Dana Gas looks to boost investments in Iraq as it sells Egyptian assets
The company reported lower quarterly profits after writing down value of 'unviable' Merak-1 well in Egypt
Sharjah-based Dana Gas is looking to spend more in the Kurdistan Region of Iraq in 2020 as it finalises the sale of its Egyptian assets.
The company reported a near-doubling of capital expenditure during the first nine months of the year of $123m, up from $63m in the same period last year. Spending in Egypt reached $70m, while $53m was allocated to the Kurdistan Region of Iraq, where it is ramping up gas production.
"As we move forward to the actual construction phase of the first 250 million square feet per day [gas processing] train we will, of course, be expecting and anticipating a significant increase in the amount of capex [capital expenditure] next year," Dana Gas chief executive Patrick Allman-Ward told reporters in an earnings call on Thursday. "This will be fully funded and will not result in any cash call to Dana Gas."
Dana Gas, through the Pearl Consortium, which operates its Kurdish assets, is looking to ramp up production of gas from the Khor Mor and Chemchemal fields to around 880 million standard cubic feet per day, with condensate production of 36,000 barrels per day by 2021. The company is also bringing two 250 million sf/d gas processing trains on stream to meet the capacity increase.
Dana Gas reported an 87 per cent year-on-year drop in its third-quarter net profit to Dh8 million. Quarterly net profit was impacted by impairment charges of Dh220m on the Merak-1 well in Egypt, which proved to be commercially unviable , it said in a statement to the Abu Dhabi Securities Exchange, where its shares trade. Excluding one-offs, the company reported flat net profit and revenue of Dh61m and Dh422m, respectively.
The company's net profit for nine months more than trebled to reach Dh521m, largely on the back of Dh462m accrued from "recognition of financial assets related to certain reserve-based earn-out and other entitlements," the company noted.
Dana Gas will evaluate bids for its Egyptian assets later this month, Mr Allman-Ward said, with proceeds from the sale expected to be ploughed into the KRI, which holds 90 per cent of the company's probable reserves.
Italy's Eni, which operates the massive Zohr gas field in Egypt is interested in Dana Gas' Egypt assets but acquisitions of those operations was not a priority for the energy company, its chief executive Claudio Descalzi told Reuters on Tuesday.
Dana Gas, which had previously announced its intention to list on the London Stock Exchange, is still keen to pursue an initial public offering "in an alternate market", Mr Allman-Ward said.
"The board has mandated the management to look into that option and we're still studying that. In terms of timing, it's not the best of times historically but we've seen examples of listings that have been extremely successful so there is indeed opportunity," he said.
Updated: November 14, 2019 04:58 PM