x Abu Dhabi, UAESaturday 22 July 2017

Dana profits treble but answers sought on $1bn sukuk repayment

Dana Gas trebles its profit thanks to increased production and surging crude prices, but it gives no indication over debt repayments.

Profits at Dana Gas, an oil and gas producer based in Sharjah, more than trebled last year on the back of increased production and surging crude prices.

The reaction on the stock market remained muted, however, as the company remained silent on its strategy to repay a US$1 billion (Dh3.67bn) sukuk maturing in October.

Net income rose to Dh506 million from Dh158m in 2010. Gross revenue jumped 43 per cent to Dh2.53bn.

Earnings were boosted by payments coming out of Egypt and the northern Iraq region of Kurdistan, where Dana has focused its exploration and production operations.

Payments totalled Dh649m. Dana's share price failed to reflect its earnings trajectory, and the stock closed only 2.7 per cent higher on the Abu Dhabi Stock Exchange General Index, as the company declined to address its debt in the earnings release.

The yield on its $1bn Islamic bonds jumped to the highest level in two weeks.

"We see positive numbers and good news on the collection front, but all eyes will remain on the anticipated announcement of the company's sukuk," said Abid Riaz, an analyst at EFG-Hermes in Dubai.

Dana has stated it would provide clarity on its refinancing strategy in the coming weeks.

The company's shares dropped by 42 per cent over the course of last year.

They gained after the company said on January 17 it would meet debt obligations and appointed a financial adviser.

"This is a potential catalyst for the shares, which have come under significant pressure over the last few months. The intrinsic value of Dana's assets is much higher than the stock today," said Mr Riaz.

The sukuk could be repaid in a number of ways, including the selling of assets, seeking financing from local banks, or refinancing the bond by issuing new debt, added Mr Riaz, who said Dana had the resources to meet its obligations.

The company seems to be ruling out an asset sale.

"We are now very focused on receivables collections while preserving our assets for benefit of all stakeholders," said Ahmed Al Arbeed, Dana's chief executive.

Dana's production averaged 66,200 barrels of oil equivalent per day from its concessions in Egypt and Kurdistan last year, an increase of 19 per cent from 2010.

The benchmark Brent crude index gained 25 per cent in last year's fourth quarter from a year earlier to average $109.02.