Sharjah, UAE: Dana Gas PJSC (“Company”), the Middle East’s largest regional natural gas company today announced its audited financial results for the full year ended 31 December 2017.
Highlights:
- Settlement with KRG unlocks future development of world-class assets, financial payments and improved terms
- FY net profit $83m (AED 305m) versus $88m (AED 323m) loss in 2016
- FY gross revenue $450m (AED 1.65bn), up 15% owing to higher hydrocarbon prices and increased production in Egypt
- Annual average group production 67,600 boepd, up 1% year-on-year
- Year-end cash balance $608 million (AED 2.23bn), highest in 10 years
- Maintained consistently low level of G&A and OPEX year-on-year
- Regular payments from the KRI were maintained
The Company reported full year 2017 gross revenue and net profit of $450 million (AED 1.65bn) and $83 million (AED 305m) as compared to $392 million (AED 1.44bn) and net loss of $88 million (AED 323m) respectively in 2016.
The turnaround was led by higher realised liquid prices, higher production in Egypt and tight management of operational expenses. Higher profit was also supported by the successful settlement agreement (‘Settlement’) with the Kurdistan Regional Government (‘KRG’). However, Q4 net profit was impacted by an impairment charge of $34 million (AED 125m) against the UAE Zora asset following the year-end reserve report.
2017 group average production increased to 67,600 barrels of oil equivalent per day (boepd), up 1% from 67,050 boepd in 2016. Egypt annual production was 5% higher at 39,500 boepd. KRI production was flat at 25,750 boepd vis-à-vis 2016 and the UAE’s Zora Gas field produced 1,650 boepd in 2017 as compared to 2,700 boepd in 2016. The average realised liquid price was $40 per barrel of oil equivalent (boe), compared to $33 boe in 2016, a 21% increase in 2017. The group average production in Q4 2017 was lower at 67,350 boepd, compared to 69,450 boepd in 2016.
The year-end cash balance stood at $608 million (AED 2.23bn), double the $302 million (AED 1.1bn) reported at the end of 2016. This cash balance is largely a consequence of the $210 million (AED 770m) dividend received from Pearl Petroleum Company Ltd (‘Pearl Petroleum’ or the ‘Consortium’) as part of the Settlement, a $110 million (AED 403m) industry payment in Egypt and $22 million (AED 81m) of condensate export in Egypt. The cash balance does not include the $140 million (AED 513m) held by Pearl for the developmental of the Kurdistan Region of Iraq (‘KRI’) assets.
The Company kept costs and expenses to a minimum which resulted in a G&A spend of $15 million (AED 55m) and operational expenses of $52 million (AED 191m), totalling $67 million (AED 246m). This is in line with 2016’s $65 million (AED 239m) and is the fourth consecutive year of targeted cost reductions. The Company will carry-on focussing on cash conservation in 2018 as payments from Egypt remain uncertain and geopolitical risks in the region persist. Capital expenditure was $47 million (AED 172m) in 2017 and the projected spend in 2018 is $50 million (AED 183m) which includes completing the Egypt drilling programme and the KRI expansion plans.
Following the cash payment element of the Settlement Agreement and the reclassification of residual receivables, KRI’s trade receivables balance stood at $7 million (AED 26m) at year-end and represents the amounts due against local sales for the month of December 2017. In Egypt, the Company collected $164 million (AED 600m), which was 129% of billings. The total receivables balance fell to $228 million (AED 835m) from $265 million (AED 971m), a 14% drop.
The Company retains Gaffney Cline & Associates (‘GCA’) to independently evaluate and certify the hydrocarbon reserves at year-end. GCA evaluated KRI’s reserves at year-end 2015 at 990 MMboe and the fields remains some of the largest undeveloped resources in the Middle East. Following the 2017 review, Egypt’s proved and probable (2P) reserves were assessed at 117 MMboe as compared to 132 MMboe, lower on account of production during the year. The UAE’s 2P reserves were also revised downwards to 24 MMboe from 33 MMboe.
Dr. Patrick Allman-Ward, CEO of Dana Gas, said:
“Our settlement agreement with the Kurdistan Regional Government was a major milestone for the Company. This has allowed us to start to fully develop the Khor Mor and Chemchemal fields, two truly world-class gas fields, with in-place volumes of approx. 75 trillion cubic feet of wet gas and 7 billion barrels of oil, to the benefit of the people of the Kurdistan Region and all of Iraq. Our targeted production increases in the KRI are 20% this year and 170% in the next two to three years. The strength of our portfolio lies in organic growth and this will be our principal focus for 2018 and onwards. If all goes according to plan we will be producing, together with our partners in PEARL Petroleum just under 900 million standard cubic feet per day from our expanded facilities by 2021. We are also pleased to have qualified with the Iraq Oil Ministry for their upcoming bidding round as we seek to rejuvenate the Company’s opportunity portfolio.
We drove solid operational performance in 2017, which contributed to strong profitability, evidenced by a net profit of $83 million as compared to an $88 million loss in 2016. We continued to focus on cost efficiencies and managed to maintain our low levels of G&A, capex and operational expenditures in support of our capital conservation objective, and this focus will carry-on in 2018. Payments from Egypt in H2 2017 were sporadic and disappointing. We remain cautious about the timing and scale of future collections and so the dialogue with the Egyptian Government continues in order for us to get paid what we are contractually owed.”
Sukuk Restructuring
Advice received from independent legal advisers at the end of May 2017 stated that the terms of the Company’s Sukuk Al Mudarabah were not compliant with Shari’a principles and are unlawful under the laws of the UAE and therefore were void and unenforceable. The outcome of the ongoing litigation finally in UAE courts could result in a significant liability for the Sukukholders to repay the Company excess ‘on account profit payments’ based on a lawful reconciliation of the transaction. The Company, in line with detailed public disclosures that it has made to the Securities and Commodities Authority (SCA) and through ADX, is pursuing the litigation route to resolve the matter and is confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.
About Dana Gas
Dana Gas is the Middle East's first and largest regional private sector natural gas Company established in December 2005 with a public listing on the Abu Dhabi Securities Exchange (ADX). It has exploration and production assets in Egypt, Kurdistan Region of Iraq (KRI) and UAE, with 2P reserves exceeding one billion boe and average production of 67,600 boepd in 2017. With sizeable assets in Egypt, KRI and the UAE, and further plans for expansion, Dana Gas is playing an important role in the rapidly growing natural gas sector of the Middle East, North Africa and South Asia (MENASA) region. Visit: www.danagas.com
Communication & Investor Relations Contact
Mohammed Mubaideen
Head of Investor Relations
+971 6 519 4401
Investor.relations@danagas.com
