Dana Gas PJSC announced its preliminary financial results for the full year ended 31 December 2016.
The company reported full year revenue of $392mn as compared to $417mn in 2015. The drop in revenue was due to lower realised liquid prices despite the increase in the group annual average production. Preliminary net profit for 2016 was $33mn as compared to $144mn last year, which included gain on one-off sale of 5% interest in Pearl and settlement from the RWE arbitration.
On a like-for-like basis, excluding the one off gain, the company continued to remain profitable in 2016 despite taking a charge on the currency devaluation in Egypt and a lower share of production from the KRI as a result of selling of 5% share of equity to RWE.
Total average 2016 production increased by 5% to 67,050 barrels of oil equivalent per day (boepd), from 63,900 boepd in 2015. The average realised liquid price was $33 per barrel of oil equivalent (boe), compared to $45 boe in 2015.
Capital expenditure in 2016 was $122mn, with the majority of that capital being invested in Egypt. Going forwards, due to the challenges being faced around collections, the company will take a prudent approach of matching further capital investment in the country with collections, as part of the effort to preserve the Company’s cash resources.
The company’s year-end cash and bank balance stood at $302mn, down from $470mn at year-end 2015. Total collections for the full year 2016 were $200mn as compared to $168mn in 2015. Total trade receivables is $982mn, up from $950mn the year before. The cash balance decrease is primarily due to the repurchase of $50mn of Ordinary Sukuk, quarterly Sukuk payments and final capital payments for the Zora project in the UAE. General and administrative expenses fell to $13mn in 2016 from $23mn in 2015, a 43% drop, concluding a three-year cost reduction programme, which has led to a decrease of over 50% in G&A costs.
The company is continuing to evaluate options to address the Sukuk maturing on the 31 October 2017.
Dana Gas Egypt recorded a drilling success rate of 92% in 2016, increasing total output by 11% to 37,600 boepd in 2016 compared to 33,900 boepd in 2015. Fourth quarter production rose by 31% to 40,500 boepd from 30,900 boepd in Q4 2015.
The company has reached maximum plant capacity, having brought into production 12 new exploration and production wells. The high potential Block 3 Mocha-1 well in Egypt operated by BP is in the primary reservoir section and close to reaching target depth. Further logging and data analysis will be required to evaluate the results.
Full year 2P reserves in Egypt stood at 132 MMboe with a reserve replacement ratio was 115%.
Collections for the full year 2016 were $79mn, representing 64% of total billings. Fourth quarter collections were $10mn. Total receivable balance increased to $265mn from $221mn in 2015.
Patrick Allman-Ward, CEO, Dana Gas, said, “We are pleased to report a strong operational performance in 2016 with total group production reaching 70,000 boepd in the fourth quarter. We have continued to improve significantly our margins by reducing overheads and operational expenditure. Unfortunately, we still face challenges around collections, which were disappointing in Egypt last year, and we must therefore balance further investment in the country with collections going forward. The situation around lack of payment in Egypt coupled with our sukuk maturity due at the end of October this year means that we must remain focussed on short-term cash preservation.
In Kurdistan Region of Iraq, the company’s 35% share of gross production for the full year was 26,000 boepd as compared to last years’ production of 29,300 boepd. The decrease in production was mainly due to change in Group’s interest in Pearl Petroleum from 40% to 35% in 2016 after disposal of 5% interest in PPCL on 27 November 2015 to RWEST Middle East Holding B.V. Fourth quarter production was 26,200 boepd versus Q4 2015 28,800 boepd.
Collections for the full year 2016 was $101mn, representing 129% of total billings. Fourth quarter collections were $37mn. Total receivable balance decreased marginally to $713mn from $727mn in 2015.
The Tribunal is due to issue its judgement on the further Partial Final Award regarding the remaining contractual issues to be decided and matters of principle concerning the further damage claims from the consortium and counter-claims by the KRG. The final hearing, which will address the consortium’s claim for wrongful late development and the KRG’s mirror claim, is yet to be scheduled but is expected to take place in September 2017.
In the UAE, full year average production was 2,700 boepd. Fourth quarter production was 2,100 boepd, a quarter on quarter decline of 18% versus Q3 2016, 2,560 boepd. Further analysis of a potential intervention to determine the sustainable production rate of the Zora Gas Field is being carried out by the Company.
A final hearing to determine the damage claims against the NIOC for non-performance of the contract took place in The Hague on 3 November 2016. A judgement is expected in 2017. This damage phase follows the first phase of the arbitration which was decided by the Tribunal’s award issued in 2014 which confirmed the validity of the 25 year gas supply contract between NIOC and Crescent Petroleum.
“Despite this backdrop, the medium term outlook for Dana Gas remains exciting. The Company has material exploration upside in Egypt, world-class fields in Kurdistan to be developed and is making progress towards successful resolution on its arbitrations,” Allman-Ward added.
