Dana Gas disappointed investors and analysts on Monday by posting a second consecutive quarterly loss, but the Sharjah-based company's share price could rebound on hopes of a financial turnaround. Scott Darling, an analyst with Nomura International, continues to rate the stock a "buy", despite the Dh193 million (US$52.5m) fourth-quarter net loss due to exploration expenses and asset write-downs.
"Our discussions with management suggest the company has taken the opportunity to draw a line under 2009 by ensuring a more robust balance sheet for the coming year," he wrote in a research note. Mr Darling now forecasts earnings swinging to Dh0.02 per share this year from an estimated loss of Dh0.09 per share last year, and tripling to Dh0.06 per share next year. Nomura's Dh1.50 target for Dana's share price is 67 per cent higher than yesterday's Dh0.90 close on the Abu Dhabi Securities Exchange.
Dana pumps gas and small amounts of oil in Egypt and Iraqi Kurdistan while awaiting the start-up of a stalled joint venture to import Iranian gas into the UAE. Only the Egyptian operations generate revenue, so why is Mr Darling bullish? The reason is Dana's solid performance in Egypt since 2006, when it acquired Centurion Energy International, a Canadian company with Egyptian oil and gas concessions, for about US$1 billion.
Centurion's output was falling, but after vigorous exploration efforts yielding 12 discoveries in the past two years, production is again trending upwards. Dana has targeted a 15 per cent increase in its Egyptian oil and gas output this year, after raising production by 20 per cent last year. On Tuesday, at a gas conference in Abu Dhabi, the company's exploration manager presented detailed geophysical data supporting the aggressive production target. Dana has also released a full assessment of its Egyptian reserves, which Mr Darling agrees "should support production growth within the region".