Dragon Oil
06/09/2005
 The abandonment of a partial takeover offer last week has done nothing to dampen our enthusiasm about Dragon Oil's (DGO) future prospects. We remain confident that the successful development of production and exploration areas offshore from Turkmenistan will underpin future earnings and reserves growth.
The successful development of the Cheleken contract area is critical to Dragon's future growth plans. We are therefore heartened that Dragon has secured the necessary funds to pursue this strategy following the completion of a US$167 million share placing in May. Separately major shareholder Emirates National Oil converted a US$40 million loan into equity.
Dragon is now free to press ahead with a field development plan which incorporates a continuous drilling programme through to 2009. This drilling programme is designed to exploit 108 million barrels of the proven reserves of the LAM field and involves the drilling of 38 wells from 4 platforms. The field development plan forecasts that Dragon will double total daily production to approximately 40,000 bopd in 2008. In addition, Dragon plans to develop associated gas from the field.
Dragon's entitlement to reserves within the Cheleken Contract Area (CCA) stands at 315 million barrels of oil and 3.5 trillion cubic feet of gas. We expect that a 3D seismic survey in the area will facilitate a reserve upgrade later this year. The Stage 1 area has been surveyed and the data is currently being processed. Meanwhile the seismic survey in the Stage 2 area is now underway.
In our opinion, management's development strategy of the CCA has proved a real success. We believe the continuation of this approach will, in combination with a strong oil market, underpin earnings growth.
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