Dana Gas reports turnaround; $83m net profit for 2017

16/03/2018 07:29 AST

Dana Gas, the Middle East's largest regional natural gas company, today reported full-year 2017 gross revenue and a net profit of $450 million and $83 million, respectively, compared to $392 million and a net loss of $88 million in 2016.

The turnaround was led by higher realised liquid prices, higher production in Egypt and tight management of operational expenses.

Higher profit was also supported by the successful settlement agreement with the Kurdistan Regional Government (KRG).

However, Q4 net profit was impacted by an impairment charge of $34 million against the UAE Zora asset following the year-end reserve report. The group average production in 2017 increased to 67,600 barrels of oil equivalent per day (boepd), up 1 per cent from 67,050 boepd in 2016. Annual production in Egypt was 5 per cent higher at 39,500 boepd. KRI production was flat at 25,750 boepd vis-à-vis 2016 and the UAE's Zora Gas field produced 1,650 boepd in 2017 as compared to 2,700 boepd in 2016.

The average realised liquid price was $40 per barrel of oil equivalent (boe), compared to $33 boe in 2016, a 21 per cent increase in 2017. The group average production in Q4 2017 was lower at 67,350 boepd, compared to 69,450 boepd in 2016.

The year-end cash balance stood at $608 million, double that of $302 million reported at the end of 2016. This cash balance is largely a consequence of the $210 million dividend received from Pearl Petroleum Company as part of the KRG settlement, a $110 million industry payment in Egypt and $22 million of condensate export in Egypt.

The cash balance does not include the $140 million held by Pearl for the developmental of the Kurdistan Region of Iraq (KRI) assets.

The company kept costs and expenses to a minimum which resulted in a G&A spend of $15 million and operational expenses of $52 million, totalling $67 million, it said. This is in line with 2016's $65 million and is the fourth consecutive year of targeted cost reductions.

The company will carry-on focussing on cash conservation in 2018 as payments from Egypt remain uncertain and geopolitical risks in the region persist. Capital expenditure was $47 million in 2017 and the projected spend in 2018 is $50 million which includes completing the Egypt drilling programme and the KRI expansion plans.

Dr Patrick Allman-Ward, CEO of Dana Gas, said: "Our settlement agreement with the Kurdistan Regional Government was a major milestone for the company. This has allowed us to start to fully develop the Khor Mor and Chemchemal fields, two truly world-class gas fields, with in-place volumes of approximately 75 trillion cu ft of wet gas and 7 billion barrels of oil, to the benefit of the people of the Kurdistan Region and all of Iraq. Our targeted production increases in the KRI are 20 per cent this year and 170 per cent in the next two to three years. The strength of our portfolio lies in organic growth and this will be our principal focus for 2018 and onwards. If all goes according to plan we will be producing, together with our partners in Pearl Petroleum just under 900 million standard cubic feet per day from our expanded facilities by 2021. We are also pleased to have qualified with the Iraq Oil Ministry for their upcoming bidding round as we seek to rejuvenate the company's opportunity portfolio.

"We drove solid operational performance in 2017, which contributed to strong profitability, evidenced by a net profit of $83 million as compared to an $88 million loss in 2016. We continued to focus on cost efficiencies and managed to maintain our low levels of G&A, capex and operational expenditures in support of our capital conservation objective, and this focus will carry-on in 2018. Payments from Egypt in H2 2017 were sporadic and disappointing. We remain cautious about the timing and scale of future collections and so the dialogue with the Egyptian Government continues in order for us to get paid what we are contractually owed."

Sukuk Restructuring

The company said advice received from independent legal advisers at the end of May 2017 stated that the terms of the company's Sukuk Al Mudarabah were not compliant with Shari'a principles and are unlawful under the laws of the UAE and therefore were void and unenforceable. The outcome of the ongoing litigation finally in UAE courts could result in a significant liability for the Sukukholders to repay the company excess 'on account profit payments' based on a lawful reconciliation of the transaction, it said.

The company, in line with detailed public disclosures that it has made to the Securities and Commodities Authority (SCA) and through ADX, is pursuing the litigation route to resolve the matter and is confident pursuant to independent legal advice of prevailing in its interpretation of the outcome, it added.

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