Dana Gas, the Middle East’s largest regional private sector natural gas company, announces its financial results for the six months ended 30 June 2012 with a net profit after tax of AED 387 million, an increase of 79% as compared to AED 216 million in H1 2011.
Revenue from the sale of hydrocarbons increased to AED 1,254 million, with gross profit reaching AED 767 million. These figures represent increases of 1% and 13% respectively, compared to the same period last year. This is due to production growth in Kurdistan Region of Iraq (KRI) coupled with higher market prices for oil, condensate and LPG during the first six months of 2012.
The above net profit excludes an unrealised loss of AED 19 million on Dana Gas’ 3% shareholding in MOL, the Hungarian-listed oil and gas company and a strategic partner in Dana Gas’ Kurdistan operations. This loss is booked directly to equity in line with the Company’s published accounting policy, resulting in Total Comprehensive Income of AED 368 million.
Earnings before interest, tax, depreciation, amortisation and exploration (EBITDAX) was AED 822 million compared to AED 814 million in the same period last year.
Commenting on the results, Dr. Adel AlSabeeh, Chairman of Dana Gas, said:
“We have achieved our revenue estimates for the first half and posted strong net profit figures of AED 387 million. Our revenue collections were in line with expectation and we continue to have constructive discussions with both the Government of Egypt and the Government of the Kurdistan Region of Iraq on payment of the Company’s receivables. Overall this has been a reasonable six months financially and we look forward to the rest of the year with renewed confidence.”
Ahmed Al-Arbeed, Chief Executive Officer of Dana Gas, added:
“We have maintained strong levels of net production in the first half of the year. Good progress is being made on our drilling programme in Egypt, with one new field discovery (the West Al Baraka Field) in the South of the country. We plan to drill further exploration and development wells in Northern Egypt. I am also pleased to report that the commissioning and start-up of the Natural Gas liquids plant in Ras Shukheir (Egypt) is advancing well and should be operational in H2 of this year.”
Production and Development
The Group’s net production averaged 60,950 barrels of oil equivalent per day (boepd) from its interests in Egypt and the KRI during the six months ended 30 June 2012.
Dana Gas Egypt produced gas, LPG, condensate and crude oil at an average rate of 32,750 boepd in the first half. Production is expected to increase later in the year as compression facilities and new production wells are added, and two new fields are brought on-stream.
In the KRI, the Company’s 40% share of production in the Kor Mor Field for the first half of the year continued to increase, achieving an average rate of 28,200 boepd (2011: 19,800 boepd). This 42% increase in production was mainly due to increased gas deliveries achieved by running the two LPG trains within the plant and the early production facility (EPF) in parallel; as well as including the condensate and LPG extracted from the additional gas.
Exploration & Appraisal
The Company drilled and tested a successful exploration well, West Al Baraka-2, in the Komombo Concession in Southern Egypt. A reservoir hydraulic fracturing test (frac) was performed in June to optimize the production rates and assess the hydrocarbon potential. After performing the hydraulic fracturing, the well productivity was increased from 30 boepd to 173 boepd, a five-fold increase in production.
In order to better understand the formation productivity performance, reservoir extension, pressure support regime and make a decision on the number of wells required for the full development of the field, Dana Gas plans to place the well on long-term testing, utilizing portable testing equipment.
Faris-1 well, the 2nd exploratory well to be drilled in the Komombo concession was spudded in late June. The well will be drilled to a total depth of 6,300 ft (SS) to explore the hydrocarbon potential in the Komombo “A” formation.
Liquidity and Financial Resources
Group cash balances as of 30 June 2012 stood at AED 601 million (31 December 2011: AED 411 million).
Dana Gas’s cash flow has been impacted by global macroeconomic and regional events. The revolution in Egypt last year and the subsequent unfolding turmoil resulted in sporadic and progressively delayed payment of revenue by government-owned entities. Similarly, political disputes in Iraq have impacted planned payments by the central government to petroleum companies operating in the KRI. Despite these challenging external macroeconomic circumstances, Dana Gas hopes that these problems will resolve themselves in the short- and medium-term.
Sukuk Update
The $1 billion sukuk, secured against certain Egyptian assets as well as SajGas and UGTC, are due to mature on 31 October 2012. The Company is committed to finding a consensual solution that is equitable to all stakeholders. For these purposes, the company has appointed Deutsche Bank, Blackstone Group and Latham & Watkins to provide advice on various options for discussions with the sukukholders. The Company will provide further updates as further progress is made.
