Dragon Oil close to restoring field production to 70,000 bopd, forecasts intact

Dragon Oil (LON:DGO) said it has resolved the production issue it encountered during the second quarter and is close to restoring field production to 70,000 barrels of oil per day.

The comments came in the company’s trading statement ahead of reporting results for the first half to end-June 2012.

It said the average production rate on the Cheleken contract area in Turkmenistan came to 64,200 barrels of oil per day in the first half of 2012, a 10.7 percent rise from a year earlier.

After a strong start to the year, Dragon had flagged in the second quarter that a number of producing wells were choked down to minimise production of sand, reducing the oil flow from these wells, which had averaged over 70,000 bopd before the issue arose.

Today, the group said it continues to bring the wells back to normal levels of flow by installing sand screens in some of those affected older wells as well as installing desander equipment on certain platforms in areas prone to sand production.

In 2012, it plans to put into production up to 16 development wells, including two sidetracks of existing wells, three more than the target stated at the beginning of the year.

Twelve wells have been competed to-date with up to four more wells to be put into production by the end of the year.

For 2012, it expects to increase production by 10-15 percent year-on-year and is maintaining its medium-term guidance over the 2012-15 period of average gross production growth of 10-15 percent per annum.

The company remains on target to reach the 100,000 bopd gross production level in 2015.

Production has continued to increase Dragon’s massive cash pile, and it reported a balance of US$1.667 billion as of June 30 2012, compared to US$1.53 billion at the end of December 2011.

Chief executive Dr Abdul Jaleel Al Khalifa said: “The first half of the year was an eventful time for Dragon Oil on a number of fronts. We have continued to deliver on our goal to grow the group into a multi-asset company as shown by the recent award, in a consortium, of an exploration, development and production contract for Block 9 in Iraq.

"While diversification remains on top of our agenda, we also commenced a US$200 million share buyback programme to return some of the cash generated through solid growth of our asset in Turkmenistan to our shareholders."

While development drilling is ongoing, Dragon is expecting delivery of a new jack-up rig towards the end of 2012.

Tenders are out to secure another jack-up rig, two land rigs, more platforms, pipelines and other equipment for its operations.

The group expects to report its interim results on August 14.