Dana Gas’s profits will decrease by 12% to 586 million dirhams in 2023

“Dana Gas” has announced its unaudited preliminary financial results for the year ending December 31, 2023. The company recorded a net profit of AED 586 million ($160 million) in 2023, compared to AED 667 million ($182 million) in 2022.

The 12% decline in profitability is primarily attributed to lower sale prices of hydrocarbons, partially offset by an increase in production in the Kurdistan region of Iraq and lower operating costs.

The company’s revenues decreased by 20% to reach 1.55 billion dirhams ($423 million) in 2023, compared to 1.94 billion dirhams ($529 million) in 2022. Operating costs also decreased by 7% to reach 195 million dirhams ($53 million) in 2023, compared to 210 million dirhams ($57 million) in 2022, as a result of expense control and reduction.

The average achieved selling prices were $51 per barrel for condensates and $35 per barrel for liquefied petroleum gas in 2023, compared to $79 and $42 respectively in 2022.

The production rate in the Kurdistan region of Iraq increased by 8%, resulting in a net production of 36,900 barrels of oil equivalent per day by the year 2023. This increase came after the successful completion of the gas congestion removal project at the “Khurmur” gas treatment station, which was a strategic step to meet the growing demand for natural gas in the Kurdistan region of Iraq.

In November 2023, as part of the company’s efforts to meet the increasing demand for electricity and continue supporting local electricity generation, the daily gas production reached record levels of 520 million cubic feet.

As Danah Gas, which is owned by Pearl Petroleum, continues to make steady progress in the expansion project of the Khormor 250 gas production, the company successfully completed drilling operations for six wells within the project in 2023. It is expected to complete the project during the second half of the current year.

The company expects to obtain final approval from the Egyptian Parliament for its merger agreement of its concession areas during the first quarter of 2024. It is anticipated that this agreement will contribute to extending the operational life of the company’s assets in Egypt and support its production levels. Additionally, it includes an additional investment worth up to 100 million dollars.

The company has recently made significant progress in collecting its outstanding payments, including previous unpaid dues. This has been achieved through a new collection mechanism of receiving payments directly from power generation stations to fulfill the obligations of the Kurdistan Regional Government.

Additionally, a specific timeline has been established to collect the previous outstanding payments, ensuring continuous gas supply to regional power stations in the Kurdistan region of Iraq without interruption. This also contributes to providing the necessary investments to complete the gas production expansion project, “Khurmala 250.”

As a result of delayed receivables in 2023 and with “Pearl Petroleum” focusing on its capital commitments and the requirements of the Khor Mor 250 project as a priority, Pearl Company did not distribute any cash dividends to its shareholders, including Dana Gas, during the previous year. Therefore, Dana Gas will not recommend the distribution of cash dividends during its upcoming annual general meeting.

However, considering its earned profits in 2023, the company expects to distribute cash dividends related to these profits in the future, once it receives the necessary cash liquidity. The company remains committed to its declared distribution policy and will resume cash distributions upon receiving the cash amounts that enable it to do so.

Richard Heil, CEO of Dana Gas, said that the year 2023 was a year filled with strong operational performance for Dana Gas, but it was not without its challenges. In the Kurdistan region of Iraq, we achieved a record gas production rate in a significant achievement that reflects our ability to continue investing in our resources.

In the last quarter of 2023, our financial position witnessed a noticeable improvement in the payments received from the Kurdistan region of Iraq thanks to the new mechanism of directly receiving dues from power stations, as well as the establishment of a specific schedule for receiving overdue payments.

This solidified our position to start the year 2024 vigorously, as we aim to further enhance the company’s liquidity and resume distributing cash dividends to our shareholders.

He added:

“With the start of 2024, we will continue to work with our governmental partners in the Kurdistan region of Iraq and Egypt to ensure timely receipt of our dues and achieve a new year of progress and successful operations. “

Our main focus will remain on developing our world-class assets in the Kurdistan region of Iraq and achieving the best possible value from our assets in Egypt after obtaining final approval from the Egyptian Parliament.

Operations and production updates

The group’s average production witnessed a slight decline of 2% in 2023, reaching 58,700 barrels of oil equivalent per day, compared to 60,200 barrels of oil equivalent per day in 2022. This is primarily due to a 16% decrease in production in Egypt, which reached 21,800 barrels of oil equivalent per day, attributed to the natural decline in output from the fields.

However, the company managed to mitigate the impact of this decline by increasing production in the Kurdistan region of Iraq by 8%, resulting in a net production of 36,900 barrels of oil equivalent per day, compared to 34,300 barrels of oil equivalent per day in 2022.

Liquidity and collection of receivables

At the end of the year, the company’s cash liquidity reached 480 million dirhams (131 million dollars), including an amount of 418 million dirhams (114 million dollars) kept with Pearl Petroleum. In 2023, due to the increase in overdue receivables from the Kurdistan Regional Government and the investment needs for the completion of the gas production expansion project “Khormor 250”, Pearl Petroleum focused on retaining its cash liquidity and refraining from distributing cash amounts to its shareholders, including Dana Gas.

The total amount received in 2023 was 872 million dirhams ($238 million). The company’s share of the payments received by “Pearl Petroleum” in the Kurdistan region of Iraq was 660 million dirhams ($180 million), while the amounts received by the company in Egypt amounted to 212 million dirhams ($58 million).

The company’s overdue receivables in the Kurdistan region of Iraq amounted to 378 million dirhams ($103 million), while the company’s receivables in Egypt reached 176 million dirhams ($48 million) as of December 31, 2023. At the beginning of the current year, Pearl Petroleum received an additional amount of 249 million dirhams ($68 million).