Dana returns to profit with bright outlook

Egyptian operations boost and Kurdistan gas plant completed.

Dana Gas has swung back to a profit this quarter in a reward for patient investors. And if a stalled gas-importing project gets back on track, there will be much more for them to celebrate. The Sharjah company increased first-quarter production from its Egyptian operations by 32 per cent above the same period last year, and forecast 20 per cent growth for this year.

It also reported that a venture in which the company is a 40 per cent partner has completed a gas-processing plant in Kurdistan that should sharply increase revenues. The company received 76 per cent of its total revenues from Egypt and 23 per cent from Kurdistan. Because Dana has a contract to sell its gas from Egypt at a fixed rate, it could provide investors with an effective defensive play. But the bigger score could come if the company finally is able to start importing gas from Iran and market it in the UAE, the project for which the company was created five years ago when it was spun off by the privately held Crescent Petroleum.

Hamid Jafar, the president of Crescent Petroleum, told Bloomberg on Saturday that the company expected to hold talks next month on the stalled project and should soon have news. Dana also said it wanted to seek an exploration partner to unload between 20 and 30 per cent of Egyptian production, which would enable the company to raise between US$280 million and $420m in cash for possible expansion projects, the Nomura analyst Scott Darling said in a recent note.

But reward is not all without risk. Analysts remain concerned about the company's $62m in outstanding Kurdish receivables. The company said it had received a payment last month but did not say if any further payments were imminent. "We still see the current share price level as an attractive buying opportunity," Mr Darling wrote. The stock closed yesterday at 81 fils, down 1.22 per cent. [e-mail]