Dana Petroleum
04/20/2006
 Full year results from Dana Petroleum (DNX) confirmed what we have known for some time - 2005 was a great year for oil and gas producers. Rising production and un-hedged exposure to strong energy markets drove revenue, cash flow and earnings to record highs. We are confident that Dana will surpass these new records in the year ahead as production and reserves continue to grow.
Last year's turnover rose an impressive 51 percent to £165.6 million. Driving the improvement was a 6 percent increase in production and a 43 percent rise in the average price per boe. Operating profit soared 180 percent to £107.8 million.
Eleven North Sea fields produce 91 percent of Dana's oil and gas. The area also contains 85 percent of the group's proved and probable reserves. At the end of last year these stood at 111.5 million boe. Exploration success is demonstrated by the ability of Dana to build reserves while also turning out record production. The addition of 24.8 million boe to the North Sea reserve base represents an impressive 375 percent replacement ratio.
In 2006 we anticipate a continuation in the steady development of reserves and production and not just in the North Sea. Currently Dana is progressing development plans for seven new fields and eleven exploration and appraisal wells this year alone. By 2008, the group plans to have drilled 40 wells targeting 2.1 billion boe.
We are confident that with a 70 percent strike rate Dana will easily meet a target of 40,000 boepd by the end of 2007. Supporting the active development programme will be a £140 million investment budget. Robust cash flows will underpin these spending plans.
By operating a sound strategy of combining high risk international exploration with increased lower risk North Sea production, Dana has excelled over the past year. We believe this approach to generating higher levels of production and increased reserves will continue to drive earnings gains in the year ahead.
Current production will benefit from the stubbornly high oil prices we have seen so far this year. We believe global supply and demand fundamentals will be supportive of higher prices in the next 12 months. In addition, geo-political tensions in Iran, Iraq and Nigeria further underpin prices. Dana, in our opinion, provides excellent leverage to these buoyant markets.
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