Sharjah-based Dana Gas will cut its headquarters workforce by 40 per cent as it responds to weakening hydrocarbon prices and payment delays.
Speaking at the Middle East Gas Conference in Abu Dhabi on Tuesday, the Dana Gas chief executive Patrick Allman-Ward said it would reduce the headcount at its main offices this year, a process that began in 2015.
He said that the company was also looking at cutting operating costs – particularly for its assets in Egypt and Iraq’s Kurdish region.
“It’s getting increasingly difficult [to cut costs] because we’ve been squeezing this particular orange for a number of years and we’re really starting to run out of juice,” Mr Allman-Ward said.
Sanyalak Manibhandu, a research manager at NBAD Securities in Abu Dhabi, said that the company had been trimming headcount and other expenses over the second half of last year. “So the news today is an indication of what has been happening and is ongoing and not a notification of the start of a new process,” he said.
While low oil prices continue to batter the sector, Dana Gas has added pressures stemming from overdue payments from the Kurdistan Regional Government (KRG) and Egypt, exceeding US$1 billion by the end of the third quarter of last year.
An alternative payment structure was established with the Egyptian authorities giving Dana Gas rights to increase production to help recoup outstanding balances with a seven-year programme.
However, coming to a similar agreement with the KRG is not at present on the table. Mr Allman-Ward said that the company would not make further investments in the area while payment disputes remain.
The continuing dispute began six years ago when a consortium that included Dana Gas claimed that the KRG underpaid for hydrocarbon assets. The row has now become mired in arbitration hearings.
At the end of November, a tribunal of the London Court of International Arbitration ordered the KRG to pay $1.98 billion to the consortium. The ruling gave the KRG 28 days to make payments, but the Dana chief said that no payment had been received to date.
“We all know the situation of the KRG. They’re clearly struggling to pay all contractors in the country, not just ourselves,” he said. “With all the will in the world, finding $1.98bn is going to be a step too far and, clearly, we don’t expect them to pay all in one go. That is an impossible task.”
He said that there was an opportunity to reschedule the debt, but that would require the KRG coming to the table. “It’s generally a fairly simple equation – if we get paid, we’ll invest. And if we invest, we expect to get paid.”
Meanwhile, Dana Gas announced in an ADX filing that it had appointed a new chief financial officer, Chris Hearne, putting to rest a five-year hunt. The industry veteran has more than two decades of experience including helping London-based Serica Energy with its initial public offering, to his most recent position as senior vice president and CFO of the US independent oil and gas firm Erin Energy.
“The CFO looks to be arriving at an opportune time, just as Dana may be resolving some long-running arbitration cases,” said Mr Manibhandu.
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