Sharjah’s Dana Gas said on Wednesday its first-quarter profit halved owing to low oil prices coupled with a 12 per cent production drop.
The Abu Dhabi-listed company’s net profit fell to US$6 million in the three months ending March 31 from $12m a year earlier, the company said on Wednesday. Dana Gas also cut further its capital expenditure, which fell under 30 per cent compared with the first quarter of last year.
“It’s been a very challenging oil price environment with average prices at $33 a barrel – the lowest average for a quarter since 2003,” said Patrick Allman-Ward, the chief executive of Dana Gas.
He added that this was the lowest oil price environment that the company, founded in 2005, had ever experienced.
Dana Gas net production from the UAE, the Kurdish region of Iraq and Egypt fell 12 per cent to 60,500 barrels of oil equivalent per day from the year-earlier period because of field decline in Egypt and re-rating of production output in the Kurdish region.
Dana Gas is hoping to offset some of the decreased production figures with new production, which Mr Allman-Ward said still would not be enough to make up the shortfall.
The company has struggled to recoup payments from Egypt and the Kurdish region amid arbitration disputes with the Kurdistan Regional Government (KRG) and the creation of an alternative payment scheme in Egypt. Yet the company has started to receive regular payments from both countries, totalling $41.5m this quarter.
The KRG made payments totalling $18m, leaving a balance of $733m. The company said that its consortia partner, Pearl Petroleum, had reached a new agreement with the KRG’s ministry of natural resources to “ensure gradual reduction of past receivables” as well as ongoing payment for production.
Dana Gas restarted local sales which had temporarily been interrupted as a result of non-payment despite ongoing arbitration.
In November, a London high court ordered the KRG to pay the consortium $1.9 billion, which is final and binding. Dana Gas and its partners, Crescent Petroleum and Pearl Petroleum, will seek further damage claims during a two-week hearing in September.
“We remain open for discussion and a negotiated settlement, but in the meantime, the arbitration continues,” said Mr Allman-Ward. “[September] will be a busy month for Dana Gas.”
The company received $23.5m in payments over the quarter from Egypt, with the trade receivable balance standing at $226m at the end of the quarter. Egypt’s petroleum minister, Tarek El Molla, said that the country was hoping to pay back the last of its arrears to the tune of $3.2bn in the next year or two.
“Our [payment] track record this year is 85 per cent, and we’re certainly in a better position than we’ve been in the past,” said Mr Allman-Ward. “Clearly we’d like to see 100 per cent, we still have a little gap there that we’re constantly working on.”
He said the deal that Dana Gas struck last year for the gas production enhancement agreement in Egypt, which includes a seven-year programme to drill 37 wells and workovers on existing wells to increase production, was starting to materialise.
But the 12 per cent decline in production after a guidance of higher production made last month, was disappointing, according to Sanyalak Manibhandu, a research manager at NBAD Securities in Abu Dhabi.
“Realised prices came in lower than estimated and the cash on the balance sheet at the end of the quarter came in lower than year-end – which also disappointed,” Mr Manibhandu said.
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