RNS Number : 7522Z
Dragon Oil PLC
24 July 2008
DRAGON OIL plc
(*Dragon Oil* or the *Company*)
Trading and Operational Update
37% Increase in Gross Production
Dragon Oil (DGO) issued the following trading and operational update for the interim
period ended 30 June 2008. All information referred
to in this update is unaudited and subject to further review. Dragon Oil will publish its 2008
interim financial results on 22 August 2008.
Highlights
Operations and Production
* 37% increase in 1H/08 gross production over 1H/07 with an average rate of 38,482
barrels of oil per day ("bopd") compared to
28,321 bopd in 1H/07
* Peak production rate of 43,227 bopd achieved on 1st June 2008
* US$170 million, 15 month contract awarded for a new 30-inch, 39.4 km trunkline
* 4 development wells completed in 1H/08
* Dzheitune (Lam) 22/128 well completed in July 2008 with an initial combined
production from the two strings of 2,600 bopd
* Cash of US$654 million as at 30 June 2008
Strategy and Outlook
* Progress the infrastructure investment plan including facility planning for gas
utilisation and commercialisation
* Pursue value-adding acquisitions, further diversifying Dragon Oil's portfolio
* Geophysical and geological studies ongoing in Dragon Oil's non-operated blocks in
Yemen
Hussain M. Sultan, Executive Chairman, commented:
"Dragon Oil has delivered another strong performance over the last six months and we are
confident of achieving our drilling and
production targets for 2008. We see progress on both the drilling programme and the
infrastructure investment plan which are key to
delivering increasing oil production and monetising the gas resource in the Cheleken Contract
Area. In addition, we are continuing to seek
acquisitions that would increase the diversity of Dragon Oil's portfolio. The Company is
wholly committed to achieving long-term growth and
profitability for all its stakeholders."
Trading and Operational update
Production and marketing
The 1H/08 gross field production from the Cheleken Contract Area was an average of 38,482
bopd, a 37% increase over the 1H/07 production
average of 28,321 bopd. Of this, Dragon Oil's entitlement was 20,850 bopd (1H/07: 21,062
bopd). Dragon Oil's entitlement barrels are
dependent amongst other factors on operating and development expenditures and realized crude
oil prices. As a result of the fiscal terms of
the Production Sharing Agreement, Dragon Oil's entitlement barrels in the current period was
54% (1H/07: 74%) of the gross field production.
Dragon Oil sold 3.5 million barrels of oil in 1H/08 (1H/07: 3.5 million barrels) and held
low crude oil inventory at period end having
resolved logistical constraints. The average realized price in 1H/08 was approximately US$108
per barrel (1H/07: US$61 per barrel).
Dragon Oil hedged 3.8 million barrels comprising a proportion of the total 2008 production
using zero cost collars, with oil price
floors at US$45 per barrel and a ceiling price averaging US$102 per barrel. These derivative
instruments produced an opportunity loss of
approximately US$91 million comprising of settlement obligations for 1H/08 and mark to market
for the balance quantities, resulting from the
exceptionally high crude oil prices. The Company continues to review its hedging strategy in
light of market conditions. No hedges have been
undertaken for the period beyond December 2008.
The Company continues to market approximately 80% of its crude oil through Neka in Iran as
it is stable and continues to offer Dragon
Oil the highest netback on its crude. In addition, the Company markets the balance of its
crude through Baku, Azerbaijan in order to
maintain a good level of marketing flexibility. Dragon Oil has arrangements in place to export
its entire crude oil entitlement to Baku
immediately should the need arise.
Drilling
Four development wells were completed during 1H/08, two from Dzheitune (LAM) 22 platform
(L22/124 and L22/126) and two from the new
Dzheitune (Lam) A Platform (LA/125 and LA/127).
The CIS 1 platform-based rig completed the Dzheitune (Lam) 22/128 well on 12th July 2008
with an initial combined production from the
two strings of 2,600 bopd with optimisation of the well to follow. The CIS 1 Rig is now
preparing to drill development well Dzheitune (Lam)
L22/130, which has a target depth of 3,840 metres and is expected to come on production in
October 2008.
The Iran Khazar jack-up drilling rig is now drilling development well Dzheitune (Lam)
A/129 which has a target depth of 4,212 metres and
is scheduled for completion in August 2008.
In addition, the Company is continuing to refurbish its own platform-based Rig 40 for
commencement of drilling operations from the
refurbished Dzheitune (Lam) 13 Platform from Q4/08.
Yemen
Geological and geophysical evaluations are currently underway on all three blocks (R2, 49 and
35) in our non-operated acreage in Yemen.Drilling will commence on additional prospects in Block 35 in 2009.
Capital Expenditure Programme
Dragon Oil recently awarded a US $170 million, 15 month contract for the engineering,
procurement and installation of a new 30-inch, 39.4 km
trunkline, which will transport all the oil and gas produced to the Company's processing
facility.
Dragon Oil continues to make progress with its other major infrastructure development
projects including the construction of additional
wellhead platforms and refurbishment of the crude oil export jetty.
The Company is tendering for the Front End Engineering Design for the gas monetisation
project and for phase 2 of the NPF which will
enable a production capacity of up to 100,000 bopd and 180 mmscfd of gas. The Company has also
tendered for up to four new jack-up rigs
intended to partially replace the current hired rigs.
The robust balance sheet reflecting zero debt and a cash balance of approximately US$654
million at 30th June 2008 is expected to
adequately support the planned capital expenditure for field development.
Outlook
Dragon Oil continues to make good progress with the field development plan and the
infrastructure investment programme. The management
team is confident that the Company will achieve its drilling and production targets for 2008.
Background Note
Dragon Oil Plc is an innovative international oil and gas development and production
company, quoted on the London and Irish Stock
exchanges (Ticker symbol: DGO). Its principal producing asset is in the Cheleken Contract
Area, in the eastern section of the Caspian Sea,
offshore Turkmenistan and recently acquired interests in Blocks 35, 49 and R2 (10%) in the
Republic of Yemen.
Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil plc, holds 100%
interest in and is the operator of the
Production Sharing Agreement for the Cheleken Contract Area in the Caspian Sea, offshore
Turkmenistan. Operational focus is on the
re-development of two oil producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).
www.dragonoil.com
For further information please contact:
Media enquiries
Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson
George Cazenove
Investor and Analyst enquiries
Dragon Oil Plc (+971 4 305 3600)
Leanne Denman, Investor Relations Officer
Disclaimer
This statement may contain forward-looking statements concerning the financial condition
and results of operations of Dragon Oil.
Forward-looking statements are statements of future expectations that are based on
management's current expectations and assumptions and
involve known and unknown risks and uncertainties that could cause actual results, performance
or events to differ materially from those
expressed or implied in these statements. No assurances can be given as to future results,
levels of activity and achievements and actual
results, levels of activity and achievements may differ materially from those expressed or
implied by any forward-looking statements
contained in this report. Dragon Oil does not undertake any obligation to publicly update or
revise any forward-looking statement as a
result of new information, future events or other information.
This information is provided by RNS
The company news service from the London Stock Exchange
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