Dana Spotlights 1Q10 Ops

Dana issued its Interim Management Statement for the period to May 18, 2010.

 

Delivery of Exploration Program:

 

 

 

 

  • Since the start of 2010, Dana has completed drilling on six exploration prospects resulting in three discoveries:
    • Dana's second well on the West El Burullus concession, offshore Nile Delta, Egypt, discovered approximately 75 bcf of gas at Papyrus, in line with the pre-drill prognosis. Following Dana's first gas discovery at WEB-1, the Company is confident that there are now sufficient gas reserves to progress discussions and studies in respect of developing the two Pliocene gas discoveries in this concession.
    • The Platypus well in the UK Southern North Sea discovered approximately 130bcf of gas in line with pre-drill estimates. Dana is undertaking technical work to fully evaluate the well results and integrate them into a development study, building on its experience in the area, in order to commercialize the discovery.
    • A small oil discovery made at Fayoum-2x in East Beni Suef, onshore Egypt is currently being tested.
    • The Company announced dry wells at Storkollen in Norway and RAD-3x, offshore Gulf of Suez, Egypt. More recently, the K3-4 well in the Netherlands discovered gas but in a tight reservoir.
    • Dana estimates it has added 15-18MMboe of oil and gas resources, net to Dana, through exploration drilling to date in 2010.
  • Dana is currently drilling further exploration wells, including:
    • Bamboo, offshore Nile delta, Egypt. This relatively complex high pressure, high temperature well is currently being drilled through high pressure zones above the target horizon, with casing recently successfully set at approximately 2960 meters. Results are expected in the coming weeks.
    • Monkwell, in the UK Southern North Sea, spudded on May 17th with results expected by end June.
    • At Lorcan-1x, onshore Gulf of Suez, Egypt, the Company is currently drilling a geological sidetrack with results expected by end May.
  • Offshore Morocco, in addition to Dana's Anchois gas discovery, some 26 further prospects and leads have been identified in the Tanger-Larache concession. The partners are currently acquiring an additional 1,300km2 3D seismic survey that covers the most prospective areas. This survey is approximately 50% complete. The group also plans to acquire a CSEM survey during Q2 2010. These new 3D seismic and CSEM data will be integrated with existing seismic data and used to high-grade the most attractive prospects prior to drilling during 2011.
  • Offshore Guinea, West Africa, Dana received confirmation of the Presidential Decree of the Arrêté approving the assignment of a 23% interest in the Guinea PSC from Hyperdynamics Inc to Dana on 10th May 2010. The PSC and Avenant, which approved the partial relinquishment announced in December 2009 and forward work program, have also received Presidential Decree. The partners have also approved an extensive 3D seismic acquisition program for mid 2010 which will infill the previously acquired 2D seismic across the key identified targets. The group plans to drill the first well in this PSC before the end of 2011. Dana's technical evaluation of the current seismic and hydrocarbon seep datasets is very encouraging.
  • Dana now expects to drill 18 wells in 2010, with the recent addition of the Blackbird appraisal well in the Ettrick oil area. Anne Marie, in the Faroe Islands, is expected to spud next month. The Company is also pleased to announce it has secured a new build semi-submersible Maersk rig to drill in Block 7, offshore Mauritania. The rig has been secured as part of a joint program with Petronas who will drill in the neighboring Block 6. Cormoran, a 2-3Tcf prospect, is expected to spud in Q4 2010. Dana will also be acquiring seismic surveys in Norway and the Tanger-Larache license, offshore Morocco, during this summer.
  • The Company has recently been awarded two further blocks, 43/17a and 43/18a, in the UK Southern North Sea, which it applied for in the UK 25th Licensing Round. Dana has also bid for a number of licenses in the UK 26th Round and expects to be notified of the results in Q3 2010. Dana is currently evaluating bids for the Norwegian 2010 APA round and 21st licensing round, and pursuing new exploration opportunities in Egypt.

Production:

  • Dana's working interest production for the year to date has averaged approximately 38,700 barrels of oil equivalent per day (boepd) in line with the guidance range of 37,000-41,000 boped.
  • There has been continued strong performance from the UK Northern North Sea fields, the Greater Kittiwake Area fields and the Cavendish gas field. Although performance on the Johnston field has been somewhat lower than expected to date, the conservative approach taken by Dana, in assuming only minimum gas liftings by the gas buyer, mitigates this.
  • Typical start-up FPSO issues affected production from the Ettrick field in the first part of the year. More recently, production performance has been much stronger, averaging 20,000 boepd except when drilling rig operations have necessitated production shut-downs. Drilling has been completed on the E3Z and E7 wells on the Ettrick field with tie-in work expected to be completed by the end of the year. Both wells appear somewhat better than prognoses and suggest better connectivity across the field than assumed in the Field Development Plan.
  • Dana has also sanctioned an additional well on the Cavendish field with incremental production from this well expected in Q4 2010. A further well is also planned on the Claymore field and ongoing drilling and workover activities continue in Dana’s onshore concessions in Egypt.
  • The Group continues to anticipate 2010 full year production in the range 37,000-41,000 boepd. Key variables on production to the end of 2010 are the timing of Babbage first gas, Ettrick field performance and the sustainability of the current UK gas price and its resultant effect on gas production.
  • A number of further infill drilling targets have been identified and are being considered in the Claymore, F16, E18, Cavendish and Johnston fields, and in each of the Egyptian concessions. Workovers are also under consideration in the Otter field in the UK, East Zeit in Egypt and on the Western Desert concessions.

Development Projects:

  • Good progress is being made on Dana's current key developments:
    • At the Babbage gas field in the UK Southern North Sea, the 3 initial wells have been drilled and completed, and are now awaiting fraccing prior to production. Fraccing is due to start in June. The platform is now mechanically complete and work is progressing well to complete all the topside work. The pipeline is also tied-in to the Babbage platform and at West Sole. The Company remains confident of achieving first gas early in Q3 2010.
    • At the Barbara/Phyllis joint gas field development in the UK Central North Sea, FEED studies have commenced on each of the key areas, including the proposed host platform. A draft Field Development Plan has been submitted to the UK Government. The Company therefore continues to expect project sanction in Q3 2010 and first gas Q4 2012.
    • On the Western Isles Oil Project in the UK Northern North Sea work continues at pace. A floating production system was selected as the preferred development concept in January 2010, with an invitation to tender being issued to several companies in April. Responses are expected in July with detailed discussions with the preferred host taking place thereafter. Subsurface work has essentially been completed, with extensive reviews undertaken by the partnership and external technical experts. These reviews have validated the reserves estimates produced by Dana. Project sanction is still planned for late 2010 with first oil late 2012. The key uncertainty on the timing of first oil is FPSO availability which should be confirmed in Q3 2010.
    • Conceptual development work has been initiated on the Fulla and Jetta discoveries in Norway, both of which were drilled in 2009.

Financial Position:

  • Overall, Dana's original guidance for its organic capital investment program for 2010 of £235 million remains on target, but given the continued strengthening of the US dollar, this may be subject to future upward revision.
  • The Company recently took up its rights in relation to the Faroe Petroleum plc Rights Issue at a total cost of £19.2 million. The Company therefore retains its 27.5% equity interest in Faroe Petroleum.
  • Dana received a payment of $6 million from Woodside Energy as its share of an out-of-court settlement in respect of a farm-in agreement between Dana, Woodside and Global Petroleum as a result of Woodside's decision not to drill a second exploratory well in the project area, offshore Kenya.
  • To date in 2010, the Company has benefited from the stronger commodity price and US dollar environment. Indeed, even after settlement of the Faroe Petroleum rights issue, Dana remains in a modest net funds position with Group cash resources exceeding bank debt by approximately £5 million. Together with the Group's convertible debt, which may become payable in 2012, Dana has total net debt of approximately £115 million, a near £30 million improvement since the start of the year. Consequently, overall gearing has reduced to the 16-17% range.
  • 2010 has also seen the re-emergence of an active market for Canadian, Asset Backed Commercial Paper (ABCP), which Dana acquired as part of the Bow Valley acquisition in 2009. In Sterling valuation terms, Dana's ABCP holding has increased by around 75% since the acquisition to approximately £16.5 million.

Outlook:

  • The remainder of 2010 promises to be a exciting period for Dana with high impact exploration wells drilling in the Faroe Islands, offshore Nile Delta and Mauritania, and the achievement of key milestones on the Group's development projects.
  • Dana expects to drill a total of 18 exploration wells in 2010.
  • The Company continues to guide production in the range 37,000-41,000 boepd and will benefit from the generally stronger oil and gas price environment.
  • In addition to Dana's extensive exploration and development program, highlighted above, the Company is continuing to evaluate new investment opportunities and commercial transactions which can add further value to the Dana group.
     
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