- Revenue growth of 16% with 9M 2014 revenue of $541 million vis-à-vis $466 million in 9M 2013
- Average production of 70,500 boepd (up 11%) vis-à-vis 9M 2013 average of 63,400 boepd
- Significant progress on resolution of outstanding receivables in Egypt through Gas Production Enhancement Agreement with two new exploration blocks awarded
- Kurdistan Joint Venture initiates local sales of liquid products and restarts income generation
12 November 2014
Dana Gas, the Middle East’s leading regional private sector natural gas company is pleased to announce its consolidated financial results for the nine months and third quarter period ended 30 September 2014.
In the nine month period ended 30 September 2014, Dana Gas reported a 16% increase in revenue to $541 million as compared to $466 million the previous year. Net profit in the nine month period of 2014 was also high at $129 million as compared to $121 million for 9M 2013. Profit from operations was higher by 57% to $129 million as compared to $ 82 million that was achieved in 9M 2013, if a one-off gain of $39 million following the partial sale of MOL shares in 1H 2013 is excluded. Production was up 11% at 70,500 barrels of oil equivalent per day (boepd) as compared to the average daily production of 63,400 boepd achieved in 9M 2013.
The Company posted robust third quarter revenue of $174 million (3Q 2013 $170 million) and gross profits of $79 million (Q3 2013: $71 million). Net profits were up 36% to $38 million (3Q 2013: $28 million) underpinned by an increase in production and a strong focus on cost discipline. Production during the third quarter increased by 3% to reach 68,700 boepd compared to 66,850 boepd in Q3 2013.
Operationally, the third quarter saw the Company sign two major agreements in Egypt and took a significant step forward in restarting income generation in the Kurdistan of Iraq (KRI) through local sales of liquid products.
The Gas Production Enhancement Agreement was signed in September 2014 with the Egyptian Government. This agreement commits Dana Gas Egypt to a seven year work programme whereby the Company keeps the proceeds from incremental liquid sales which will be used to pay down receivables. Also in Egypt, two new blocks – Block 1 and 3 onshore Nile Delta – were awarded as part of an EGAS bid round conducted earlier in the year.
Cash from operations and cash collections improved during 3Q 2014, as the Company received a total of $71 million during the quarter. The Company’s cash collection in Egypt was $53 million, out of which $36 million was in local Egyptian Pounds earmarked to settle overdue payables to service providers to its Egypt operations and $11 million is ring-fenced towards funding for the previously announced GPEA in Egypt, wherein it was agreed that the money received would be reinvested into this project in Egypt going forward.
In relation to its Kurdistan operations, the Company received a cash advance amounting to $18 million as part of its 40% share in PPCL in the Kurdistan Region of Iraq.
Dr Patrick Allman-Ward, CEO of Dana Gas, commented: “Our continuous focus on operational excellence and cost discipline is paying off resulting in significantly improved net profits for the quarter and year to date. We have made good progress in restarting cash flow in KRI through the initiation of local sales of liquid products. Our operations have continued uninterrupted despite the ongoing security situation in Iraq. We remain fully committed to Egypt and are very pleased to have found a win-win solution for all parties through the Gas Production Enhancement Agreement which commits the Company to making significant new investments which will result in higher production for the country and allows Dana Gas to recover outstanding receivables within a defined period of time.”
Dana Gas signed the Gas Production Enhancement Agreement (GPEA) on 30 September 2014 with the Egyptian government, ensuring the Company long-term production growth and a significant reduction in receivables. The GPE has committed Dana Gas to a staged work programme over a seven year period with drilling expected to start in the first quarter of 2015. This will result in increased liquid volumes which will be monetised in accordance with the GPE agreement. As part of the work programme commitment, Dana Gas will drill over 20 new development wells and conduct a similar number of work-overs of existing wells. The estimated incremental production during the period will be approximately 270 billion cubic feet of natural gas, 8 to 9 million barrels of condensate and around 450,000 tons of LPG. Peak production is expected in 2017 with incremental daily production of approximately 160 mmscfd gas and 5,600 barrels of condensate. In return for the Company’s work programme commitment, financial proceeds from the direct sale of all of the incremental condensate in international markets at international prices will be retained by Dana Gas and will be used to reduce its outstanding receivables balance. Under the agreement it is envisaged that outstanding receivables from the government, will reduce to nominal levels by 2018. In addition, Dana Gas expects that it will receive payments from the Government as part of its ongoing strategy of paying down overdue receivables due to the oil and gas industry in the country.
In late September, Dana Gas reinforced its presence in the Nile Delta by successfully bidding for onshore Blocks 1 and 3 as part of the 2014 EGAS bid round. Under the terms of the agreement, Dana Gas holds 100% of Block 1 and 50% working interest alongside BP in Block 3. The joint-venture partnership with BP on Block 3 affords Dana Gas a partner with a strong track record of exploration and production in Egypt. An additional positive commercial consideration is that the two blocks are located adjacent to Dana Gas’s existing development leases thus allowing for potential leveraging of the existing infrastructure in case of potential discoveries.
In the third quarter, the Company produced an average 40,500 boepd, marginally higher than 39,350 boepd in 3Q 2013. Production is expected to stabilise over the remainder of the year. The GPEA work programme is expected to commence in early 2015, allowing the Company to resume its production growth up to 2017.
KURDISTAN REGION OF IRAQ
Pearl Petroleum Company Limited (PPCL), the consortium company of which Dana Gas has a 40% share, commenced direct, local sale of condensate and LPG in September 2014. The Company received its share in the form of $18 million cash advance against future product deliveries. This represents a step forward in restoring income generation in KRI.
Dana Gas’s share of gross production in the KRI for the third quarter was 27,700 boepd as compared to 27,100 boepd in Q3 2013.
The Company recently announced that it has secured $100 million Term Facility for the Zora Field Development Project. The facility will contribute the debt component of the financing needed to complete the project and bring the Zora gas field on-stream in 1H 2015. The field is expected to provide a production of 40 mmscfd (6,650 barrels of oil equivalent per day). The gas will be transported via a subsea pipeline to an onshore gas processing facility located in Hamriyah Freezone in Sharjah.
LIQUIDITY AND FINANCIAL RESOURCES
On a year to date basis, the Company has collected a total of $ 99million in cash. The Company’s receivables, however, were positively impacted by $46 million which was set off against the North Al Arish Offshore Block 6 signature bonus and liabilities due to other Government owned contractors in Egypt.
As part of its liquidity management, Dana Gas also completed a sale of 350,000 shares i.e. around 25% of sell-down of its equity holding in MOL and realised gross proceeds of $18 million in October 2014.
The Company’s outstanding receivables, as of 30 September 2014, are $276 million in Egypt and $712 million in the KRI.
During the period from 1 January 2014 to 30 September 2014, the Company received voluntary early conversion notices for the convertible sukuk amounting to USD 72,926,080. These conversions will result in sukuk profit saving of approximately $ 3 million in 2014.