Dana Gas in Cairo talks over delayed payments

The Egyptian government and Dana Gas are holding meetings to speed a backlog of late payments after the gas company missed a US$920 million (Dh3.37 billion) debt deadline.

The company, based in Sharjah, crossed its sukuk repayment deadline at midnight on Wednesday.

With the company said to be locked in "intense" negotiations with bondholders to avoid default, Dana released earnings yesterday, two weeks ahead of schedule.

Dana reported net income of Dh104m in the third quarter of this year, a decline of 27.2 per cent compared with the same period last year, driven by a fall in revenues.

Dana's Egypt operations have been hamstrung by late payments since the Arab Spring, but the company expressed confidence that resuming the flow of payments would help it with its funding difficulties.

"The company believes that the aforesaid liquidity challenges are short term and is encouraged by recent developments regarding receivables due to Dana Gas," the company said in a statement to the Abu Dhabi Securities Exchange.

"The Egyptian government in particular made significant efforts to address the backlog of payments due to Dana Gas."

Production in Egypt, which accounted for almost half of Dana's revenues, declined by 25 per cent during the quarter compared with the same period last year.

Trade receivables from Dana's Egyptian operations totalled Dh754m at the end of September, with Dh549m collected from Egypt so far this year.

The Egyptian government had been "very proactive" in its efforts to assist Dana and was looking at "innovative ways of accelerating payment", said Majid Jafar, the chief executive of Crescent Petroleum, Dana's largest shareholder.

"It's not like they're hiding the problem or being difficult. They're going out of their way to address the problem, obviously recognising the Egyptian government's fiscal position as well," he said.

Pearl Petroleum, a joint venture between Dana Gas, Crescent Petroleum, Austria's OMV and Hungary's MOL, is owed Dh1.3bn for operations in Iraqi Kurdistan, up from Dh808m at the end of last year, Dana reported yesterday. A deal struck between Baghdad and Erbil was expected to release some government payments towards that amount, said Mr Jafar.

The company's shares jumped as much as 4.9 per cent yesterday before paring gains after the bond matured at midnight, having plunged 8.8 per cent on Wednesday. The shares closed up 2.4 per cent at 42 fils each yesterday.

Statements by the company had soothed investor nerves, said Mohammed Ali Yasin, the managing director of Abu Dhabi Financial Services.

The company and its creditors were "playing hard to get better terms, but they're close to the end and reaching a final agreement that's acceptable to both parties", he said.

Sources close to the company said that a six-month standstill agreement had been reached with creditors of the sukuk, under which they will hold off on pressing claims against Dana.

"The desirability to amend and extend the terms of the sukuk became evident in the interests of all stakeholders owing to the recent liquidity challenges that have emerged as a result of challenging external macroeconomic and political circumstances in the region, including the extensively reported problems of payment delays where the company operates," Dana Gas said.

"Until this date, the company has consistently honoured its payment obligations," it added.