OilVoice - Dragon Oil Announces 2009 Interim Results

Dragon Oil Announces 2009 Interim Results

Monday, August 17, 2009

Dragon Oil plc, an international oil and gas exploration and production company, announces its Interim financial results for the period ended 30 June 2009.

Operational performance
• Average gross production increased by 11% over the 1H 2009 period to 42,808 bopd (1H 2008: 38,482 bopd), of which 27,782 bopd (1H 2008: 20,850 bopd) was attributable to the Group;
• Two wells successfully completed in 1H 2009;
• Further two wells came on stream in July and August 2009;
• Contract for the Iran Khazar rig extended for another two years;
• Six months' contract for the Astra jack-up rig secured to drill two wells, starting in November 2009;
• Dzheitune (Lam) B platform currently being installed; and
• Storage capacity added and Phase 2 upgrade of the export facility completed.

Outlook for 2H 2009
• On track to complete a total of eight wells during 2009;
• Production growth for 2009 is likely to be below 15%; we maintain our target of annual gross field production growth of up to 15% on average for 2009-11;
• Secure another platform-based rig to start drilling from Dzheitune (Lam) 28 in Q4 2009;
• Drilling scheduled to commence from Dzheitune (Lam) B platform in Q4 2009 using the Iran Khazar jack-up rig; and
• Initiate discussions on gas pricing.

Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, commented:
"We continue to build momentum towards achieving significant production growth in the coming years. We have contracted the Iran Khazar rig for another two years and are looking to secure another platform-based rig to ensure that we have three full-time rigs operating simultaneously before the end of the year along with an additional rig on a short-term contract. Our infrastructure upgrade and renewal programme has showed progress, with the expansion of our export capabilities and the construction of the Dzheitune (Lam) B platform, which is currently being installed in the Western part of the Dzheitune (Lam) field.

"With the slowdown in the broader economy, we have been able to drive cost optimization by renegotiating contracts and re-tendering certain projects. Despite the slow start to the drilling programme in 2009, we achieved an 11% growth in production compared to 1H 2008. While the overall production growth in 1H 2009 was below our expectations, we expect more wells to come on stream in 2H 2009 with the aim to complete up to 35 wells during the 2009-11 period. That will help us achieve our long-term goal of annual production growth of up to 15% on average for 2009-11.

"The first half of 2009 has been a challenging period for Dragon Oil, but the full support of the Board and the enthusiasm and teamwork across the Group have enabled us to move ahead confidently."

Production
Gross field production in the first half of 2009 increased by 11% compared to the level achieved in the same period in 2008. Dragon Oil produced 7.7 million barrels of crude oil; the average daily production rate on a working interest basis was 42,808 bopd for 1H 2009. During the corresponding period in 2008, the Group produced 7.0 million barrels of crude oil with an average daily production rate of 38,482 bopd.

Due to changes in the drilling programme, with the first two new wells coming on stream only at the end of May 2009 and lost production from the Dzheitune (Lam) A/127 well, the average daily production for 1H 2009 was below our expectations and lower than the 43,787 bopd reported for Q1 2009. The production from the Dzheitune (Lam) A/127 well has been significantly reduced due to operational issues, which are expected to be resolved through a workover scheduled to take place later this year.

The entitlement production for 1H 2009 was approximately 65% of the gross production compared to 54% for the comparable period in 2008. The entitlement barrels are dependent, amongst other factors, on operating and development expenditure in the period and realised crude oil prices. In the first half of 2009, lower oil prices, than in 1H 2008, resulted in higher entitlement barrels.

Preliminary approach
On 4 June 2009, we announced that the Company had been approached by ENOC in relation to a possible offer for the entire issued and to be issued share capital of the Company it does not currently own. The Company formed an Independent Committee of the Board to evaluate an offer should one be forthcoming. Davy Corporate Finance and HSBC are acting as joint financial advisers to the Independent Committee. The Approach is of a preliminary nature and there can be no certainty that any offer will be made or as to the terms of any such offer. A further announcement will be made as appropriate.

Corporate restructuring
On 27 March 2009, the Board of Dragon Oil plc announced the proposed restructuring of the Company by means of a scheme of arrangement by putting in place a Bermuda incorporated company as the new ultimate holding company of the Group. Following the restructuring, the Company was planning to apply for a primary listing on the London Stock Exchange and a secondary listing on the Irish Stock Exchange. In light of the approach received from ENOC, the corporate restructuring has been put on hold.