Dana Gas swings to third-quarter loss on low hydrocarbon prices and investment sale

Dana Gas has swung to a post-tax net loss of US$9 million for the third quarter from the same period last year.

It cited the slump in hydrocarbon prices and a one-off loss of $11m from the sale of an investment in MOL Group.

Patrick Allman-Ward, the chief executive of the Sharjah-based company which made a $38m profit in the third quarter last year, warned shareholders to expect a poor fourth quarter before the firm’s outlook improves.

Post-tax profit at Dana Gas for the first nine months of the year plunged 92 per cent year-on- year to $10m.

Its shares fell 4 fils to Dh0.39 on Sunday. They were trading at Dh1.02 at the start of last year.

Sharjah’s Crescent Petroleum is the largest shareholder in Dana Gas with a 21 per cent stake.

Dana Gas also reported that it sold its remaining stake in MOL Group, the Hungarian oil and gas company which bought 10 per cent of Dana’s Pearl Petroleum asset in the Kurdish region of Iraq in 2009.

Dana Gas booked a $4m loss in the third quarter from the sale of more than 1 million shares at $48.03, and sold the remaining stake of just over 65,000 shares at $44.79 for a loss that will be realised in the fourth quarter.

Mr Ward said Dana Gas’s Zora gasfield project (to deliver gas from offshore to supply Sharjah) was delayed by harder than expected drilling and the slow delivery of the onshore processing plant.

That project is now expected to start delivering gas by the end of the year, about six months late. Mr Allman-Ward said he expected the Zora gasfield to contribute gross annual revenue of about $58m.

Meanwhile, Dana Gas has cut its costs by more than 10 per cent, which includes job losses. A company spokesman declined to specify where the jobs were cut, other than saying that they were from its Sharjah headquarters and the Egyptian field operations.

In Egypt, there was a bright spot for Dana Gas, where it has reported finding additional gas in its Nile Delta exploration acreage. Mr Allman-Ward said there were good results from two wells on the Balsam gasfield and that initial indications point to the addition of 165 billion cubic feet of gas to proven and probable reserves, equivalent to about 28 million barrels of oil. So called “2p” reserves in Egypt stood at 113 million barrels of oil at the end of last year.

This would mean that gas output in Egypt should reverse the 21 per cent decline in the latest quarter and “increase significantly” next year, said Mr Allman-Ward. There are also further promising exploration areas in Egypt, including the deepwater Block 6 where Dana Gas has acquired “very exciting” seismic data in recent months, and Block 3, which it is exploring with BP.

Dana Gas has cut $5m in costs this year and Mr Allman-Ward said it was planning to trim a further 10 per cent from operating expenses next year.

But despite some progress, the company’s key problems persist – the back payments owed by its principal host governments – Egypt and the Kurdish Regional Government (KRG) – are still mounting. The combined arrears exceeded $1 billion at the end of the quarter, compared with $992m at the end of last year.

Although Egypt’s government reached a deal with Dana Gas at the end of last year to clear the back payments and made payments of $53m this year, the amount that Cairo owes Dana Gas has risen to $252m, from $233m at the end of last year.

Mr Allman-Ward said he expected the plan to remain on track for the arrears to be cleared by 2018 as gas output volumes rise there, although stipulating that Dana Gas’s capital expenditure to further develop gasfields would depend on the rate of payments from the government.

However, the situation with the KRG remains intractable. Despite arbitration rulings in favour of Dana Gas this year, the arrears have exceeded $800m and continue to rise.

Mr Allman-Ward reiterated the willingness of Dana Gas, and its partners, to settle and invest more to tap into the vast gas reserves on the two main assets there, which would cover all of the region’s gas needs, as well as supply significant exports via Turkey.


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