x Abu Dhabi, UAEFriday 19 January 2018

Dana Gas first-quarter profit rises after MOL stake sale

Dana Gas, the oil and natural gas producer forced to restructure debt last year, boosted first-quarter profit 17 per cent as gains from an asset sale outweighed a decline in revenue.

Dana Gas has boosted its profits in the first quarter on the sale of shares in the Hungarian oil company Mol as revenues declined on lost production in the Kurdish region of Iraq.

The Sharjah-based company increased net profits by 17 per cent to Dh241 million, while revenues dropped by 20 per cent to Dh557m.

The gas producer in February sold about half of its 3 per cent share in Mol for Dh495m. Mol had given both Dana and its parent company, Crescent Petroleum, equity in exchange for a 10 per cent stake for their joint operations in Kurdish Iraq.

"The company has dramatically improved its liquidity position," said Gus Chehayeb, the director of Mena credit research at Exotix. First quarter profits followed strong earnings last year, a relief after payments to Dana dried up in its core markets in previous years. Revenues suffered as production of liquefied petroleum gas (LPG) in Kurdish Iraq had been suspended since June last year after a fire, the company said.

Overall production from assets in the autonomous region and Egypt fell year on year to 61,400 barrels of oil equivalent per day.

LPG production will resume in June after repairs to facilities have been completed, said the company.

Dana continued to receive payments for its gas from both the Kurdish Regional Government (KRG) and the Egyptian government in the first quarter. Prior to last year, the company's finances suffered from the political turmoil of the Arab Spring, which brought payments in Egypt to a halt.

While it is still owed money for past production, the company now receives full payment for the gas it delivers, amounting to US$41m in the first three months of the year.

"We are very encouraged by the first quarter receivables position," said Patrick Allman-Ward, Dana's general manager in Egypt.

A protracted dispute between the KRG and Iraq's central government also restricted payments out of the region. Dana received $32m from the KRG last quarter, but uncertainty remains over the scope of future payments.

Exports out of the region are limited to truckloads sent across the border to Turkey, as exports via Iraq's infrastructure remain suspended since last year as the KRG and Baghdad disagree over the Kurdish share of oil revenues.

The central government is only prepared to include payments of $625m in the next budget, far short of Kurdish demands for $3.5 billion.

Dana Gas completed the refinancing of a $1bn sukuk this year. Its payment issues prevented the company from repaying the bond when it matured last October, and its financial difficulties had caused its shares on the Abu Dhabi Securities Exchange to slump.

As it considers its share price too low, Dana continues to eye a listing on an international stock exchange, an idea first floated two years ago.