Dana Gas Achieves 12% Growth in Production in Q1 2014
Dana Gas, the Middle East’s largest regional private sector natural gas company, today announced its financial results for the first quarter ended 31 March 2014.
The Company reported a 67% rise in operating profits in 1Q 2014 to US$ 45 million (AED 164 million) as compared to US$ 27 million (AED 98 million) in Q1 2013. This excludes the one-off gains of US$ 39 million (AED 143 million) profits arising out of the partial sale of MOL shares in 1Q 2013. Gross revenues achieved in 1Q 2014 were US$ 180 million (AED 660 million), 18% higher than Q1 2013’s revenue of US$ 152 million (AED 557 million). Increase in production (and sales) and tighter control of operational expenditure were the major contributors towards this rise in revenue and operating profit.
The Company’s share of overall production for 1Q 2014 increased by 12% to register an average of 68,800 barrels of oil equivalent per day (boepd) as compared to 61,400 boepd in the same period last year. Dana Gas Egypt experienced a large upturn in average production to 39,100 boepd, a 17% increase vis-à-vis the 33,400 boepd achieved in Q1 2013. In the KRI, the Company’s share of production was also higher by 6% to 29,300 boepd vis-à-vis 27,700 boepd in Q1 2013.
In 1Q 2014, the company received US$ 3 million (AED 11 million) in Egypt and did not receive any payment from the Kurdistan Regional Government (‘KRG’). This resulted in trade receivables being higher by US$ 68 million (AED 249 million) to US$ 583 million (AED 2.14 billion) (FY2013: US$ 515 million (AED 1.89 billion)). As a result, the Company’s cash balance was US$ 155 million (AED 568 million) as at the end of the quarter. Egypt’s trade receivables stood at US$ 278 million (AED 1.02 billion) following the offset of US$ 37 million (AED 135 million) against the North Al Arish Offshore Block-6 signature bonus and amounts payable to government-owned contractors in Egypt. Total assets were unchanged at US$ 3.53 billion (AED 12.9 billion).
As of 30 April 2014, the Company has received voluntary conversion notices amounting to US$ 65.4 million (AED 239.7 million), reflecting positive investor sentiment and helping the company lower its outstanding debt and cash outflow.
Commenting on the results, Dr. Patrick Allman-Ward, Chief Executive Officer, said:
“We have made a solid operational start to the year and have delivered on our strategy of increasing output through organic growth, resulting in a 12% increase in production output to 68,800 boepd. This reflects the quality of our assets in Egypt and the KRI and provides confidence for additional growth potential going forward. For the time being our capital expenditure will remain in-line with our collections. We are committed to further increasing production in Egypt and continue our discussions with the relevant authorities to resolve the matter of overdue receivables. In Kurdistan, we have increased production by 6% through increased supply of LPG. The arbitration initiated by us and our consortium partners commenced in January 2014 with the successful formation of the Tribunal and proceedings are now ongoing. Regardless, we continue to operate our gas production facilities in Khor Mor at full capacity to provide the much needed power supply to the people of the Kurdistan Region of Iraq.”
Production and Development
Dana Gas’s average quarterly net production from Egypt and KRI was 68,800 boepd, a year-on-year increase of 12% (Q1 2013: 61,400 boepd).
The Company has rationalized its Egyptian portfolio of assets, concentrating on its most commercial and long-term production growth opportunities in the Nile Delta and offshore Eastern Mediterranean.
The process has seen Dana Gas complete major new field tie-in work, which together with maintenance and debottlenecking work in the El Wastani Plant, will increase output capacity by 25% to 200mmscfd (an increase equivalent to 6,650 boepd) and contribute 10% to overall group production. This has been a key factor in the country’s producing assets increasing their output to 39,100 boepd, a 17% increase on its 33,400 boepd production in Q1 2013.
Dana Gas was also awarded a new Development Lease called Balsam following the discovery made in 2012, whilst simultaneously increasing its El Basant Development Lease (to cover the Allium discovery), jointly located in the West El Manzala Concession. It has also secured an increase to its Sama Developments in the West Al Qantara Concession to include the West Sama discovery. Through Dana Gas’ comprehensive gas pipeline network and available processing plants, the Allium and West Sama discoveries have already been brought on-stream in a very short space of time.
As part of this rationalization process, Dana Gas sold its entire 50% holding in the Komombo concession to Mediterra Energy for $6.3 million in cash plus working capital adjustments. The transaction is expected to be completed in the second quarter of 2014.
Kurdistan Region of Iraq
In the Kurdistan Region of Iraq, the Company saw its quarterly share of production (40%) in the Khor Mor Field increase slightly to 29,300 boepd as compared to 27,700 in Q1 2013 through increased LPG supply. Since repairs to the LPG loading bay were completed in 2013, LPG production has been growing steadily but remains below full capacity due to under-lifting by the KRG.
The work programme for the development of the Zora Gas Field project is ongoing. In March 2014, the Company issued a letter of intent for the load out and installation of platform and topsides, the construction of the onshore gas plant, offshore pipeline installation and line pipe procurement. First gas production remains on track for H1 2015 with an estimated output of 40 mmscfd (6,650 boepd).
Sukuk Conversion Update
During the period from 1 January 2014 to 30 April 2014, the Company has received voluntary early conversion notices for the Convertible Sukuk amounting to US$ 65.4 million (AED 240 million). Accordingly, 320,199,303 ordinary shares of the Company calculated at a conversion price of AED 0.75 (nominal value AED 1.0) will be issued to satisfy the Notice. The difference in value between the conversion price and the paid-up value of the shares is accounted for by appropriation from the capital reserves of the Company.