Dana Attains All-Time High for Production
Dana Petroleum PLC said that shareholders at its annual general meeting on Monday approved all resolutions. In addition, the company issued a report on its progress during the past year.
"Dana delivered exceptional performance in 2005, continuing its strong track record of year-on-year growth," said Colin Goodall, Dana's chairman. "By achieving a new high in oil and gas production, coupled with a number of astute commercial deals, this led to a record financial performance for the company with net profit increasing by over 400%."
Goodall said that the group completed the year in a very healthy position, with significant cash reserves, excellent cash flow, and a portfolio of high quality growth opportunities. "Dana thus began 2006 poised ready to double its production levels from less than 20,000 boepd to 40,000 boepd over the ensuing 2-year period to end 2007, through unprecedented levels of development activity in the North Sea," he said. "The first three of these new field developments--Goosander, Cavendish, and Enoch--are progressing well and due to come onstream over the next 6 months. Dana is thus on track to achieve its target of producing 40,000 boepd by the end of 2007."
According to Goodall, Dana has continued its high pace of operational activity in each of the group's core areas to date in 2006. "Major achievements already this year have included two new oil and gas discoveries in the North Sea, one in the UK, and one in the Netherlands," he said. "Both of these are currently being flow tested and the final results will be reported shortly. In addition to the ongoing new North Sea field developments, a range of work is being undertaken offshore to enhance the long term performance and value of the company's existing producing assets, including infill drilling, increased water injection and facilities upgrades."
Goodall added that Dana should continue to benefit strongly from this growth in production during 2006 and 2007 because the company is currently completely un-hedged with respect to oil price.
North Sea Operational Update
Southern North Sea Gas Fields
The Cavendish field development is on schedule for first gas by end 2006. The platform was installed in June and the drilling rig is due to arrive in August following completion of drilling at the F16-E gas field in The Netherlands, in which Dana also has an interest.
A key appraisal well is in progress to appraise the Babbage gas field, which has the potential to contain up to 390 billion cubic feet of gas-in-place in Permian age Rotliegend sandstone reservoir. The well is targeting a crestal area of the reservoir in order to establish reservoir productivity ahead of a development decision. If appraisal is successful, it is expected the field will be moved quickly into development as a tie-back to existing infrastructure.
In the Netherlands, the E18-DF exploration well has reached total depth, discovering good quality gas bearing sands and is currently being flow tested. This discovery has encouraged the potential drilling of an appraisal well in a fault block to the west of the current well to prove further volumes before developing the fields as a tie-back to the F16-E platform. Two additional wells have been drilled, as planned, on the F16-E gas field since production started in late 2005.
Central & Northern North Sea Oil Fields
2006 is seeing major progress across the Greater Kittiwake Area (GKA) with both the Gadwall water injection well and the Goosander oil production well already completed. Goosander will deliver first oil imminently. Good production performance from the GKA during the first half of 2006 was partially offset by a drilling rig anchor collision incident involving the Gadwall/Mallard pipeline.
This led to both fields being shut-in for a period of several weeks. A permanent solution was completed in July and production from the Gadwall/Mallard pipeline has been reinstated. Dana's net production from the Kittiwake, Mallard and Gadwall fields is currently around 8,000 to 9,000 boepd and this could rise to 13,000 to 14,000 boepd when Goosander comes on stream.
Dana's overall production is significantly influenced by the ongoing field development activities at GKA as the company holds a 50% interest in these fields. Group daily production is currently around 24,000 boepd, which is more than a 20% increase from the 2005 annual average production of 19,683 boepd. As previously reported, average production for 2006 as a whole will be highly sensitive to the timing of the three new field start-ups. Two of these, Cavendish and Enoch, will begin flowing around the year end.
It is currently estimated that Dana will exit 2006 with production levels of over 33,000 boepd, with the average for the year in the range 24,000 to 27,000 boepd. Production will be biased to the second half as new fields are being added. These figures can only be rough estimates at this time and a forecast to year end will be given at the company's Interim Results in September. By that time the early performance of the Goosander field and the reinstated Mallard and Gadwall fields will be known, as well as the completion date for the Gaz de France transaction which will add new producing interests into the Dana portfolio from the Anglia and Johnston gas fields.
Numerous opportunities have been identified to further increase oil production and reserves at GKA. Currently, a sidetrack of the original Mallard water injection well is being drilled to increase reservoir sweep efficiency and hence recoverable oil reserves. Development plans are also being progressed for the Grouse discovery, to the east of Kittiwake, and the redevelopment of the Durward and Dauntless oil fields to the west of Goosander. Dana has concluded a deal with Venture to enter Block 21/20a (outside the Cook field area) and Block 21/ 20b, which includes the Christian oil field and the Bligh gas condensate discovery. The Christian partners, which are currently Dana, Venture, and Noble, are considering plans to tie the field across the Mallard and Kittiwake infrastructure. The relatively fixed operating costs on the Kittiwake host platform mean that any incremental oil produced in the GKA is highly profitable.
The Enoch field development is broadly on schedule with first oil currently expected to flow around the end of 2006. The drilling rig is due to arrive by September and the topsides work on the host Brae platform is already underway.
Infill drilling at the Claymore field continues to maintain production levels, extend field life and increase oil reserves. In addition, planning has started to drill a further well on the Banff field in Q1 2007 and gas compression upgrades have begun on the FPSO.
The Causeway exploration well, now drilling in Block 211/23d, has effectively tested two prospects. It has discovered additional oil in the Brent reservoir both in proximity to the existing 211/23d-2 discovery and in the previously undrilled A-prospect. A flow testing program is currently being undertaken.
Dana, as operator of the adjacent 211/22a block, has begun subsurface studies to identify development opportunities, either on the existing undeveloped discoveries, or in new fault blocks. Given the close proximity to existing infrastructure, the Causeway discovery and further targets identified by Dana, give increasing confidence in being able to deliver a valuable development opportunity in this area.
International Exploration Update
Dana will use the Atwood Hunter rig for two wells offshore Mauritania beginning in August. The first is targeting the Flamant prospect in Block 8, which is a very large carbonate structure in this under-explored area of Northern Mauritania. After Flamant the rig will move to the Aigrette prospect in Block 7. Aigrette is a structural closure some 40 km to the north of the Pelican discovery made by Dana with its first well in Block 7. The Aigrette well is targeting similar age sands to Pelican.
After entering Egypt in 2005, Dana is rapidly building a valuable portfolio of licenses in country. A 3D seismic survey at the South Feiran Concession in the Gulf of Suez was successfully completed in Q2 2006. Seismic processing is underway and interpretation of this data should define exploration targets for drilling from 2007.
Offshore Kenya, the Chikyu deepwater drillship has been contracted by the joint-venture operator Woodside to enable two wells to be drilled to test the huge Sokwe and Pomboo Cretaceous age structures. Drilling is currently planned for late 2006 or early 2007.
While the Chikyu drillship is available, Woodside and Dana intend to bring forward the drilling of a first well for the group in the Great Australian Bight, offshore South Australia, in late 2006 or early 2007. The precise timing of the drilling in Australia and Kenya will depend on the combined partnerships' view of the weather windows at the two locations.
Offshore Morocco, 3D seismic has been accelerated over the North-West Safi exploration license. The survey, which is already complete, should define drilling targets on a number of prospects identified from earlier 2D seismic, with a view to commencing drilling by late 2007.
"Dana is on track to grow significantly over 2006 and 2007," said Goodall. "The company's sound strategy has led to both strength and balance being developed within its portfolio and this is now delivering tangible benefits with rising production capacity and a 40-well exploration and appraisal drilling program running from 2006 through 2008 targeting potential reserves of over 2 billion barrels net to Dana. The company's good working relationships with its co-venturers, major oil and gas companies, and governments, have led to valuable cooperation across different areas. One example of this has been the securing of drilling rigs for deepwater wells in Mauritania, Kenya, and Australia.
"The strategic Exchange Agreement previously announced with Gaz de France (GdF) is nearing legal completion. The multi-country, multi-asset nature of this transaction has meant that achieving the various governmental and third party approvals is, as expected, taking some time. However, approval has now been received from the DTI in the UK and the Government of Mauritania, and both GdF and Dana are working to expedite approval in Egypt and obtain third-party consents. Dana has also reached agreement with GdF regarding the other assets to be included within this transaction and an announcement will be made detailing these associated assets in the near future.
"It is particularly pleasing to report the faster-than-expected pace of license acquisition and seismic acquisition offshore Morocco and Egypt. It is already clear that these two new business areas should deliver numerous quality drilling opportunities for Dana in the medium term, starting as early as 2007.
"The next year will be an exciting period for Dana, with results from a range of
important exploration wells internationally and the commissioning of new
producing fields in the UK which will ensure the company's continued strong
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