Dana Gas is set to reap a richer reward from its investments in Egypt and Iraqi Kurdistan as the Sharjah-based company swung back into profit in the first three months of the year thanks to higher energy prices and rising production. The company posted net income of Dh33 million (US$8.9m) for the three months that ended on March 31, almost exactly balancing the Dh32m loss it made in the same period a year earlier. Revenue increased by two thirds to Dh411m from Dh247m.
"I am pleased to be able to report that Dana Gas is delivering good financial results from its strong operational performance in both Egypt and Iraq," said Ahmed al Arbeed, the chief executive. The focus on Egypt and Iraq makes Dana a different company from the one envisaged in 2005, when its shares were listed on the Abu Dhabi Securities Exchange. At the time, Dana was seeking to raise capital for its share of a joint venture with its major shareholder, the privately held Sharjah company Crescent Petroleum, to import Iranian gas and market it in the UAE. That project remains stalled, even though Crescent completed an undersea pipeline for the gas in 2006.
That same year, however, Dana spent $1 billion to acquire Centurion Energy International, a Canadian company with oil and gas concessions in Egypt. It has since built that regional business into a solid gas producer through the rapid development of a string of discoveries concentrated in Egypt's Nile Delta. Dana's first-quarter output from Egypt averaged 39,200 barrels of oil equivalent per day (boepd), up 32 per cent from a year earlier. For the full year, the company is targeting a 20 per cent production increase. It expects output this quarter to average 40,500 boepd.
Now Dana is seeking an exploration partner in Egypt to provide additional technical capability and financing in exchange for as much as 30 per cent of its concessions there. In Kurdistan, a consortium led by Dana and Crescent continues to develop a large gasfield that is supplying fuel for regional electricity generation. The group has recently completed the construction of a gas processing plant that is expected to contribute substantially to the profitability of the venture, in which Dana holds a 40 per cent stake.
In the past few days, the plant has started processing gas to strip out valuable liquids. The production of liquid petroleum gas (LPG) would start in the third quarter of this year, Mr al Arbeed said. That would boost the importance to Dana of the Kurdish operations, which have already provided the company with a significant second revenue stream. Kurdistan contributed 23 per cent of Dana's first-quarter revenue, while 76 per cent came from Egypt.
Jim Dewar, the chief financial officer of Dana, said the Kurdish development consortium did not profit from the gas it provided to local power plants but was allowed to sell LPG and condensate, a type of light oil extracted from some gasfields, at international market prices. The venture started separating condensate from its gas stream late last year. LPG output would be added in two stages, with the second production facility expected to come into service by early next year, Mr Dewar said.
Dana's share of the Kurdish gas and liquids production averaged 10,800 boepd in the first three months of this year and was expected to increase to 13,500 boepd in the second quarter, he added. Dana's partners in Kurdistan also include the Austrian petroleum group OMV and Hungary's MOL. The consortium hopes eventually to export gas to Europe. tcarlisle@thenational.ae