Dana Petroleum plc, the independent oil and gas exploration and production company focused on growth through international exploration and the development of production in the North Sea and Egypt, reports its Interim Management Statement for the period to 19 May 2009.
Significant Portfolio Growth:
Dana successfully completed the acquisition of Bow Valley Energy on 30 April 2009. The assets acquired are an excellent fit, and effective from 1 May 2009 they add to Dana interests in four producing oil fields in one of the Company’s core areas, the UK Central North Sea, with a fifth project, the Ettrick oil field development, now expected onstream in mid-summer 2009. In addition, the planned sale of UK Licence P.090, Block 9/15a (including a portion of the undeveloped Peik field), from Bow Valley to Centrica plc, was completed on 15 May 2009. Overall, the acquisition has proceeded very
smoothly and integration of the Bow Valley assets into the Dana group is now well underway.
The Company is delighted to have been awarded two attractive new licences which it applied for in the Norwegian 20th Round. Dana has received a 20% interest in licence PL526, to be operated by North Energy, which covers blocks 6608/6, 6608/9 and 6609/4, and a 20% interest in PL523, to be operated by Eon Ruhrgas, which covers Blocks 6605/11 and 12. Both licences build on Dana’s strong position in the Norwegian Sea where the Company already holds interests in two further large licences.
Delivery of Exploration Programme:
Dana is currently drilling three exploration wells, two offshore Norway and one onshore Morocco.
Dana has discovered a substantial gas-condensate field at Fulla, in the Norwegian North Sea, with a second well having just been drilled as a sidetrack to the original Fulla discovery well. Proven volumes for the two wells are currently estimated at between 60 and 105 million barrels of oil equivalent. The Fulla field is now thought likely to be commercial with development options now being considered.
Operations are ongoing in the Det Norske operated Eitri well, offshore Norway, where results are expected shortly. Prior to drilling the Eitri well, Dana decided to farm-out a part of its interest to Bridge Energy. Under the terms of the deal, which is subject to the usual partner and government consents, Bridge will acquire a 10% interest in PL027D and an 8.5% interest in PL504 and pay a proportion of Dana’s well costs in the ongoing Eitri well and the Jetta well, which has been accelerated into 2009. Even post farm-out, Dana will retain a significant 30% interest in both licences.
Dana is also making good progress on the drilling of the Tafejjart-1 well in the Bouanane concession, onshore Morocco. Results from this frontier exploration well are expected during July 2009.
The Company has advanced its plans to drill two further exploration wells in the West El Burullus concession offshore Nile Delta, Egypt, in which Dana holds a 50% interest. The first well, on the Papyrus prospect, is due to spud in September and will target gas at a similar horizon to the West El Burullus-1 discovery made in 2008. The key aim of this well is to prove additional gas volumes in this area in order to optimise development planning. The second well, on the very large Bamboo prospect, is due to spud in November, and will target deeper, high pressure gas reservoirs which have the potential to open up significant further prospectivity in the block.
Dana has continued to explore the East Beni Suef concession, onshore Egypt. The Company made an oil discovery at Gharibon-3x in January 2009 and the well came into production in late April. Drilling is ongoing on the Azhar-7x exploration well with results expected by the end of May and up to three further wells are planned in the concession later this year. Development licence applications have been submitted for the Tareef and Sohba discoveries, which were made in 2008, with first production from both these fields expected later this year.
To date in 2009, and in addition to the ongoing three wells, the Company has drilled eight exploration wells with notable successes at SE Rinnes, Anchois and Fulla. Due to recently advised delays in rig arrival and in an effort to optimise timing to the Spring/Summer weather window, the planned well on Anne Marie in the Faroese West of Shetlands area has been moved until Q2 2010. However, an additional well on the Jetta prospect in the Jotun area of the Norwegian North Sea has been brought forward and is now planned to be drilled in 2009 rather than 2010. This well will allow a complete assessment of the resource potential in this core area for Dana in Norway. The Company is now also planning to drill the BP operated September prospect, on the North Ghara licence in the Gulf of Suez, which is expected to spud in June 2009.
Production and Development Projects:
Group production to end April 2009 has averaged approximately 38,600 barrels per day oil equivalent. The Bow Valley assets, which can be taken into account post completion of the transaction on 30 April 2009, add approximately 5,400 barrels per day oil equivalent. This figure will increase when the Ettrick field comes on-stream.
At the East Zeit field in Egypt (Dana 100%) the water-cut on the C2 well, which was drilled in 2008, has increased more rapidly than expected, reducing field production by approximately 3,000-4,000 barrels per day oil equivalent. The Company is currently undertaking a workover programme on the field to offset this production decline and is also evaluating longer term infill opportunities. The effect on earnings of lower than expected production from East Zeit is mitigated due to the terms of the Production Sharing Contract.
Development of the Babbage gas field (Dana 40%), in the UK Southern North Sea and the E18 gas field (Dana 5.228%) in the Dutch North Sea are both progressing according to plan with first production scheduled for Q1 2010 and Q3 2009 respectively.
Work on the Dana operated Barbara/Phyllis joint gas field development project, in the UK Central North Sea, is progressing well with host platform selection now planned for mid 2009 and project sanction expected early in 2010.
Conceptual studies are already underway on the Rinnes-Melville oil development in the UK Northern North Sea. A number of alternative options are being considered and the aim is to evaluate the most attractive development scenario during the second half of 2009.
In addition to new field developments, a number of infill drilling targets have been identified within Dana’s existing fields. A recent well on the F16 gas field in the Dutch sector has proved up additional gas volumes, and further opportunities for drilling in 2010-2012 are being considered in the Cavendish and Johnston gas fields and the Otter oil field, all in the UK, and in each of the Egyptian concessions.
Dana now holds interests in 35 producing oil and gas fields.
Financial Position:
The Dana group has increased its financial strength through its new 3 year corporate debt facility agreed with Bank of Scotland. To complete the acquisition of Bow Valley Energy, the Company has to date drawn down approximately $173 million under this facility, from the currently available $300 million. The company is now progressing through the syndication
process.
At the end of April 2009, following completion of the Bow Valley transaction, The Dana group had total net debt of approximately £168 million, inclusive of the convertible bond of £118 million.
Outlook:
Taking into account the final Bow Valley completion date, the latest expected timing for the start up of the Ettrick field and the production activities highlighted above, the Group’s average production for 2009 is still expected to
be in the range 43,000-47,000 barrels per day oil equivalent, within the guidance previously provided, but probably towards the lower end of the range. The full year out-turn will be dependent on facility uptime and no significant disruption to production from the Group’s UK Southern North Sea gas fields due to low spot gas prices. The 2009 full-year forecast will be updated once Ettrick is onstream and early field performance is known.
Dana’s overall 2009 capital investment programme, including projected spending on the newly acquired Bow Valley assets, is currently expected to be approximately £244 million.
In 2009, the Company now expects to drill approximately 17 exploration wells. The exploration programme for 2010 will be refined over the coming months and reflect rig availability and discussions with co-venturers. In addition to Dana’s extensive exploration and development programme, highlighted above, the Company will continue to appraise new investment
opportunities and commercial transactions which can add further value to the Dana group.