Dana Gas reports 70% jump in 2Q 2014 net profits to $ 46m
* 2Q 2014 gross revenues of $ 187 m and gross profit of $ 85 m; 30% and 35% higher than 2Q 2013, respectively
* 1H 2014 gross revenues of $ 367 m and gross profit of $ 172 m; 24% and 25% higher than 1H 2013, respectively
* Strong production growth of 17% in 2Q 2014 to 72,200 boepd
* Interim relief award in Kurdistan Region
Dana Gas, the Middle East’s largest regional private sector natural gas company, today announced its financial results for the six months of 2014 and second quarter ended 30 June 2014.
In the second quarter of 2014, the Company reported a 70% jump in net profit to $ 46 million (AED 169 m) as compared to $ 27 million (AED 100 m) in 2Q 2013. The increase in revenue was due to increased production across the Group which increased by 17% on a year-on-year basis and higher realized hydrocarbon prices
during the period.
During first half of 2014, profit from operations increased by 68% to $ 91 million (AED 333 m) as compared to $ 54 million (AED 198 m) in 1H 2013. This excludes the one-off gains of $ 39 million (AED 143 million) arising out of the partial sale of MOL shares in 1H 2013. Gross revenues and gross profit were $ 367 million (AED 1.35 bn)
and $ 172 million (AED 630 m), 24% and 25% better than in 1H 2013. A combined increase in production in Egypt and resumption of LPG production in the Kurdistan Region of Iraq (KRI), along with higher energy prices and a reduction in cost of sales were the major contributors towards this rise in revenue and gross profit.
Average overall production volumes increased by 17% in 2Q 2014 to 72,200 barrels of oil equivalent per day (boepd) as compared to 61,700 boepd in the same period last year. Dana Gas Egypt experienced a continued upturn in average 2Q production to 42,950 boepd, a 25% increase vis-à-vis the 34,300 boepd achieved in
2Q 2013. In the Kurdistan Region of Iraq (KRI), the Company’s share of production in the second quarter was also higher by 7% to 28,800 boepd vis-à-vis 27,000 boepd in 2Q 2013.
Commenting on the results, Dr. Patrick Allman-Ward, Chief Executive Officer, said: “Dana Gas has continued to deliver impressive production growth and consistent operational and financial performance despite ongoing challenges in our key markets. This is the result of a business strategy that has focused on operational delivery whilst addressing the issue of unpaid receivables from our government clients and diversifying our business exposure. The focus on operational performance has seen us achieve better operating profits and margins, revenues and a 17% increase in production output in the second quarter. We continue to address and make progress on our overdue receivables. We continue to focus on diversification, and are progressing the development of the Zora field in the UAE and review other new business development opportunities.”
Average daily production in 2Q 2014 was 42,950 boepd. This represents an increase of 25% compared to the same period last year (2Q 2013: 34,300 boepd). Higher production was mainly driven by start-up of Salma/Tulip field and production optimization of other fields.
Dana Gas will continue to concentrate on its most commercial and long-term production growth opportunities in the Nile Delta and offshore Eastern Mediterranean.
KURDISTAN REGION OF IRAQ
The Company saw its quarterly share of production (40%) in the Khor Mor Field increase to 28,800 boepd as compared to 27,000 in 2Q 2013, due to resumption of LPG production which has seen a full restoration of production capacity. However, LPG sales continue to be constrained by under-lifting on the part of the Kurdistan Regional Government (KRG).
On 13 July 2014, Dana Gas announced that it had received an award of interim relief by the London Court of Arbitration relating to the case it has filed against the KRG along with Crescent Petroleum and Pearl Petroleum Company Limited (collectively referred to as ‘the Consortium’). In its decision, the Tribunal of the London Court of Arbitration ordered KRG to restore the previous regular payments to the companies as of 21 March 2014, the date of the application and until the case is concluded.
The work program for the development of the Zora Gas Field project continues to make good progress. The project will contribute to Dana Gas’ overall strategy of diversifying and rebalancing its portfolio and moving into growth markets within its focus region of the Middle East, North Africa and South Asia (MENASA).
The Company has awarded most of the contracts for the load out and installation of platform and topsides, the construction of the onshore gas plant, offshore pipeline installation and line pipe procurement. It plans to sign contracts imminently for drilling and well engineering operations, as well as onshore pipeline work. First gas production remains on track for 1H 2015 with an estimated output of 40 mmscfd (6,650 boepd).
The conversion period for convertible sukuk issued on 8 May 2013 commenced on 31 October 2013 which will expire 25 trading days prior to the scheduled redemption date of 31 October 2017. During this period sukuk holders have the right to convert all or part of the convertible sukuk into ordinary shares of the Company. During the period from 1 January 2014 to 30 June 2014, the Company has received voluntary early conversion notices for the convertible sukuk amounting to $ 73 million. Accordingly 357,094,708 ordinary shares calculated at a conversion price of AED 0.75 (nominal value of AED 1) are required to be delivered to satisfy the said voluntary early conversion notices. As of 30 June 2014, 349,749,708 ordinary shares were issued with the remaining 7,345,000 ordinary shares delivered on 16 July 2014.
LIQUIDITY AND FINANCIAL RESOURCES
In 1H 2014, the Company received $ 28 million (AED 103 m) in cash from the Egyptian Government and did not receive any payment from the KRG. Total receivables, as at 30 June 2014, stood at $ 955 million (AED 3.5 bn).
Egypt’s trade receivables stood at $ 297 million (AED 1.09 bn) following the offset of $ 41 million (AED 150 m) against the North Al Arish Offshore Block-6 signature bonus and amounts payable to government-owned contractors in Egypt.
Trade receivables from the KRI stood at $650 million (AED 2.38 bn) as at 30 June 2014, up from $ 515 million (AED 1.88 bn) on 31 December 2013.
Cash from operations and cash collections declined significantly on a year-on-year basis as no payment was received from the KRI (which has been the case since July 2013) and cash collections in Egypt were $ 28 million (AED 103 million). The Company’s cash balance declined 35% to $ 132 million (AED 484 m) by the end of June 2014 compared to $ 204 million (AED 748 m) on 31 December 2013.
The Cash balance in 2Q 2014 benefitted from the receipt of dividend from MOL ($ 4 million) and receipt of unclaimed acquisition funds relating Centurion acquisition made in 2007 ($ 3 million). The overall cash balance by end June was slightly higher than forecast as a result of re-phasing of capex in Egypt into 2H 2014 and later cash calls from the Sharjah Western Offshore (Zora) project.
Total assets as at 30 June 2014 increased slightly at $3.57 billion (AED 13.0 bn).