Dana Gas, the Middle East’s largest regional private sector natural gas company, posted  a net profit of $18 million (AED66 million) for the first half (H1) of this year, compared with $52 million in H1 2019 on a like-for-like basis and excluding one-off impairments, earn-out amounts, and deferred income. 

 

On a non-adjusted basis, the company recorded a loss of $19 million (AED69 million) as a result of a $37 million impairment charge related to oil and gas assets in Egypt due to low oil prices, and decreased value of its financial assets, the company said.

 

Revenue for the first six months of the year stood at $181 million compared to $242 million in H1 2019, down 25%. The decrease is largely due to lower realised prices during the period, which had a $42 million impact, and, to a lesser extent, lower production in Egypt as a result of natural field declines. Realised prices in H1 2020 averaged $30/bbl for condensate and $28/boe for LPG compared to $51/bbl and $33/boe respectively in 1H 2019.

 

The company implemented cost cutting measures, achieving $2 million saving in G&A costs with further savings expected in H2 2020. Capex was also cut by 72% to $25 million as all non-essential work was deferred.

 

In Q2 2020, Brent averaged $30/bbl and touched a low of $13/bbl on April 21, 2020. Despite historical low prices, Dana Gas ended the second quarter close to breakeven with a small net operating loss of $3 million, demonstrating its ability to stay resilient even in a low oil price environment given its fixed price long term gas contracts.

 

The Egypt sales process continues although it has been delayed as a result of the COVID-19 pandemic. The company expects to make a further announcement during H2 2020.

 

Dr Patrick Allman-Ward, CEO of Dana Gas, commented: “The company has demonstrated a strong and resilient financial and operational performance in the first half of 2020. We generated an operational net profit (before impairments) of $18 million, which demonstrates our ability to operate successfully in low-cost environments. Our gas sales account for approximately half of the company’s income and are sold under long-term gas sale contracts with host governments, providing us with sustainable revenues even when oil prices are low."

 

"Furthermore, we were able to swiftly execute safety measures to ensure our assets remained operational and production uninterrupted despite the great difficulty of working through the Covid-19 pandemic. I wish to express a big thank you in recognition for the huge efforts made and the dedication shown by our teams in the KRI and Egypt, who managed to maintain an average production of 63,250 boepd in the first half of 2020," he said.

 

"We remain focused on strengthening our balance sheet to better position the Company for the future and we plan to press ahead with certain strategic actions regarding our asset and sukuk which will benefit all our stakeholders alike,” he added.

 

Operations & Production

The company’s average production in H1 2020 was 63,250 boepd, a 7% decrease as compared with 68,200 boepd in H1 2019. The drop in output was due to reduced production in Egypt and the KRI, by 9% and 2%, respectively; and ceasing production from the UAE’s Zora Gas Field. Egypt’s production was 30,950 boepd, reflecting the impact of natural field declines, and the KRI’s production was 31,700 boepd.

 

Covid-19 has impacted growth plans though not current production in the KRI, where movement restrictions and other preventative measures have impacted Pearl Petroleum’s Khor Mor expansion project. As a result, Pearl Petroleum has experienced delays in the implementation of the first 250 MMscf/d gas processing train which had a declaration of force majeure by the EPC contractor due to the border closures and restrictions resulting from the pandemic. While basic engineering works have been completed, major works are expected to resume once conditions on the ground allow. All parties remain committed to implementing the expansion project as soon as possible, the company said.

 

Liquidity and Collections

Dana Gas received $90 million in collections during H1 2020 against total billings of $111 million. Its share of receipts by Pearl Petroleum in the KRI contributed $47 million and Dana Gas Egypt brought in $43 million in collections, respectively. The company received a $50 million dividend from Pearl Petroleum in the first half of the year.

 

As of June 30, 2020, the company’s receivables stood at $117 million in Egypt and $39 million in the KRI. After suspension of certain payments due for the months of December 2019 to February 2020, regular payments in full by the Kurdistan Regional Government have resumed since March allowing the company to continue regular and timely monthly collections. - TradeArabia News Service