Income at Dana Gas tumbles by almost half

Income at Dana Gas fell by almost half during the second quarter after lost production in the Kurdistan region of Iraq and difficulties collecting debts from Egypt.

The liquefied petroleum gas facility in Kurdistan, above, was earlier shut down as it underwent repairs. Wam

Income at Dana Gas fell by almost half during the second quarter after lost production in the Kurdish region of Iraq and difficulties collecting debts from Egypt.

The Sharjah-based energy producer reported net income for the second quarter of Dh100 million, a decline of 44.7 per cent compared with the corresponding period last year.

The company, which successfully restructured US$920m of sukuk last year on the expectation it would be able to collect payments from its international operations, reported trade receivables of Dh2.47 billion, 7.8 per cent higher than three months earlier.

Revenues dipped 4.6 per cent during the period to Dh528m, which Dana Gas attributed to falling hydrocarbon prices and lower production of liquefied petroleum gas (LPG) in the Kurdish region after an industrial accident last year.

The company expects sales to recover after the completion of a loading bay at the plant.

"As LPG sales resume, energy prices rebound, production volumes continue to remain high, and the Egyptian economic situation stabilises as government authorities continue to work with the international financial community to address investors' concerns. Collectively these will support our main growth strategies going forward," said Adel Al Sabeeh, the chairman of Dana Gas.

The company's shares fell 3.1 per cent to close at 62 fils each after the release of earnings yesterday. Dana's stock is up 37.7 per cent since the start of the year, lagging gains on the Abu Dhabi Securities Exchange General Index.

The company said last month it had restarted production at its Khor Mor LPG plant in the Kurdish region, which was closed after an explosion in June last year killed one person and injured four.

The company's unpaid invoices are worrying some investors.

Dana Gas reported the lowest level of collection on trade receivables in two years, said Montasser Khelifi, a senior manager for global markets at Quantum Investment Bank in Dubai. "There has been a decrease in the pace the company has been collecting its receivables in both Egypt and Kurdistan," he said. "The company is dependent on this to enhance its liquidity position."

The company's efforts to collect receivables from Egypt should be made easier as the Egyptian economy stabilises, Mr Khelifi added.

"Over the last quarters we've seen them being more flexible with the Egyptian government, even receiving and accepting payments in Egyptian pounds," he said. "It was a low point this quarter, but I'm still confident in their ability."

Dana Gas expressed optimism that the Egyptian government would support international energy companies as a means to counteract slowing investment in the country's energy sector.

"There is … an inclination towards increasing gas prices in Egypt, especially with industrial end users," said Rashid Al Jarwan, the company's acting chief executive.

"To implement these initiatives it'll take time, but at least these issues are being discussed. Our people are in direct communication with the Egyptian authorities to see the potential impact of these policy changes in the future."

This month, Dana announced Patrick Allman-Ward would take over from Mr Al Jarwan as the chief executive.