3 May 2017 Restructuring press release English.pdf
Sharjah, UAE; 3 May 2017
Dana Gas PJSC (the "Company"), the Middle East's largest regional independent natural gas company today announces that, due to continued challenges it faces around cash collections and resulting need to focus on short to medium term cash preservation, it will commence restructuring discussions with holders of its Sukuk dated 8th May 2013.
The Company will be addressing the way forward on the Sukuk, which has a maturity date of 31st October 2017 in a practical manner that balances the interests of all stakeholders. The remaining profit payments will be addressed sensibly as part of the solution.
Strong progress in 2016
Operationally, 2016 was another successful year for Dana Gas with production increases in Egypt and steady operations in the Kurdistan Region of Iraq (KRI). The Company also made excellent progress in its ongoing arbitration cases against the Kurdistan Regional Government (KRG) and NIOC, the awards of which fully affirmed the Company's disputed contractual rights as well as receivables owed by the KRG. However, due to the difficult macro-economic backdrop in both of Dana Gas' key markets, the Company continues to face challenges around cash collections.
Collection challenges remain
At year end, collections in Egypt amounted to $79 million, representing a realisation rate of 64%, of which only $3.5 million were collected in US Dollars with the balance received in Egyptian pounds. The outstanding receivables as of 31st December 2016 stand at $265 million. The economic and currency crisis in Egypt persists and collections may therefore remain below expectations in the near term. Collections from the KRI, on the other hand, have improved in 2016 with local sales of liquid petroleum products and staged payments by the KRG for outstanding debt realising $101 million for Dana Gas. That said, the outstanding, now undisputed amount owed to the Company by the KRG stood at $713 million (as of 31 December 2016). In addition, the Zora Field gas project in the UAE has experienced production difficulties and has not contributed as positively to the Company's cash balance as had been projected.
Cash preservation programme
As a result, the Board has taken prudent action in implementing a cash preservation programme which must continue in the short to medium term in the interests of all of the Company's stakeholders. As part of that programme, the Company has significantly reduced its costs to mitigate the low collection levels with a 43% reduction in G&A and a 7% reduction in operating expenditure in 2016 and to the extent possible, balancing capital outlay with collections as well as paying suppliers in Egypt in Egyptian pounds.
Potential future upside for all stakeholders
Whilst the Company must focus on near to medium term cash preservation, the future outlook is far more positive. Following the successful key arbitration hearings against the KRG and the NIOC, Dana Gas is confident that it will achieve significant cash contributions resulting from these awards over a 2-3 year time frame and beyond. In both of these cases, the Company's contractual rights were affirmed beyond doubt and are now recognised without challenge by the respective host Governments allowing unimpeded operations to be implemented from here on.
As recently reported, the Company's potential value – prepared by an independent consultant for the Board – was estimated to be in excess of $29 billion on the basis of the maximum potential value of the Company's main assets, including its key resources and reserves in the KRI, Egypt and the UAE, arbitration awards and pending damages claims. The Company is focused on preserving its financial well-being in order to ensure realisation of its full value potential over the coming years for the benefit of all its stakeholders.
Although the recent Mocha exploration well in Egypt did not result in commerciality, there is significant remaining exploration potential onshore and in Block 6 where Dana Gas' recent seismic programme identified promising multi-Tcf potential in multiple prospects and plays.
Most significantly, the Company holds two world class assets in the KRI through its 35% interest in Pearl Petroleum Company Limited ("Pearl"). Gaffney Cline Associates has certified the Proved plus Probable (2P) gas and condensate reserves for the Khor Mor and Chemchemal fields to be 8.5 Tscf and 191 MMbbl for Khor Mor and 6.6 Tscf and 119 MMbbl for Chemchemal. Total Dana Gas share of the Khor Mor and Chemchemal 2P reserves is therefore 5.3 Tscf gas and 109 MMbbls condensate,
equivalent to 990 MMboe. Dana Gas estimates these fields to have 75 Tcf of wet gas and 7 billion barrels of oil (P50 total geologically risked resources initially in place).
Also of major significance for the Company are the recent public announcements by the NIOC that it is able and willing to start the delivery of gas to our affiliated company Crescent Petroleum which will have immediate positive implications for Dana Gas and the long-awaited implementation of the UAE Gas Project.
Longer timeframe required to realise full value
Despite the successes that Dana Gas has had operationally, and in affirming its contract rights with the KRG and NIOC and establishing unchallenged debt owing from the KRG of $713 million, along with the several billion dollars of damages claims being heard in September of this year, the Company needs time to realize its full value for the benefit of all of its stakeholders. Time will allow the Company to collect on circa $1 billion due from the KRG and Egypt, but also to realize value pursuant to its remaining damages claims being adjudicated at the arbitrations described above. These factors provide a real opportunity for value creation and upside for all stakeholders which is the focus of the Dana Gas' Board and management team.
Invitation to Sukukholders
The above compelling factors provide the context in which Dana Gas plans to approach the restructuring its Sukuk. Accordingly, Dana Gas invites Sukuk holders to form a committee to represent them and contact the Company.
About Dana Gas
Dana Gas is the Middle East's first and largest regional private sector natural gas Company established in December 2005 with a public listing on the Abu Dhabi Securities Exchange (ADX). It has significant exploration, production and other assets in Egypt, the Kurdistan Region of Iraq (KRI) and the UAE, with an average output of 66,650 boepd in H1 2016. With sizeable assets, particularly in the KRI, and further plans for expansion, Dana Gas is playing an important role in the rapidly growing natural gas sector of the Middle East region. Visit: www.danagas.com
Investor Relations Contact
Head of Investor Relations
+971 6 519 4401
All media enquiries: Azadeh Varzi
Jade Mamarbachi +971 (0)4 560 9600
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