Sharjah-based Dana Gas's net profit for the first half of 2019 increased almost six fold as a new assessment citing higher reserves led to an increase in the value of earn-out entitlements.
The company said first-half profit was up 483 per cent to $140 million (Dh513m), of which just over half ($71m) was attributed to "the recognition at fair value of certain reserve-based earn-out entitlements".
Dana Gas said the entitlements were due "from certain shareholders in Pearl Petroleum", which were contingent on Pearl proving certain reserves.
This was achieved late last month as a new audit from consultancy Gaffney Cline indicated that two Pearl Petroleum in the Kurdistan Region of Iraq (KRI) contained proved plus probable (2P) reserves of 1 billion barrels of oil equivalent (boe).
Even without this, Dana Gas said first-half profit from core operations would have stood at $69m - still almost three times' last year's profit of $24m. It attributed this to increased production at its sites in Kurdistan following a de-bottlenecking project, as well as savings on sukuk profit payments and the reimbursement of arbitration costs incurred last year as the company dealt with a dispute with holders of sukuk notes worth $700m. The sukuk was eventually restructured in August last year.
"Dana Gas’ net profit of $140m in the first half 2019 is a clear reflection of the company’s strong operational and financial performance with strongly rising production and revenue from the KRI," said Dana Gas chief executive Patrick Allman-Ward.
"An independent certification exercise has shown a 10 per cent increase in the company’s 2P reserves in the KRI to over 1 billion boe. This external reserve auditor‘s report confirms our view that the Khor Mor and Chemchemal Fields are world class and are probably Iraq’s biggest gasfields.”
Dana Gas said revenue for the six-month period edged up 3 per cent to $242m. Although increased production in Kurdistan added $27m to its top line, this was partially offset by lower selling prices and lower levels of production in Egypt. The company announced last week that it is embarking on a strategic review of its Egyptian assets.
Average production rates during the first half of 2019 reached 68,200 boe per day, a 7 per cent year-on-year increase.
The company described collections from customers in the first half as "excellent", with the KRI's government paying for all $81m of the oil for which it was billed. In Egypt, it billed for $58m and collected $81m, reducing the amount it is owed the country to $117m. This is the lowest amount it has been owed by Egypt in eight years.
By the end of June, Dana Gas was sat on a cash pile of $404m, it said, which was little changed from the $407m at the end of 2018.