was a shutdown in the quarter. That has reduced the production for Q1 to 12,700 in the first quarter. Those are some of the main operational things that I can highlight. I won't go into all the details on finance, but just say that we are up on Kurdistan revenues because we have kept up production in a good manner and have benefited from the increasing oil prices through the last quarter. For the North Sea, we had a bit of a different situation. The revenues are down from NOK 216 million in Q4 to NOK 131 million in Q1. That's basically because we had very high liftings in Q4, and we have now seen lower lifted volumes in Q1. That's the reason why we have booked lower North Sea revenues. Yeah, those are some of the things on that. Just to mention the important product that we keep expanding in Kurdistan on the gas capture and injection. This program, as you know, has been going on for a couple of years now, and we have succeeded in reducing flaring gas emissions significantly. In fact, the total reduced emission level is aggregating 760,000 tons of CO2 since we got started in mid 2020, up until through the first quarter of 2022. We keep on expanding this project with a second phase now that we're working on. Very important. I think what we should say about that, when people ask us, "What are you doing to contribute to, you know, the reduced emissions on the oil and gas industry?" This is our main product. This is something very tangible, something measurable, and that we can present, and these are the efforts we are doing. I think this is our main and very important contribution. Yeah. Again, just to comment a bit on the Kveikje discovery. This is now becoming a very important exploration area in the Norwegian continental shelf. It's west of the Troll field. There's already a nickname on these discoveries. They seem to form a sort of a highway of new discoveries or a ring road, if you want. We are quite excited about our position in this area and look forward to the next wells that we will drill now in this Kveikje and the west of Troll area. We're also happy to be awarded the 10 new licenses in the APA round in Norway in January. We keep on expanding and high-grading our portfolio in the area. Yeah. Okay. Those are just some comments. On the finance part, you will see all the numbers in the presentation in the report. Just, you know, we're down on revenues because of the lower liftings in the North Sea, but still a very solid revenue of NOK 339 million for Q1. That gives us a very strong cash flow, both net back that we like to focus on, after tax net back. It's up at NOK 275 million now, a strong level. A much stronger operating profit, basically because of strong revenues and much lower costs. Those are those things. As mentioned, we have increased our dividend proposal, and we have bought back bonds in Q1. We are now doing a call, or a partial call on the DNO three bond of $200 million, and that was released yesterday. In addition, we with the bonds we have bought back, $23 million something, we will significantly reduce the outstanding amounts under the DNO three bond. I think it shows the real strength of what we are doing now, that we are further strengthening our capital structure and balance sheet and reducing interest expense, and keep on expanding our investments, so a strong position for the company. You would see that reflected also, of course, in some of the key metrics for our balance sheet, including the equity ratio that we focus on in DNO. Right. That was just to kind of give you the background on the quarter. Happy now to go into a Q&A session, Jostein, and see what interest we have and what people want to know more about. Yes. I think we will start with some questions we have received in advance from a private investor, Torstein Hagen, on behalf of himself and several other investors. The first one is, are you able to increase drilling activity and as such production at Tawke, even more at these high prices? Yeah, yeah. Thanks, Torstein, for that question. Yeah, we are able to ramp up. You know, we gotta be able to adjust our production levels in the Tawke field, and we have done so in the past, as you have seen. Now, we are doing a lot at the moment. We are coming up to four rigs drilling at the Peshkabir and Tawke fields, and we do wanna be sure that we learn from the new wells that we drill and that we have a responsible and sustainable program for the long- term. We will see what we can do, but we have guided that we will keep the Tawke total production output at 105,000 barrels per day this year. I think that's a good level, and you know, we will see how long we can keep it this stable. The Tawke field is more mature and is on decline, whereas the Peshkabir field is a newer field. You know, we'll be able to keep that up in a good way, we think. Just to add that we have good long-term reserves here that we can give us a good R/P ratio for many years ahead. The answer is basically we can take it up and down. We will keep it stable now with the drilling program. Another question from Torstein is, what is the discount to your oil produced in Kurdistan? Does the discount include increased transportation costs as other E&P companies have communicated? Yeah. It does. The discount, the so-called one on Kurdistan is basically that there's a quality part and there's a tariff for pipelines part of the discount that we have on our deliveries. The discount part on quality has remained stable, but there's been some increase in the tariff on the pipelines, especially through the Turkish pipeline that we use to transport our oil through Turkey up to the port city of Ceyhan in Turkey. If you take the volumes of oil produced that we report in our quarterly report and divide that with revenues, you'll come up with an estimated price per barrel. We will see that that indicates a If you do that, to say an indication that you're paying that we're paying around $14.5 per barrel in total quality discount and tariff. The increase here is around 1.5 dollars per barrel from 13 to 14.5. This is partly then linked to the increase in tariffs. It's linked to the. It's because of a link to the oil price. When the oil price is much higher, you pay more in tariffs under that structure. The effect for DNO in the Q1 is around $2.5 million increase in tariff for Q1. That's the level we are talking about, Torstein, on the increase. Yeah, I hope that answers the question. Then there's a question that I think we partially answered yesterday, and that is, whether we were intending to call back DNO03 in May. Is there anything you want to add, Haakon? I don't know. Good question. I think that we had already announced that yesterday, that we are doing that. We're calling $200 million of the bond associated, and we have another $23 million and close to $24 million that we hold in the company. We are reducing that bond by close to $224 million. If you wanna think forward, yeah, what are we gonna do? Well, if you look back on the track record of the company, we've been a conservative and proactive issuer, where we've been very often prepaying, refinancing our outstanding bonds well ahead of maturity. This bond we bought back now, DNO three, has maturity in 2024. In that context, it's not unlikely that we will look at it again in the coming quarters to see what we will do. We will sort of maintain always that we have a long-term profile on the maturities, which is important to us, and also manage the debt level. I think yeah, this is something we will keep on focusing on. It's really an important part of our strategy to be sort of in front of the curve on the bond refinancing and that we want to keep a strong and robust balance sheet at all times. We have a question from Teodor Sveen-Nilsen, an analyst with SpareBank 1 Markets. I believe you have to unmute yourself, Teodor. Yes, sure. Good morning. Can you hear me? Yeah, we can. Yes. Okay. Good morning. Great. Congrats on good Q1 numbers. Three questions from me, if I may. First off, from your balance sheet position, of course, you now propose to increase your dividend, but just looking forward over the next few quarters, it won't be very surprising if you have a net cash position soon. So I just wonder if you could say anything about net gearing ratio, target ratio going forward. Do you intend to run the company with a net cash position? That's my first question. Second question, Kveikje discovery, any thoughts around development solutions and costs associated with that? My third question, just a general on the oil industry, of course, cost inflation is a hot topic now and looks like at least on NCS, that is something that most operators are observing. Do you have any comments around that, and what do you see in Kurdistan versus, NCS? Thanks. Thanks, Teodor. Okay, try to address your questions in sequence. Yeah, on the balance sheet, you know, our ratios and what we think about, as I mentioned already, we have a covenant in our bond facilities that is based partly on an equity ratio of a minimum 30%. We think about it mostly in our company that we focus on maintaining a very strong equity ratio, which, you know, if you turn it around, that will give you the debt side as well. But that equity ratio is now at 37%. It's a good level. I personally like to see that go above 40% and stay, you know, above 40. It gives us a good headroom on the covenant if something should come up. We're thinking about it that way. We have in the past discussed what it would be our minimum cash in the company and, you know, if you look back that we have kept high cash balances over time. That's also to have, you know, a conservative financial position and strategy that we're prepared to, you know, meet complications if we have that and to always be in a strong and liquid position. We'll keep cash at high levels. I think we discussed internally at the moment, at least, exceeding $400 million of cash in the balance sheet, it would be a prudent level. I mean, it can go up and down, but say that would be the floor that we think is very, you know, a strong level for us to keep. On the Kveikje question, the development solutions, I'm not sure I can answer that, but I just believe there are nearby infrastructure available and this could be developed in a cost-efficient manner. Let's see if I have some input here from others. I'm somehow not accessing that. Let's see. I think my colleague helped me saying it's several options tied to this highway or ring road I talked about. I don't have a real answer on that just now, but there are several options that we have available, and that will be addressed as we develop, hopefully this interesting and promising discovery. Cost inflation, yeah, that's becoming a problem, more so now, in the current situation. I can just say that, in Kurdistan, our main, some of the main costs are around the drilling costs. We have good contracts with the drilling contractors, long-standing relationships with the drilling contractors. I think we're in cooperation with our business partners on the drilling side can keep those expenses, you know, that they won't escalate that much. Some of the other services, we see cost inflation in Kurdistan, but not to any alarming effects so far. Maybe more of an issue in the North Sea that we see some way up there. You would see maybe it comes from steel prices that we use, but raw materials, et cetera. I think it's more on the personally, I think it's more on the services side that you will see pressure. You see some of the oil service companies doing real well now and seeing a revival in their markets, which then in turn will mean that they are getting better prices. Yeah, I think the answer is there will be more pressure on the cost side, especially in the North Sea, Kjetil. Just on Kveikje, of course, I understand it's early days, so hard to comment on. Is there any chance that you will be able to submit a PDO under the temporary tax regime, i.e. by end 2022? We'd love to do that, but that's gonna be very hard to do, I think, Kjetil. We have to miss that window on that one. Understood. On the other hand, the way it looks, that will be doing well even without the tax incentive support. I think, that's not gonna drive it. Sure. That's all from me. Thank you. We have some questions from Nikolas Stefanou with Renaissance Capital in London. Please. Hi, guys. It's Nick from RenCap. Thank you for taking my questions. I've got a couple to ask, please. Haakon, I just want to go back to that balance sheet question. You know, I mean, calling back those bonds, where, you know, I mean, presumably in a rising interest rate environment, the refinancing would be a bit more expensive from a cost of debt perspective. How does that tie in with your inorganic aspirations? Because I think, you know, you have stated in the past that you are quite keen on buying something out of Kurdistan. So if you could comment on that and perhaps, you know, the kind of like size such a transaction could be and how the capital structure could look like on the back of it. Like this, you know, you as the CFO, how you kind of like think of that. That's the first question. Then the second one is on the shareholder distributions. I just want to clarify if the NOK one per share, if that's kind of like a firm sort of like commitment to pay us dividend this year, or is it, you know, what potentially you could do as kind of like an indication? I also know that you did ask for approval to buy up to 10% of the, you know, the outstanding shares back from the market. I mean, clearly you're not gonna do that, but I just want to see how kind of like buybacks could fit in with these share distributions this year. Thank you. Great. Good. Thank you, Nikolas. Good questions, as always. Starting with the calling back of the bonds, as I already discussed, it's also part of our debt management and how we do that. You know, we're proactive, as I said, in the early prepayments and refinancing and always be with a long-term view on our long-term profile on our debt maturities. How does that tie into acquisitions and capacity to take on acquisition is the way I understood your question. Well, we, you know, when we take back this debt, we will still have a very solid position on our balance sheet, and we have high production, low costs, and we generate cash flow. We will think we'll be able to have a even stronger position going forward. We will still have a good capacity to do transactions and M&A that we have been looking for. Much of the recent focus has been on the North Sea for transaction opportunities, as you may have seen, I'm sure, a lot of discussion that you also witnessed. With the current oil prices, you know, the high levels and the fluctuations, it's hard to agree on the valuations for M&A between the sellers and the buyers. That's part of the reason why we haven't landed anything over the last years. I think it's very safe to say that if we do it in the North Sea, we'll have a very strong support from our RBL banks that would be part of the financing on an acquisition. If there should be opportunities elsewhere, especially then Kurdistan, we will have to see what levels of size we can look at. Recently, most of the focus on M&A has been on the North Sea. The NOK 1 per share dividend, the request to the AGM is to be seen as a request from the board of the company to the shareholders so that we can dividend up to that level if that's seen as prudent and a good thing to do during the one year from the AGM that's taking place at the end of this month until a 12-month period until the next AGM next year. You know, we're not saying we're gonna pay out all that NOK 1 in the first month, but it will be something the board will decide how that's gonna be done, you know, in parts or in full, and when it will take place. It's sort of up to that level is the authorization we're asking for. I think your third question was on the 10% buyback on the shares. That's a sort of a standard authorization we have had in the AGM requests to the shareholders for many years. It's been some time since we used it. We like to have full flexibility, and you will see that in the request to the AGM that we're asking for for several, you know, repeating authorizations. The request for buyback of shares is one of those repeating authorization that we like to have in place. That we have full, you know, access to opportunities, if we see a good situation where we can use that or some of the other authorizations that we're asking for. Yeah. Okay. I think I... Sorry. Answered your questions, Nikolas. Just a follow-up. Sorry, just to clarify, from Baeshiqa, are we still kind of like targeting the same kind of like exit rate that we spoke about last quarter? Or do you guys think you might exceed that? I'm not sure we discussed, Nikolas, the exit rate. I think what Baeshiga was saying was around 8,000 barrels per day. Sorry? I think what Baeshiqa was saying was around 8,000 barrels per day on a gross basis. Yeah. We could easily get to that level, I think, if we can get drilling on the three wells we're targeting this year, together with the two wells we have already in the discovery wells. That's fully possible to get to that level. We are drilling now, as I said, Zartik-2, and then. Sorry, I think we said 4,000 for the year in the previous set, not 8,000. That's what I'm saying. That's the average. I think Nikolas is discussing the exit rate. 10,000 apparently was mentioned. You know, I can just confirm, Nikolas, we would be able to get there if we can get these three wells done and the development program done the way we plan. Awaiting the remaining government approvals to get all this work completed by year end. Okay. Understood. All right. Thank you. This was intended as a short call. Maybe, Jostein, you will manage the remaining part of this and Okay. Yes. I think we will close now. There's, I think, Teodor has the quick follow-up question. That would be the last, I think, from for now. Sorry. I think you have to unmute yourself. Yes. Thank you, Jostein. Just a short follow-up. Maybe it's not that short, but it's regarding cash dividend versus buybacks. Any comments on your preferences between those two choices? Yeah. We have kind of started a dividend program some years back and wanted to have a sort of a long-term reliable, and that's something you could understand when what will be coming dividend program. We had the unfortunate drop in the market with COVID, especially 2020. We suspended the dividend payments. We wanna come back now to a long-term dividend program so that people can know what to expect from the company. That's gonna be one target is to have a long-term dividend program. That's one preference. Dividends versus buybacks, well, I don't know that will give it a real clear priority, Teodor, but at least we wanna keep this dividend program in place for the benefit of our shareholders. If there's an opportunity to do something on the buybacks on the shares as well, I'm sure the board will discuss and consider that. What has been established is the ambition and the target to carry out a long-term dividend program. At least you can look for that, and then that will then maybe be complemented by buybacks. Okay. Good. Okay. Thank you. I think this, earnings call is over, and, we thank you all for taking part, and I will look forward to see you on the next occasion. Very good. Thank you all. Bye. Bye-bye.