Dana Gas, the Middle East’s largest regional private sector natural gas company, today announced its financial results for the half-year ended 30th June, 2020.
The Company’s H1 2020 net profit was US$18 million (AED66 million) compared with $52 million (AED191 million in H1 2019 on a like-for-like basis and excluding one-off impairments, earn-out amounts, and deferred income. On a non-adjusted basis, the company recorded a loss of $19 million (AED69 million) as a result of a $37 million impairment charge related to oil and gas assets in Egypt due to low oil prices, and decreased value of its financial assets.
Revenue for the first six months stood at $181 million (AED664 million) as compared to $242 million (AED887 million) in H1 2019, down 25 percent. The decrease is largely due to lower realised prices during the period, which had a $42 million impact, and, to a lesser extent, lower production in Egypt as a result of natural field declines. Realised prices in H1 2020 averaged $30/bbl for condensate and $28/boe for LPG compared to $51/bbl and $33/boe respectively in H1 2019.
The company implemented cost-cutting measures, achieving $2 million (AED7.3 million) saving in G&A costs with further savings expected in H2 2020. Capex was also cut by 72 percent to $25 million (AED92 million) as all non-essential work was deferred.
In Q2 2020, Brent averaged $30/bbl and touched a low of $13/bbl on 21st April, 2020. Despite historical low prices, Dana Gas ended the second-quarter close to breakeven with a small net operating loss of $3 million, demonstrating its ability to stay resilient even in a low oil price environment given its fixed price long term gas contracts.
The Egypt sales process continues although it has been delayed as a result of the COVID-19 pandemic. The company expects to make a further announcement during H2 2020.
Regarding the Sukuk, the company continues to explore the various financing options available to it, and as previously announced, has hired financial advisors to assist it in evaluating these options.
Dr Patrick Allman-Ward, CEO of Dana Gas, commented, “The company has demonstrated a strong and resilient financial and operational performance in the first half of 2020. Our gas sales account for approximately half of the company’s income and are sold under long-term gas sale contracts with host governments, providing us with sustainable revenues even when oil prices are low. I wish to express a big thank you in recognition for the huge efforts made and the dedication shown by our teams in the KRI and Egypt, who managed to maintain an average production of 63,250 boepd in the first half of 2020.”
The company’s average production in H1 2020 was 63,250 boepd, a seven percent decrease as compared with 68,200 boepd in H1 2019. The drop in output was due to reduced production in Egypt and the KRI, by 9 percent and 2 percent, respectively; and ceasing production from the UAE’s Zora Gas Field. Egypt’s production was 30,950 boepd, reflecting the impact of natural field declines, and the KRI’s production was 31,700 boepd.
COVID-19 has impacted growth plans though not current production in the KRI, where movement restrictions and other preventative measures have impacted Pearl Petroleum’s Khor Mor expansion project. As a result, Pearl Petroleum has experienced delays in the implementation of the first 250 MMscf/d gas processing train which had a declaration of force majeure by the EPC contractor due to the border closures and restrictions resulting from the pandemic. While basic engineering works have been completed, major works are expected to resume once conditions on the ground allow. All parties remain committed to implementing the expansion project as soon as possible.
Dana Gas received $90 million (AED330 million) in collections during H1 2020 against total billings of $111 million (AED407 million). Its share of receipts by Pearl Petroleum in the KRI contributed $47 million (AED172 million) and Dana Gas Egypt brought in $43 million (AED158 million) in collections respectively. The company received a $50 million (AED183 million) dividend from Pearl Petroleum in the first half of the year.
As of 30th June, 2020, the company’s receivables stood at $117 million (AED429 million) in Egypt and $39 million (AED143 million) in the KRI. After the suspension of certain payments due from December 2019 to February 2020, regular payments in full by the Kurdistan Regional Government have resumed since March allowing the company to continue regular and timely monthly collections.
The company’s cash position is $366 million (AED1,341 million) as of 30th June, 2020, lower by 14 percent compared to $425 million (AED1,558 million) in FY 2019. The cash balance includes $58 million (Dana Gas 35 percent share) held by Pearl Petroleum. The company’s debt stood at $452 million consisting of $380 million of outstanding Sukuk and $72 million of non-recourse project debt at Pearl level.
In the period following the half-year results, the company completed a further $70.7 million Sukuk buyback in the market, taking the total buybacks in 2020 to $88.5 million. The overall cost savings to the company in profit payments and repayments at maturity represents around $10 million. The outstanding total for the Sukuk is now $309 million with the full amount due for repayment on 31st October, 2020.