Dno Asa Ord

Good morning and welcome to DNO's first quarter in 2025 earnings call. My name is Jostein Lovos and I am the communication manager here at DNO. Present with me in Oslo on this beautiful day in May are executive chairman Bijan Mostavaramani, managing director Chris Spencer and CFO Håkon 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 Håkon. 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.

Thank you. First, I mentioned who the call is primarily for. I should just add to that it's primarily for our shareholders and our bondholders. And 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. To any questions that you'd like to post 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 and also have. Before the meeting, I'd like to again. important for us, transformative in many important respects. First and foremost, with the announcement of our acquisition of Sval Energy, 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. at the time as of the completion of the transaction that's significant we roll it together with the small assets the dno assets will total output uh averaging uh i think just over uh 80 000 barrels of oil equivalent today and that now puts the the combined companies very significant milestone and the one that we hope to uh to continue uh improving on as we bring our discoveries on stream hopefully in a rapid click but also as we perhaps do additional acquisitions whether they're smaller bolt-on acquisitions in the north sea to improve our perhaps through larger acquisitions that might become available to us. So we hope and we expect on an upward slope in terms of acquisitions and additions through developments in terms of North Sea producers. There's been other, again, advantages to us. We expect having a larger reduce and improve the terms of financing for DNO, so to reduce our cost of capital. And there are different reasons why we expect that to be the case. Importantly, because Norway is considered more safe and more secure and more credit worthy than our other leg, where we have important production in Kurdistan. So there are these strategic advantages to us. We will be able to access some of the flow through these through these hubs, and that will help us again accelerate the development of our our impressive list of discoveries. As those of you who follow us know, but DNO has been over the last several years of one of the most successful explorers in the offshore Norway. I think in one year we probably came in the number one in terms of the cumulative size of the discoveries that we've made so we've been very successful and we hope to continue that uh that trend as well importantly also with with the uh the merger position but i think of it as a merger of the of dno and small we will acquire a crack and very impressive uh of a group of small uh employees right-sizing done recently. But the group, I had a chance to meet with them yesterday in Stavanger, and it's a very impressive group. And importantly, coming from a high-tech group and ownership, they have a private equity mindset. and private equity culture that's been importantly created and nurtured by the senior high-tech individuals, John Knight and also Einar Jelsvik, to whom both are friends and to whom we owe a lot of gratitude for creating and nurturing private equity investors first. mindset as well. And the DNO has been moving in that direction more and more. As you can see in the, for example, our dividend policy, which over the last several years we've created and maintained and do so for this quarter. And this is part of our announcement. And 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. 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 very knowledgeable about Sval, the organization of the Norwegian oil sector. industry background and a very active partner, in fact, in a major US private equity firm. So 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've said in the press release today that we're driven by the need and the expectation that we will move faster, cheaper and better in terms of bringing discoveries to market. these would have been on the on development less than a year here in norway it takes three four or five six years sometimes to get there we want to move that faster and uh and uh i think other companies of our size and scale uh be very supportive and hopefully even the largest of the companies here in norway would uh would be motivated and more inclined and uh and joined with us in trying to accelerate the uh development of many discoveries in Norway that are sitting, waiting to be monetized. 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 and production, company operating in Kurdistan, and we've done it the DNO way, of innovative creative and quite fast techniques and mindset for putting oil on production and 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 been we've surprised everyone the market maybe not ourselves but we've surprised everyone how well we've been able to that typically have a natural decline of 15 to 20% a year. We arrested that decline. In fact, we were able to inch it up a bit through creative So we'd like to continue to pivot the DNO and the industry towards that kind of Norwegian Viking get it done mindset. the nature and character of our presentation and our financial presentation, operational presentation will change and that'll be very exciting. So I look forward to seeing many of you at the second quarter presentation. I think we're going to have the combination of small and the APMR operations in the North Sea. I expect we will have an appeal to a larger group of investors, so I expect hopefully all our current investors will still be with us, but I expect to see other investors who will find the DNO an attractive opportunity for them because of our North Sea presence. Chris.

Thank you again. And good afternoon to all who are joining this conference from me. So let's dive straight into the slides following that production from Bijan. And as we often do, sorry, 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 and we'll be talking more about that as Bijan has already mentioned. So let's get into the slides. Thank you. And the highlights. you can read for yourselves. I think we've announced this as a strong, 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 of gross production that Bijan mentioned. And we have done all that safely. We had no recordable incidents of any type in our operated activities, despite drilling operated well in the North Sea and high level of well intervention activity in Kyrgyzstan. So for me, although the news item of course from the quarter was the huge hugely important acquisition uh i think it's it's really important to our investors that you see we continue to deliver operational excellence and um with the great team that we'll be working within uh once swell and dno come together in the north sea i have no doubt we will continue um 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 bond market. many bond investors listening in today because we've had a great cooperation over 24 years now in the bond market and we certainly see that as a win-win and 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 and we're very pleased to say that uh the board of directors have uh once again approved uh a uh the same level of dividend uh um which is giving us the 1.25 per share on an annualized basis if we go to the next slide then please uh we're obviously all um very excited to be uh that we're still naturally on track to close the uh acquisition um and it's coming up very fast so we're Really looking forward to that. A number of these figures have been mentioned by BHM, but it's worth repeating because we will quadruple our North Sea production and having just re-entered the North Sea in 2017, we are now going to hit 80,000 barrels a day some eight years later, which has been quite a journey. We 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 Swale have give us a great pipeline of projects and infill opportunities to maintain this 80,000 barrels a day in the medium term. And 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've 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 development heavy portfolio and a production heavily portfolio. The other point that we've 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. And what we're alluding to there is that a number of Swell's positions are in the infrastructure that our discoveries need to tie back to. And so we believe and we see from other situations that that gives you much greater insight and we expect that to enable us to accelerate development of our discovery portfolio. So looking forward to driving that forward in the next year or two.