Sharjah-based Dana Gas reported lower sales and profit in the first quarter as cost-cutting wasn’t enough to mitigate the effects of lower oil and gas prices.
Dana Gas, whose largest shareholder is Crescent Petroleum, reported that revenues fell to US$115 million in the first quarter, down from $180m in the same period last year. Gross earnings were nearly halved at $55m versus $106m and net profit was $12m compared with $45m – a fall of 73 per cent.
The company’s main operating assets are offshore gas fields in Egypt and a gas project in the Kurdistan region of Iraq. Overall production was little changed on the year at 68,700 barrels of oil equivalent, down 100 boed.
The company has struggled in the past to get paid from its two main assets because of troubles in both Egypt and Kurdistan. Dana Gas struck a deal with Egypt at the end of last year, whereby it will be able to recoup the money it is owed by receiving the associated liquid (condensate) from the gas fields project it has, in return for which it will make additional investment to develop further fields.
Dana Gas chief executive Patrick Allman-Ward said that at the end of the first quarter, Egypt owed Dana Gas $243m in total, which was up from $233m at the end of last year, though the overdue amount was lower at $173m. Dana Gas in currently moving additional equipment onto its gas fields in the Nile Delta and expects to start recovering condensate and selling it on the world market by August, Mr Allman-Ward said.
Egypt has promised to clear its outstanding backpayments owed to all the international oil and gas companies operating in the country by the end of next year. The amount outstanding is currently about $5 billion, the same as at the end of last year. Mr Allman-Ward said Dana Gas expects to get a pro rata share of any “bullet payments” the Egyptian government will make to clear the outstanding balance. Meanwhile, the company has earmarked an additional investment of $350m for Egypt to develop and improve more than three dozen wells.
The company still has problems in Kurdistan, where it has taken the Kurdistan regional government to the London Court of Arbitration, from which a ruling is expected in the next few months. That would be the first phase of a process than can drag out for years before any damages are awarded and paid, so the company is hoping to get a resolution by negotiation with the KRG.
The company also is due to see the first gas from its Zora gas project in the middle of this year, with the expected average of 14m standard cubic feet a day (6,650 boed), which will be paid at domestic gas prices, with all the output being taken by the Sharjah authorities.
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