United Arab Emirates’ energy producer Dana Gas reported higher first quarter profits on back of higher production in Egypt, while it began refinancing talks with its creditors of a $700 million Islamic loan, the company said.
Dana Gas reported net profit of $11 million in the three months ending March 31, compared with $6 million during the same period a year earlier. Profits rose by $4 million quarter on quarter, partly due to increased production, principally in Egypt, and higher realised prices, the company said in a statement.
It made $118 million in revenues for the quarter, compared with $82 million from the year-ago period. Overall group production was 69,900 barrels of oil equivalent per day, 16 per cent higher compared to Q1 2016.
It lowered OPEX by 23 per cent, mainly from Egypt, and CAPEX by 78 per cent, resulting in the generation of $27 million in free cash flow, as the company focused on completing only those projects that were already in progress and those related to maintaining plant asset integrity and safe operations, Dana said.
"Whilst we focus on short to medium term cash preservation, we remain excited about the potential for medium-term growth opportunities in Egypt and the development of our world class assets in the Kurdistan Region of Iraq over the medium to long term,” Dr Patrick Allman-Ward, CEO, Dana Gas, said.
In the first quarter 2017, collections in Egypt were $13 million, representing 42 per cent of total billings. Total trade receivables in Egypt increased to $283 million from $265 million as of 31 December 2016.
In the Kurdistan Region of Iraq, collections were $31 million, representing approximately 119 per cent of total billings. This was due to direct sales of liquid products to the local market and regular pro-rata payments against the $100 million peremptory order.
Total receivable balance decreased marginally to $712 million. The company's overall trade receivables were $1 billion at the period end, up from $982 million as of 31 December 2016.
The company, which has faced a cash shortage after failing to receive payments from investments in Egypt and Kurdistan, announced a plan to begin talks on the restructuring of the sukuk, which was issued in May 2013 and matures at the end of October this year.
Restructuring discussions will “balance the interests of all stakeholders, taking into account the continued challenges it faces around cash collections and its resulting need to focus on short to medium term cash preservation,” Dana Gas said.
Separately, Dana Gas said it expects to be awarded damages at the end of 2017, or early 2018, from a drawn-out arbitration case against National Iranian Oil Company, over non-performance for a gas supply contract with Crescent Petroleum, through which the Dana Gas has significant supply rights.
It also expects a favourable resolution from the arbitration with KRG and realise “significant value resulting from these arbitrations, whether through settlement and/or enforcement of the awards.”
“Together with the potential damages claims from the arbitration cases the total value of Dana Gas' assets are very significant. The company needs time to realise this value, as well as collect on the circa $1 billion owed by the KRG and Egypt, for the benefit of all its stakeholders,” Allman-Ward said.