Dana Gas swings to $279m record net profit in nine months on higher oil prices

Revenue increased by 27% to $334m due to higher production in the Kurdistan region of Iraq

A Dana Gas plant. The company's board proposed a 27 per cent increase in annual dividend and called for a general assembly on December 9 to approve the new dividend policy. Reuters

Sharjah-based Dana Gas, one of the largest private natural gas companies in the region, swung to a record net profit for the nine months ended September 30 on higher oil prices, improved operational performance and other income.

The company posted a $279 million net profit for the January to September period compared with a loss of $379m in the same period last year, it said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded. The net profit included “other income” of $608m and a $78m reversal of impairments related to Egypt assets, the company said on Sunday.

Revenue for the first nine months increased 27 per cent to $334m compared with $262m in the same period last year, supported by higher oil prices and higher production in the Kurdistan region of Iraq (KRI).

Dana Gas also reported a net profit of $140m for the three months to the end of September compared with a net loss of $360m in the same period last year. This included an impairment of $373m in respect of its Egyptian assets, according to the filing.

Oil prices have rebounded as demand for crude surges on the back of a strong recovery by the global economy, which slumped into its deepest recession since the 1930s amid the pandemic.

Oil demand in 2021 is expected to grow by 5.8 million barrels per day, with global consumption hitting 96.6 million bpd, Opec data released last month showed.

“The steps the company has taken to increase production and reduce its cost structure and the progress it has made in increasing collections has well-positioned Dana Gas to benefit from rising energy prices and create shareholder value,” Patrick Allman-Ward, chief executive of Dana Gas, said.

“Operationally, the company’s production in the KRI grew by 7 per cent and is on track with its expansion plans, with first gas from the KM250 project scheduled for April 2023. In Egypt, a five-well drilling programme has concluded and the additional production has almost entirely offset natural well declines.”

The board of Dana Gas proposed a 27 per cent increase in annual dividend and called for a general assembly on December 9 to approve the new dividend policy.

Oil and gas production in the first nine months of the year rose to 63,200 barrels of oil equivalent per day, compared with 63,000 boepd for the same period last year.

The small rise in output was due to the company’s Kurdish assets, which helped offset declines in Egypt. Production from Iraqi Kurdistan rose 7 per cent to reach 34,000 boepd, while output from Egypt fell 4 per cent to 29,200 boepd due to natural field depletion.

Collections from both regions for the first nine months of 2021 increased 102 per cent year on year to $256m from $127m in the same period last year, the company said.

In Iraq, Dana Gas saw its share of collections from sales of condensate, LPG and gas rise 77 per cent to $131m in the first nine months of 2021 over the same period the previous year.

In Egypt, Dana Gas collected $125m during the first nine months of 2021, compared with $53m in the same period of 2020.

The company’s cash position was $200m, compared with $108m at the end of 2020.

In September, an international arbitration tribunal awarded Dana Gas $607.5m in compensation for damages in a case against Iran’s state-owned energy producer. The dispute concerns a 25-year gas sales and purchase contract between Dana Gas affiliate Crescent Petroleum and the National Iranian Oil Company. The project was due to commence in December 2005, however, NIOC never delivered on its commitments.

“This first arbitration is now concluded and covers the period of the first eight and a half years of the 25-year gas sales agreement from 2005 to 2014,” Dana Gas said.

A second arbitration covering the remainder of the gas supply period from 2014 to 2030 is currently under way, with the final hearing due in October 2022 in Paris. A final award on the damages is expected to be announced in 2023, Dana Gas said.

In April, the company said it resumed expansion work on the Khor Mor field in Iraqi Kurdistan.

Dana Gas and Crescent Petroleum will invest $600m through the Pearl Petroleum consortium to add 250 million cubic feet per day of gas production capacity.

Gas production by the Pearl Consortium accounts for more than 80 per cent of Iraqi Kurdistan's power generation.

Pearl Petroleum signed a $250m financing agreement with the US International Development Finance Corporate to support the gas expansion works under way at the Khor Mor plant in the KRI.

The agreement is for seven years and will provide funding towards the total project cost of $630m, it added.