Dana Gas, the Middle East’s largest regional private sector natural gas company, has seen its first-half (H1) net profit drop 25% to AED304 million ($83 million) as compared to AED407 million in H1 2022 on falling oil prices. 

 

Profitability for the first half declined amid a 25% drop in the average price of Brent during H1 2023 to $80 per barrel compared to $107 per barrel in H1 2022. 

 

The decline in profitability was also due to additional discounts on condensate sales in the Kurdistan region of Iraq (KRI), where the firm began to sell to third party local buyers as other companies shut down production in KRI.

 

Revenue decrease

Revenue for the first six months of the year decreased 22% to AED814 million compared to AED1.04 billion in H1 2022 due to lower realised prices amid the softening global oil and gas prices.  The company’s realised prices during the period averaged $56/bbl for condensate and $37/boe for LPG compared to $87/bbl and $44/boe respectively in H1 2022.

 

The impact of lower realised prices on the company’s profitability was partially offset by a production increase in the KRI and reduced operating costs by 15%.

 

Pearl Petroleum recently received $101 million from the Kurdistan Regional Government (KRG) despite the ongoing challenges within Iraq and is in ongoing discussions with the KRG to settle outstanding receivables as soon as possible. Unlike other operators in the KRI Pearl’s operations and production have continued without interruption since all its products are consumed locally.  

 

Challenging environment

Dr Patrick Allman-Ward, CEO of Dana Gas, commented: “Dana Gas’s first half results reflect the challenging environment hydrocarbon producers have been facing amid a decline in global oil prices. To counter the downturn in energy prices, the Company has strengthened its focus on maintaining production and lowering costs, while working with partner governments in Egypt and the KRI to settle outstanding payments.  

 

“As oil prices have turned a corner and started to rise, we are optimistic about the potential positive impact on our Company's financial results for the remainder of the year, provided that this upward trend persists.”

 

Operations & production

The group’s overall production in H1 2023 averaged 59,800 boepd (barrels of oil equivalent per day), a 2% decrease as compared to 61,100 boepd in H1 2022 as a decline in Egypt production outweighed an increase in the KRI. The 12% production drop in Egypt was mainly the result of natural field declines. 

 

Owing to active reservoir management and optimisation of production from existing wells, the reduction was significantly below expected levels of decline for Nile Delta fields, which are typically between 20-30% each year. KRI production grew by 6% to 36,400 boepd from 34,500 in H1 2022, KRI production was supported by the successful debottlenecking project that added 50 mmscfd (million standard cubic feet per day) to output in January. In the second quarter, a partial shut down for maintenance in Kor Mor was successfully carried out without any HSSE incidents but impacted production during its duration. 

 

Pearl Petroleum has now successfully completed the drilling of the six KM250 project development wells. Once complete, the KM250 expansion project will add 250 mmscfd of production, resulting in 750 mmscfd total daily production capacity.  

 

Liquidity 

The company’s cash position at the end of H1 2023 stood at AED370 million, including AED301 million held at the Pearl Petroleum joint venture. 

 

The group collected a total of AED388 million during H1 2023, with the KRI and Egypt contributing AED293 million and AED95 million respectively. In Q2 2023, Pearl management proactively began the sale of condensate to third party local buyers which has allowed Pearl to improve its liquidity position through regular collections on condensate sales.

 

The company’s receivables in KRI stands at AED356 million and in Egypt at AED150 million at the end of the first half. 

 

In May, Dana Gas also received regulatory approval to increase foreign ownership in the company’s shares, in line with the UAE’s new Commercial Companies Law that has abolished a requirement that UAE nationals own 51% of onshore companies. 

 

Foreigners can now hold up to 100% of Dana Gas’s shares, up from 49%, a decision that was approved by the company’s shareholders at its Annual General Meeting on April 26.-- TradeArabia News Service