Dana Gas announced its financial results for 3Q
An extended period of low prices, which is affecting earnings across the sector, combined with a consistently challenging global economic environment, has resulted in the Company reporting nine months 2015 gross revenues and net profit of US\\$ 324 million and US\\$ 10 million respectively, as compared to US\\$ 541 million and US\\$ 129 million in the same period 2014.
Average production in the third quarter 2015 was 60,800 barrels of oil equivalent per day (boepd). Dana Gas Egypt is pleased to report a significant gas discovery at Balsam-3, and that it has proved up additional 2P reserves with the Balsam-2 development well, both located in the Balsam Developmental Lease in the Nile Delta region. Preliminary estimates have put the additional 2P reserves at 165 billion cubic feet (Bcf) of gas, equivalent to 28 million barrels of oil equivalent.
Dana Gas has continued to drive further cost reductions during the third quarter. Since the beginning of the year the Company has cut US\\$ 5 million in costs by lowering G&A as well as reducing the workforce in quarter four 2015. Furthermore, because of early conversions on the convertible sukuk in early 2014, the Company has saved approximately US \\$4 million in interest payment during 2015. This has resulted in a company better positioned to operate in a low oil price environment going forward.
Dr Patrick Allman-Ward, CEO Dana Gas, said:
“In the Nile Delta, we are pleased to announce the outcome of two successful wells in the Balsam Development Lease. Both Balsam 2 and 3 wells had excellent results and initial estimates indicate a 2P reserve addition of about 165 Bcf, with a high condensate yield. The wells open up further development potential that will be pursued in 2016. We expect first production from the Balsam Field to come on stream before the end of the year. This is also the first gas resulting from our new investment program linked to the Gas Production Enhancement Agreement signed with the Egyptian government in August 2014. It represents a notable milestone as we start to add incremental production, generate additional revenues and reduce our outstanding receivables position.”
“The market remains extremely tough on producers but Dana Gas continues to be resilient and our focus on managing our cost base is yielding positive results. It has helped us to partially offset the low oil price environment and reduction in production to post a nine-month net profit of US\\$ 10 million.”
Financials
The Company reported third quarter gross revenue of US\\$ 93 million as compared to US\\$ 174 million and an overall net loss of US\\$ 9 million versus a net profit of US\\$ 38 million in the third quarter 2014 principally due to lower prices but also to lower production. The average realised price of condensate and LPG in the first nine months of 2015 was US\\$ 53 and US\\$ 37 respectively, a decline of approximately 50% on 2014 prices.
Cash and bank balances, as of 30 September 2015, stood at US\\$ 142 million, a 23% decline as compared to 31 December 2014, because of ongoing capital expenditures in Egypt related to the Gas Production Enhancement Agreement activities (GPEA) and the Zora project in the UAE, together with the regular Sukuk profit payments.
Cash collections from Egypt in the first nine months 2015 stood at US\\$ 53 million and Kurdistan Region of Iraq (KRI) at US\\$ 36 million. During the third quarter, the Company realised US\\$ 41 million from the sale of its MOL shares.
Production and Development
The Company saw its share of production in Q3 2015 decrease by 11% to 60,800 boepd from 68,700 boepd, due primarily to natural declines in the Nile Delta fields in Egypt.
Egypt
Dana Gas Egypt recorded 32,144 boepd of production over the third quarter of 2015, a decline of 21% from an average of 40,500 boepd in Q3 2014. This is in line with the annual average decline rates for Nile Delta fields and will be offset once the Balsam Field comes on stream.
The Balsam-2 and Balsam-3 wells were both drilled to depths greater than 3500 metres. The Balsam-2 well encountered 78 m of net pay in excellent quality reservoir in the primary Qawasim (QP2) objective, the longest gas column yet penetrated in the Company’s history. The well will be completed with a 700 metre horizontal section, the longest drilled in the onshore Nile Delta to date, in order to maximize recoverable volumes. The Balsam-3 well encountered 34 m of net pay in the QP2 reservoir with no gas-water contact logged. An additional 11 m of net pay was encountered in the shallower secondary QP1 objective in both Balsam-2 and Balsam-3.
The Balsam Field, through Balsam-1 and -2 will be brought on-stream before the end of the year, and Balsam-3 will be tied into the El Wastani plant in 2016. These successful wells have de-risked the western part of the Development Lease and has created the opportunity for an additional three exploration and development wells to be drilled in 2016.
Kurdistan Region of Iraq
Dana Gas’s share (40%) of gross production in the KRI in Q3 2015 was 28,000 boepd, compared to 27,700 recorded in the third quarter 2014.
UAE - Zora Gas Project
Dana Gas continues to make progress on its Zora Gas Field project. The last quarter has seen the well completed and cleaned up. All construction works for the onshore plant were completed and the pre-commissioning and commissioning works commenced. Production capacity will be approximately 40 MMscf/d gas (6,650 boepd). First gas is due on-stream before year end.
Receivables
As at 30 September 2015, Dana Gas’ total receivables were US\\$ 1.071 billion (31 December 2014: US\\$ 992 million).
In Egypt, during the first nine months of 2015, the Company received cash of US\\$ 53 million whilst offsetting US\\$ 13 million against the signature bonus for Block 1 and 3 and US\\$ 3 million of payables to government-owned contractors. As at 30 September 2015, trade receivables stood at US\\$ 252 million (31 December 2014: US\\$ 233 million).
In the KRI, Dana Gas’s share of cash collections for the first nine months of 2015 stood at US\\$36 million. Upon expiry of the direct local sales contracts, the KRG has commenced lifting of LPG from 20 September, and condensate from 7 October 2015, direct from the Khor Mor plant through local contractors. As at 30 September 2015, the trade receivable balance stood at US\\$ 804 million (31 December 2014: US\\$ 746 million).
Kurdistan Arbitration Update
On 21 September 2015, a one-day hearing was held during which the Claimants made an application to the LCIA Tribunal for a final monetary award against the KRG for outstanding unpaid invoices for produced condensate and LPG calculated as per the pricing methodology determined by the Tribunal on the 30th June in its Partial Final Award. The Tribunal considered the parties’ claims and their submissions made on the day. The Tribunal will inform the parties of its ruling in due course.
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