I am pleased to report that Dana Gas achieved commendable performance in the year 2010. The Group has reported a 40% increase in revenue to AED 1.79 billion, a 79% increase in gross profit to AED 781 million, and an 80% increase in earnings to AED 158 million.

The political changes and turmoil that gathered pace in 2010 have now spread across the MENA region creating some concern and operational challenges for many organisations. We are now experiencing a level of volatility in the global markets and a change in the regional political systems that have little precedent. In such uncertain times it is difficult for investors and stakeholders to appreciate the underlying value and growth potential of the companies in their portfolios. The Dana Gas share price, as a consequence, has suffered downward pressure in response to these recent developments, in line with the trend across the region’s stock markets. We are studying options for the optimum capital structure so that the Group’s true value may be reflected in the share price.

In the current economic and political climate it has also become increasingly important to examine the robustness of our corporate strategy, market fundamentals, and the profitability of our assets. The Management of Dana Gas is continually evaluating strategies for further enhancement of shareholder value through pursuit of new opportunities for revenue generation, rationalising the Group’s cost base, and progressing development of our assets in Egypt and the Kurdistan Region of Iraq.

The Group continues to develop and maintain strong relationships with its stakeholders including governments, partners, and local communities, as we take pride in our regional identity, strong partnering and solutions-based approach. Importantly, your Board of Directors maintains regular oversight of the Group’s risk management system, and through the Management ensures appropriate mitigation strategies are in place to ameliorate the risks and enhance value for our Shareholders.

Fortunately, Dana Gas’ Egyptian operations have remained largely unaffected by the recent events in the country, aided by the fact that the majority of our workforce are local staff, and our having maintained excellent relations with the local communities where we operate.  That said, we continue to be vigilant, and the situation remains under close review.

In the Kurdistan Region of Iraq we continue to deliver significant amounts of gas to two regional power stations, and with the recent completion of our LPG processing plants, we are now in full operational mode extracting valuable condensate and LPG from the produced gas. We continue to press for payment for the condensate that we have delivered to the Kurdistan Regional Government, and are actively engaged with the KRG to resolve the issue with urgency. 

The UAE Gas Project to process and transport Iranian gas continues to await the commencement of gas deliveries by the National Iranian Oil Company (NIOC) to our associate Crescent Petroleum. The Group has a 35% interest in Crescent National Gas Corporation Limited (CNGCL). During the year Dana Gas completed the commissioning of its Sajaa Gas processing facilities after receiving commissioning gas in July from NIOC, and in preparation for receiving the full contracted gas quantities in September 2010. Unfortunately however, NIOC has not yet been able to make good on its contractual obligations to deliver, which were exacerbated by the discovery of major leaks in its gas transmission pipeline as it pressured up. These latter NIOC technical problems are currently being addressed by NIOC. Meanwhile, in order to protect the Company’s contractual rights, our associate Crescent Petroleum continues to seek a legal ruling on the binding 25 year gas supply contract with NIOC through international arbitration, and expects an enforceable decision by the Tribunal in less than a year. 

Fundamentally, global demand growth for gas has continued to be disproportionately driven by a variety of the usual factors, including progressive oil substitution as well as increasing demand for industry and electricity generation, particularly in emerging market economies. These are realities that underpin the original vision of Dana Gas’ founders to create a regional gas champion in Dana Gas, and we certainly remain true to that vision. 

More recently and unexpectedly, the unfortunate recent nuclear disaster in Japan has highlighted the importance and value of gas not only as “the fuel of the 21st Century”, but as a safe and reliable one.

Bearing in mind all the above factors, I am confident that long term supply-demand fundamentals will remain positive for our sector in a world of robust energy prices and growing demand for oil and particularly gas, both regionally and internationally.

Our capable management team, led by CEO Mr. Ahmed Al Arbeed, continues to work to deliver the full value of our assets. On behalf of the Board of Directors, I wish to register our thanks to the management and all our employees for their dedication and hard work over the past year, which was pivotal in achieving the results realised. 

Our Board of Directors has also worked tirelessly in 2010 on your behalf, our esteemed Shareholders, and collectively look forward to continuing our task through 2011. I would like to express my gratitude to all of them for their efforts in guiding the management through another successful year. I would also like to thank our Honorary Chairman, His Highness Sheikh Ahmed bin Sultan Al-Qasimi, for his encouragement and wise guidance. Moreover, I wish to record my appreciation for the excellent strategic advice and global insight provided by our esteemed International Advisory Board.

Last but not least to our Shareholders, I would like to express my and the rest of the Board’s appreciation for the faith and trust placed in us. We will continue to work to achieve another profitable year marked by an increase in production and reserves across our projects for the benefit of our Shareholders, all the while maintaining our commitment to safety and the environment, and to meeting the needs of the Region as a responsible regional company.

Mr. Hamid Jafar