RNS Number:3410K
Dragon Oil PLC
24 April 2003
DRAGON OIL PLC ("DRAGON or the Company")
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2002
Dragon Oil Plc, the international oil and gas exploration and production
Company, today announced its results for the year ended 31st December 2002.
Highlights to date:
* A total of 4 wells (LAM22/102-103-104-105) were drilled and completed
during 2002 and one (LAM22/101) successfully worked over.
* The average gross production from the Cheleken Contract Area for the year
was 10,383 barrels of oil per day ("bopd") (2001: 6,730 bopd)
* Dragon recorded a post tax profit of US$15.5 million (2001, post tax loss
of US$ 5.4 million).
* The Company made a further drawdown of US$16.3 million during the year
from European Bank for Reconstruction and Development ("EBRD"). In May 2002,
Emirates National Oil Company Ltd (ENOC) L.L.C. ("ENOC") granted a loan of
US$50 million for a period of one year, to enable Dragon to meet it's
subsidiary's (Dragon (Holdings) Limited), loan repayments due to Standard
Chartered Bank ("SCB") in May and November 2002 totalling US$45.5 million.
* In line with the Company's short term cash requirements, the Company has
renegotiated the position with ENOC who have agreed to provide a new loan
facility of US$40 million for a period of one year that will result in a net
repayment of US$10 million of the original US$50 million loan on 3rd May
2003.
Hussain M Sultan, Chairman of Dragon, said:
"I would like to congratulate everyone in the Company for the hard work put in
and for working as one team. Last year the focus was on reorganisation, cost
reduction, drilling operations, improving the efficiency and performance of the
Company. We achieved the 2002 production target despite many constraints.
We have made a good beginning working as a team, but have a long and tough road
ahead of us. Success never comes easy. This year we have to work towards
maximisation of the field production to achieve its full current potential and
execute the 2003 work programme efficiently and in a cost-effective manner."
Drilling programme & results from production
Following the first well, the second development well LAM22/102 was spudded on
8th August 2001 and brought on stream in February 2002 at an initial rate of
about 3,200 bopd.
The third well LAM22/103 was completed in June 2003 and two of the intervals
tested aggregate rates of approximately 3,700 bopd.
The testing of well LAM22/104 was completed in October 2002 in five zones. The
well was tested at a cumulative rate of 3,956 bopd.
LAM 22-105, the fifth and last well to be drilled from Lam 22 platform, was
completed in December 2002, and tested at a cumulative rate of 9,464 bopd from
three intervals.
The total field production for 2002 was 3.8m barrels and the average gross
production from the Cheleken Contract Area for the year was 10,383 bopd with
5,778 bopd attributable to Dragon. This compares to a total gross production of
6,730 bopd in 2001, of which 2,435 bopd was attributable to Dragon.
Financing programme
During the year, we made a further drawdown of US$16.3 million from the facility
of EBRD, consequent to a borrowing base review. In May 2002, ENOC and Dragon Oil
Plc agreed and executed a loan agreement for $50 million to enable Dragon Oil
Plc's subsidiary Dragon (Holdings) Limited to meet the loan repayments due to
SCB in May and November 2002 totalling US$45.5 million. The term of the loan was
for a period of one year, repayable on 3rd May 2003.
In line with our short term cash requirements we have renegotiated our position
with ENOC who have agreed to provide a new loan facility of US$40 million for a
period of one year that will result in a net repayment of US$10 million of the
original US$50 million loan on 3rd May 2003. Therefore, the sourcing of
alternative financing remains a critical and immediate priority for Dragon.
Management is seriously looking at appropriate long term financing opportunities
to take the Company forward into an aggressive field development plan to exploit
the resources to the fullest. We are currently looking at the most appropriate
way to maximise shareholder return, retire the existing debt and provide capital
for the field development plan.
Enquiries:
Dragon Oil (+353 1 676 6693)
Hussain Sultan, Chairman & Acting Chief Executive Officer
Citigate Dewe Rogerson (+44 020 7638 9571)
Martin Jackson / Sara Thomas
Chairman's Statement
Dear Shareholder,
I am pleased to report that 2002 was a successful year for Dragon. We met the
challenges in the field, made significant progress in the redevelopment of the
LAM field in terms of drilling and completion of 4 wells in 2002, and the
additional production from these wells, together with higher crude oil prices in
the international market, control of financial and other costs, resulted in a
post-tax profit of US$ 15.5 million.
I continue to hold the additional responsibility of Chief Executive Officer
since early in 2002 and with my new management team have achieved our targets in
2002. We effectively utilised our resources, concentrating on increasing
production and reducing costs.
2002 Activities
Well LAM 22-105 tested at a cumulative rate of 9,464 bopd from three intervals.
The completion of this last well on LAM 22 saw Dragon exceed its stated
production target of 15,000 bopd by December 2002. Four new wells (including LAM
22-105) were brought into production during the year.
We have recognised areas that caused earlier overruns in the drilling programme
and continue to set ourselves challenging production and cost reduction targets.
The total field production for 2002 was 3.8m barrels and the average gross
production for the year was 10,383 bopd with 5,778 bopd attributable to the
Dragon. This compares with the average gross production of 6,730 bopd in 2001 of
which 2,435 bopd was attributable to Dragon.
The oil and gas assets held by the Company are substantial and have enormous
potential with the latest estimate by an independent consultant putting the
total recoverable proven & probable reserves at 680 million barrels of oil and
condensate. In addition, the Cheleken block contains best estimate contingent
gross gas resources of 3.57 trillion cubic feet.
Safety continues to be our top priority and we achieved a very low lost
work-time rate for both Company staff and contractors, which is commendable
considering the level of construction, drilling and field operation activities.
We will strive for further improvements in Health, Safety and Environment in the
coming year.
Marketing of crude production continued through Northern Iran under the swap
arrangement and as alternative routes crude has also been sent to Baku and
Makhachkala. We continue to evaluate options to determine the most economical
route for our crude.
During the year, we made a further drawdown of US$16.3 million from the facility
of the EBRD, consequent to a borrowing base review. In May 2002, ENOC and Dragon
Oil Plc agreed and executed a loan agreement for $50 million to enable Dragon
Oil Plc's subsidiary Dragon (Holdings) Limited to meet the loan repayments due
to SCB in May and November 2002 totalling US$45.5 million. The term of the loan
was for a period of one year, repayable on 3rd May 2003. In line with our short
term cash requirements we have renegotiated our position with ENOC who have
agreed to provide a new loan facility of US$40 million for a period of one year
that will result in a net repayment of US$10 million of the original US$50
million loan on 3rd May 2003. Therefore, the sourcing of alternative financing
remains a critical and immediate priority for Dragon.
Looking forward 2003
The economic climate for our business remains uncertain and we expect continuing
volatility in crude prices. We would be resilient against lower oil prices in
2003 and are well placed to benefit from any upturn in prices in the world's
energy markets with respect to our limited production levels.
Within the limitations of the forecasted cash flow for the year 2003, the
Company is continuing with a minimum capital expenditure programme for the
development of the field. There are plans to drill the first of six new wells,
under the planned continuous drilling programme, from a new platform LAM A, by
the end of the year. We expect the average field production for 2003 to be over
13,000 bopd despite the decline rates and bottlenecks in the field. As we have
ended drilling from Lam 22, we continue to look for alternative utilisation
options for our land rig. We are in the process of securing a jack-up rig for a
short-term in 2003/04 to maximise the exploitation of the oil reserves in our
Contract Area.
The Board will continue to seek alternative long-term funding proposals, which
remains critical to our continued success. Our aims are to continue with
drilling under the phase I development programme, subject to further funding
becoming available to maximise shareholder return, retire the existing debt and
provide capital for the field development plan. In the meantime, under our
long-term facility with EBRD, further funding is available to continue
development, but it is subject to us continuing to meet our obligations under
the borrowing agreement and loan drawdown criteria.
We will continue to fulfil our commitments to the government and the people of
Turkmenistan under the Production Sharing Agreement based on sound business
principles, and have already embarked on employing more qualified and capable
Turkmenistan nationals.
I would like to congratulate everyone in the Company for the hard work put in
and for working as one team. Last year the focus was on reorganisation, cost
reduction, drilling operations, improving the efficiency and performance of the
Company. We achieved the 2002 production target despite many constraints.
We have made a good beginning working as a team, but have a long and tough road
ahead of us. Success never comes easy. This year we have to work towards
maximisation of the field production to achieve its full current potential and
execute the 2003 work programme efficiently and in a cost-effective manner.
Shareholders should realise that we are faced with a number of operational and
geopolitical issues. However, we are optimistic that by acting in a professional
manner we can deliver returns to our shareholders. The contribution of all
involved, including our suppliers, bankers, contractors and stakeholders is
essential to ensure Dragon's long term financial stability and success and is
essential to build upon the platform of the achievements of 2002.
Hussain M Sultan
Chairman of the Board
Operations Review
Highlights:
* A total of 4 wells (LAM22/102-103-104-105) were drilled and completed
during 2002 and one (LAM22/101) successfully worked over.
* The average gross production from the Cheleken Contract Area for the year
was 10,383 bopd and Dragon's share increased to 5,778 bopd.
* After LAM22/105 was completed, Rig 40 was demobilised from Lam 22
production platform and laid down in the harbour area.
* Lost time accident frequency rate ("LTAI") decreased from 0.45 to 0.25
Dragon Oil (Turkmenistan) Ltd holds 100% equity in, and is operator of, the
Cheleken Contract Area, in the Caspian Sea offshore Turkmenistan. The Cheleken '
block' contains two producing oil and gas fields LAM and Zhdanov, and is
operated under a Production Sharing Agreement (PSA) which became effective on
1st May 2000.
Drilling
Following of the first well, the second development well LAM22/102 was spudded
on 8th August 2001 and brought on stream in February 2002 at an initial rate of
about 3,200 bopd.
The third well LAM22/103 was completed in June 2003 and two of the intervals
tested aggregate rates of approximately 3,700 bopd.
The testing of well LAM22/104 was completed in October 2002 in five zones. The
well was tested at a cumulative rate of 3,956 bopd.
LAM 22-105, the fifth and last well to be drilled from Lam 22 platform, was
completed in December 2002, and tested at a cumulative rate of 9,464 bopd from
three intervals.
Production
The total field production for 2002 was 3.8m barrels and the average gross
production from the Cheleken Contract Area for the year was 10,383 bopd with
5,778 bopd attributable to Dragon. This compares to a total gross production of
6,730 bopd in 2001, of which 2,435 bopd was attributable to Dragon.
Engineering & Construction
During the year, Dragon completed the engineering of its first new production
platform in the Lam field and the subsea pipeline required to connect this to
the existing infrastructure.
Reserves
The underlying data in respect of the project remains encouraging; with the
latest estimate by an independent consultant putting the total recoverable
proven & probable reserves at 680 million barrels of oil and condensate. In
addition, the Cheleken block contains best estimate contingent gross gas
resources of 3.57 trillion cubic feet.
Marketing
Under its swap agreement Dragon sold approximately 1.08 million barrels (2001,
approximately 0.77 million barrels) at Kharg Island in the South of Iran.
Further sales from the Cheleken Contract Area of approximately 1.05 million
barrels (2001, 0.19 million barrels) were made to west and north of the Caspian
to Baku and Makhachkala. Arbitrage between Urals (Med) and Dubai/Oman was very
volatile during 2002 which made it very challenging to spread the risks between
Southern and Western routes. However, Dragon constantly monitored the Urals/
Dubai spread which enabled the Company to achieve the best price through
alternating the routes in accordance with the market arbitrage.
Safety
During 2002 one LTAI was recorded. Prior to this accident, drilling had 426 days
without LTAI. Safety continues to be a top priority and Dragon achieved a LTAI
of 0.25 for both Company staff and contractors, which is good considering the
level of construction, drilling and field operation activities taking place.
Throughout the coming year further improvements will be made including the
implementation of an integrated Health Safety and Environment ("HSE") management
system and continued staff training.
Group Profit & Loss Account
Year ended Year ended
31 December 2002 31 December 2001
US$'000 US$'000
Turnover 50,593 22,248
Cost of sales
Operating and production costs (21,060) (19,011)
Depreciation and depletion (6,111) (2,455)
Gross profit 23,422 782
Administrative expenses (3,363) (2,617)
Other income 805 213
Operating profit/(loss) 20,864 (1,622)
Interest payable and similar charges (7,870) (3,811)
Profit on sale of investments 2,528 -
Profit/(loss) on ordinary activities before taxation 15,522 (5,433)
Taxation on profit on ordinary activities - -
Profit/(loss) for the financial year 15,522 (5,433)
Earnings/(loss) per share
Basic 4.29c (1.53)c
Fully diluted 4.28c (1.52)c
The results for both years have been derived from continuing operations. No
gains or losses were recognised in the years to 31st December 2002 and 31st
December 2001 other than those reflected in the above profit and loss accounts.
Group Balance Sheet
31 December 2002 31 December 2001
US$'000 US$'000
Fixed assets
Tangible assets 265,165 239,532
Current assets
Stocks 5,867 6,846
Debtors 10,554 2,467
Investment 1,723 -
Cash at bank and in hand 18,075 12,342
36,219 21,655
Creditors
Amounts falling due within one year (66,878) (58,515)
Net current liabilities (30,659) (36,860)
Total assets less current liabilities 234,506 202,672
Creditors
Amounts falling due after more than one year (36,877) (20,565)
Net assets 197,629 182,107
Capital and reserves
Called-up equity share capital 61,142 138,292
Share premium account 109,374 109,374
Capital redemption reserve 77,150 -
Profit and loss account (50,037) (65,559)
Total equity shareholders' funds 197,629 182,107
Group Cash Flow Statement
Year Ended Year Ended
31 December 2002 31 December 2001
US$'000 US$'000
Net cash inflow from operating activities 24,215 7,567
Returns on investments and servicing of finance
Interest received 118 326
Interest paid (7,682) (3,774)
Net cash outflow from returns on investments and servicing of finance
(7,564) (3,448)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (31,744) (38,699)
Receipts from sale of investments 26 -
Net cash outflow from capital expenditure and financial investment (31,718) (38,699)
Financing
Issue of ordinary share capital, net of expenses - 5,768
Repayment of loan (45,500) -
Debt drawdown 66,300 29,500
Net cash inflow from financing 20,800 35,268
Increase in cash 5,733 688
Certain corresponding figures have been reclassified, where necessary, for the
purpose of comparison.
Dragon Oil plc
Notes to the Preliminary Announcement for the year ended 31st December 2002
1. The results for the year ended 31st December 2002 do not constitute full
accounts within the meaning of Section 3 of the Companies (Amendment) Act,
1987.
2. There remains a substantial deficit on distributable reserves and so the
Directors do not expect to recommend a dividend for the year.
3. The year-end cash balance was US$18.1 million with total borrowings of
US$88.3 million compared with US$12.3 million and US$67.5 million at the end
of 2001 respectively.
4. The borrowings of US$88.3 million include a loan of US$50 million repayable
to ENOC. This loan is included in the accompanying Balance Sheet in
creditors - amounts falling due within one year.
Furthermore, Dragon have renegotiated the position with ENOC who have agreed
to provide a new loan facility of US$40 million for a period of one year
that will result in a net repayment of US$10 million of the original US$50
million loan on 3rd May 2003. The new loan will be repayable on 3rd May
2004, at an interest rate of LIBOR plus 3.25%. The loan carries an
arrangement fee of US$3.5 million.
5. The net cash inflow from operating activities during 2002 was US$24.2 million
(2001, US$ 7.6 million). Interest charges amounted to US$7.7 million (2001:
US$3.8 million).
6. Earnings/(Loss) per Share
The calculations of Earnings/ (Loss) per share are based on the following
Profit/ (Loss) and weighted average number of shares:
Year ended Year ended
31 December 2002 31 December 2001
US$'000 US$'000
Profit/(loss) for the year 15,522 (5)
Weighted average number of shares :
Basic 362,153,116 355,927
Fully diluted 362,267,870 357,876
7. Further information regarding Dragon is available on the Company's website,
www.dragonoil.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SELFDLSDSESL