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Abu Dhabi, UAEMonday 25 June 2018

Despite sukuk cases, Dana Gas swings to profit in 2017

Sharjah-based company benefits from higher production, oil prices and settlement deal with Kurdistan government

The company which didn't provide fourth quarter figures, said profit in the the last three months of 2017 took a hit from an $34m impairment charge against the Zora gas. Jaime Puebla / The National
The company which didn't provide fourth quarter figures, said profit in the the last three months of 2017 took a hit from an $34m impairment charge against the Zora gas. Jaime Puebla / The National

Dana Gas, the Sharjah-based energy company embroiled in court battles over the legality of $700 million sukuk, swung to a profit last year thanks to a settlement deal with Kurdistan's government, higher output in Egypt and Iraq, and an uptick in oil prices.

The Abu Dhabi-listed firm, posted a net profit of $83m compared with a loss of $88m a year earlier. Reported gross revenues grew 15 per cent to $450m compared with $392m in 2016. The company, which did not provide fourth-quarter figures, said profit in the the last three months of 2017 took a hit from an $34m impairment charge against the Zora gasfield located offshore from Sharjah.

"The increase in revenue and profitability was due to the higher production in Egypt and the Kurdistan Region of Iraq and an increase in realised liquid prices," the company said. "Net profit was also supplemented by the successful settlement agreement with the Kurdistan Regional Government."

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Dana Gas is in the midst of court cases in the UAE and UK after it declared its $700m sukuk issuance illegal in June because of changes in Sharia. The Islamic bonds, which matured in October, are held by a number of creditors including BlackRock, the world's biggest asset manager.

Dana gas posted in the third quarter a 700 per cent increase in net profit to Dh375m due to the favourable outcome of its arbitration dispute with the KRG in August.

Under the terms of the settlement, the KRG agreed to pay the Pearl Consortium - consisting of Dana Gas, its parent Crescent Petroleum, OMV of Austria, Germany’s RWE and Hungary’s MOL - a sum of $600m, together with a $400m payment to be allocated towards the consortium’s further investment in the region’s gasfields.

The $1.24 billion balance of the amount awarded by the London Court of International Arbitration was reclassified as outstanding costs, recoverable from future revenues generated.

The settlement allows Pearl to start development of two Kurdish gasfields estimated to hold around 75 trillion cubic feet of wet gas and seven billion barrels of oil with plans under way to increase total output by 20 per cent this year and 170 per cent in two years. It did not provide figures for current output levels.

Total production from Dana Gas' assetswas nearly flat, rising by 1 per cent to 67,600 barrels of oil equivalent per day (boepd), with the average realised liquid price of $40/boepd compared with $33/boepd in 2016 - an increase of 21 per cent.

Collections from Iraqi Kurdistan stood at $466m following the settlement, with trade receivables balance at $7m for the year-end, representing dues against local sales for December 2017.

Collections from Egypt accounted for $164m or around 129 per cent of billings with the total receivables balance falling 14 per cent to $228m from $265m.

Dana Gas reported a year-end cash balance of $608m, almost double the $302m it declared at the end of 2016.