Oil slide drags energy companies into fourth-quarter losses

Dana Gas has battled to recoup payments from Egypt and the Kurdistan Regional Government over the course of the past year.

Above, a Dana Gas plant in the Kurdish region. Dana Gas / Reuters

Regional oil and gas producers reported fourth quarter losses yesterday as the tumbling price of crude forced asset writedowns from Egypt to the Kurdish region of Iraq.

Sharjah-based Dana Gas swung to a loss as lower oil prices battered the sector. Meanwhile DNO, the Norwegian oil producer part-owned by RAK Petroleum Holdings, said its fourth quarter loss more than doubled.

Dana reported a net loss of US$4 million for the period, compared to a profit of $35m a year earlier. That sent the stock tumbling as much as 6 per cent in morning trading to close 4 per cent lower.

“Oil prices do affect our business,” said Patrick Allman-Ward, the Dana Gas chief executive. He said that the company’s short-term focus would be on boosting production in Egypt and the UAE.

DNO widened its fourth quarter loss to $252.5m from $98.1m a year earlier. It wrote down the value of its oil and gas assets in response to the lower price of crude, which led to $297m in impairments.

“Our focus in 2015 is to align our spending with our earning,” said Bijan Mossavar-Rahmani, the DNO executive chairman.

DNO will focus on its Kurdish operations to generate more revenue. The company started selling oil to the local market again, with plans to ramp up deliveries. Mr Mossavar-Rahmani added that the company had “one foot on the accelerator and one on the brake”.

Dana Gas also took a $22m impairment charge after it wrote down the value of assets in Egypt.

The company has battled to recoup payments from Egypt and the Kurdistan Regional Government (KRG) over the course of the past year.

Dana Gas Egypt collected $210m last year as compared to $134m in 2013. Dana’s KRI operations, in which it has a 40 per cent share, collected $34m last year, about half as much as it recouped a year earlier.

Last year the Egyptian government gave up its share of the profit from production to Dana Gas, totalling 52 per cent, to offset its debt. The company’s assets in Egypt provided a 10 per cent increase in production to an about 40,000 barrels of oil equivalent per day.

“Overdue receivables are forecast to be fully recovered by 2018, excluding any further payments that may be coming from Egypt,” Mr Allman-Ward said.

In the Kurdish region, Dana Gas has been in a dispute with the KRG over about $700m in payments since 2009. In December, a London court ordered the KRG to pay $100m in back payments, which was rejected by the KRG.

Dana Gas continues arbitration, but said it was open to reaching a deal outside of court. It was able to collect $18m from the KRG in October as part of its stake in the Kurdish Pearl Petroleum venture.

“We detect structural positives in the company reducing trade receivables in Egypt and the receipt of $18m in cash from the KRG,” said Sanyalaksna Manibhandu, a senior analyst at NBAD Securities. “The company is having some success in solving the long-standing problem of trade receivables.”

He added that the payment from the KRG also indicated a potential resolution in the lengthy dispute.

Oil traded below $50 a barrel in New York yesterday after US crude inventories rose from the highest level in more than three decades.

West Texas Intermediate rose as much as 2.1 per cent, erasing an earlier decline of 2.3 per cent. Prices dropped 8.7 per cent on Wednesday, the most since November.

Market volatility has forced companies such as BP and the ConocoPhillips to slash capital expenditure.

Follow The National's Business section on Twitter