Dana Gas, the Middle East’s largest regional private sector natural gas company today announced its financial results for the second quarter ended 30th June 2015:
The Company reported revenues of US$116 million despite the sharp decline in global oil prices since a year ago. Net profit after tax which was US$7 million with cash and cash equivalent at US$132 million, after additional investments in new projects in Egypt and the implementation of the Zora project in the UAE. Total assets grew to US$ 3.729 billion.
Operationally, Dana Gas commenced drilling work on the Balsam-2 development well and Balsam-3 appraisal well in Egypt, which represent the first operations of a major drilling and work-over campaign as part of the Gas Production Enhancement Agreement (GPEA) work commitment. The Company has also completed a Participation Agreement with BP for drilling one exploration well in El Matariya Onshore Concession (Block 3). In the UAE, work on the Zora Gas field project is progressing, with the first gas expected to come on-stream in the second half of 2015. Together, these factors are expected to translate into increased production for Dana Gas over the coming period.
“Despite the steep fall in global oil prices over the past year and events in the region, Dana Gas has remained profitable and strengthened its operations with new investments,” said Dr. Patrick-Allman Ward, CEO of Dana Gas. “We are looking forward to additional production and cash generation in the second half of the year from our new investment program in Egypt which is now under way as well as from our Zora field in the UAE coming on-stream. With our continued cost discipline and this expected increase in production, Dana Gas is well positioned to benefit from any improvements in the oil price in the future,” he added.
Dana Gas maintained steady cash-flows from Egypt and Kurdistan operations, and also received an important ruling on the last day of the quarter from the international arbitration with the Kurdistan Regional Government (KRG) of Iraq, which confirmed the Consortium’s exclusive long-term rights to develop and produce gas and petroleum from both the Khor Mor and Chemchemal fields for the duration of the Contract, being not less than 25 years, as well as the KRG’s contractual obligation to pay the Consortium for the produced condensate and LPG at international prices, including the pricing methodology for each.
Production and Development
The Group share of production was 65,700 boepd, with the decline of 9% mainly due to a natural decline in production from fields in Egypt. However, the revenues related to the production decline in Egypt were offset by a 4% production increase in Kurdistan mainly due to an increase in LPG production, and the Egyptian production is projected to grow given the investments in the expansion programme.
Dana Gas Egypt delivered total production of 35,010 boepd compared to 42,950 boepd in Q2 2014. The production decrease of 18% is in line with normal field decline trends for Nile Delta fields but was the result of delays in the planned drilling and tie-in schedules. The drilling of the Balsam-2 and Balsam-3 wells on the Balsam Development lease is expected to take up to four months to complete with results from both wells due in the last quarter of the year. The first exploration well on the El Matariya Onshore Concession (Block 3) operated by BP is scheduled to commence drilling in the first half 2016.
Kurdistan Region of Iraq
In the KRI, the Company’s quarterly share of production (40%) in the Khor Mor Field was 30,000 boepd, a slight increase over second quarter 2014 production of 28,800 boepd, predominantly as a result of increased LPG production.
Zora Gas Project
Dana Gas continues to make progress on its Zora Gas field project in the UAE’s Sharjah & Ajman Emirates, with first gas expected to come on-stream in the second half of 2015
As at 30 June 2015, total receivables were US$1.05 billion. The Company received a total collection of US$49 million in Egypt, of which US$33 million was in cash and US$16 million was government offsets. Overall, trade receivables in Egypt are US$246 million. The Company continues to sell its liquid hydrocarbon products domestically on the local market in the KRI and collections from local sales during the period, after adjusting for cash deposit received in September 2014, amounted to US$17 million. The Company’s share of the trade receivables from the KRG stood at US$793 million by the end of the quarter..
Kurdistan Arbitration Update
On 5th July 2015, Dana Gas updated the market with regard to the case it has filed with the London Court of International Arbitration (LCIA) against KRG. On 30th June the LCIA Tribunal delivered a Partial Final Award confirming the Consortium’s contractual rights including a number of important issues addressed at the hearing in the week of 20 April 2015. The Tribunal’s Award confirms:
· The Consortium’s exclusive long-term rights to develop and produce gas and petroleum from both the Khor Mor and Chemchemal fields for the duration of the Contract, being not less than 25 years.
· The KRG’s contractual obligation to pay the Consortium for the produced condensate and LPG at international prices, including the pricing methodology for each.
· Dana Gas and Crescent Petroleum were entitled to farm out part of their own interests to MOL and OMV, and that the KRG was not entitled to a share of the farm-out proceeds.
The Arbitral Tribunal has also already fixed the date of 21st September 2015 to determine the Consortium’s monetary claim against the KRG for outstanding unpaid invoices for the produced condensate and LPG, now totaling US$1.96 billion as of end June 2015 as per the pricing methodology determined by the Award. The remaining claims in the arbitration will be heard during the next phase of the Arbitration, early in 2016.