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Abu Dhabi, UAEMonday 17 December 2018

Dana Gas to seek third-party financing for Kurdish projects, as it returns to profit

The Sharjah gas company will refrain from further Egyptian investent until payments are cleared

Dana Gas chief executive Patrick Allman-Ward said the company will move the Sharjah courts to dismiss litigation over the next week or ten days. Amr Abdallah Dalsh / Reuters
Dana Gas chief executive Patrick Allman-Ward said the company will move the Sharjah courts to dismiss litigation over the next week or ten days. Amr Abdallah Dalsh / Reuters

Dana Gas plans to secure third-party financing to fund gas development projects in Iraqi Kurdistan but will refrain from further investment in Egypt pending payments, its chief executive said on Thursday.

The Pearl Consortium, in which Dana Gas and its parent Crescent Petroleum are the largest stakeholders, wants to boost production in Khor Mor and Chemchemal fields by 20 per cent this year and 170 per cent over the next two to three years, Dana Gas said yesterday as part of its full annual results for 2017.

“The amounts of capital expenditure that will be spent at the Pearl Consortium level will either be funded through third-party financing or from the funding pot that has been retained for the purposes of development fund or retained operating cash flow,” Dana Gas chief executive Patrick Allman-Ward said on Thursday.

Austria’s OMV, Hungary’s MOL as well as Germany’s RWEST hold minority stakes in the gasfields, which Mr Allman-Ward said held enough potential to meet 10 years of gas consumption in Germany, France and the United Kingdom combined.

The consortium is currently undertaking a de-bottlenecking project in the fields that will see production of 50 to 80 million cubic feet of gas per day “by September or October time frame”, Mr Allman-Ward told The National, as well as 3,000 additional barrels of condensate production within the same time span.

Pearl also hopes to boost gas production from the twin Kurdish fields to around 880 million standard cubic feet of gas per day, with condensate production of 36,000 barrels per day by 2021.

Financing for the de-bottlenecking project had been secured, while the consortium is in the process of obtaining third-party finance for two 250 million cubic feet capacity gas trains that will come on stream over the next two to three years.

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Read more:

Despite sukuk cases, Dana Gas swings to profit in 2017

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The third-party financing will allow $400m paid to the company last year by the KRG for development in Iraqi Kurdistan - obtained as part of the $1 billion settlement - to be “released back to the shareholders,” said Mr Allman-Ward.

“So there is an interest form the shareholders to secure as much as third-party financing as possible.”

The firm is also considering bidding after becoming qualified on blocks being tendered by the federal Iraqi oil ministry's this year, he said.

While investment plans for Iraq are advancing, Dana Gas said it would withhold further investment in Egypt until the government cleared its dues.

The company, which earlier this month received $10.4m in payments for the sale of Egyptian condensate, noted that receivables from the state gas authorities had been “sporadic and disappointing” in the second half of 2017.

“Absent payments, absent investments,” Mr Allman-Ward said.

“Future investment in Egypt depends on the monies that are owed to us as a result of the investments we have already made,” he added.

Dana Gas swung to a net profit of $83m compared with a loss of $88m a year earlier, as first reported in February, helped by a $1bn payment from the KRG as part of the settlement of a long-running dispute over gas payments.

Mr Allman-Ward declined to take questions on the ongoing court battles between Dana Gas and its sukukholders but confirmed media reports that the firm received threatening letters from a delegate and trustee in May 2016, forcing the company to see injunctions to “protect the value of its assets” on behalf of all shareholders.

A Sharjah court hearing on the ongoing case will be held on March 22.