Sharjah's Dana Gas to cut down on expenditure

Dana Gas expects to reduce expenditure this year and maintain its production after reporting flat second-quarter earnings, the Sharjah company said.

Second-quarter net profit stood at US$7 million as Dana Gas cut expenditure and increased production, the Abu Dhabi-listed company said in a statement. NBAD Securities had forecast a net profit of Dh23m.

“Results are steady in a continuing challenging environment – this was a good result for us indicating how far we’ve come adjusting to the new oil prices,” said Patrick Allman-Ward, chief executive of Dana Gas. “We are in a good, but still uncomfort­able position.”

He said that spending would be further reduced for the remainder of the year as projects are mostly complete. Capital expenditures in the first half of this year were down over 30 per cent to $80m compared to $116m the previous year, with $74m going to Egypt and the remainder for the UAE’s Zora field.

However, production figures for the group are likely to increase only minimally for the rest of the year. In Egypt output climbed 11 per cent for the second quarter, but there is only a little room left to produce more.

Another key area is the Zora field in the UAE, which will be shut down in October to undergo maintenance to streamline operations. The field is producing less than half of its maximum capacity of 6,650 barrels of oil equivalent per day. “We hope to restore production to plant capacity, but clearly that will impact our overall production for the year,” said Mr Allman-Ward.

Dana Gas said the shutdown is likely to last for four to six weeks.

Yet despite the continued drag in oil prices, Dana Gas made headway on repurchasing $50m of its $777m outstanding sukuk, which is due for payment next year. The company acknowledged that it did not have enough cash to redeem those bonds, but was studying a range of alternatives.

Sanyalak Manibhandu, the head of research at NBAD Securities, said that the buy-back – especially after nothing was spent last year – was an indicator that the company was expecting positive cash flow in the near term.

He pointed to the potential of capital from arbitration cases with both the Kurdistan Regional Government and the National Iranian Oil Company, with hearings taking place in September and October.

“That’s a lot of money given their bank balance,” he said. “Why spend money on buying back on a sukuk if you don’t think you’ll get some money back?”

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