Cash rich Dragon Oil (LON:DGO) says it still sees plenty of acquisition opportunities in Africa and Central Asia.
And in a call today chief executive Dr Abdul Jaleel Al Khalifa told City analysts that he hopes to have some positive news on in this regard in the second half of the year.
“There are opportunities available. Though sometimes the sellers are electing to go through a (formal) sale process and this takes longer than is needed,” he said.
“This also makes (the bidding) quite competitive as well, even in today’s market. But we are currently working on many fronts, in different areas and at (projects that are in) different stages.”
Dragon has been scouting for new assets for some time. With a growing cash-pot it has a strong bargaining position. But it has so far shown a prudent and patient approach.
In this morning’s interim results the growing oil producer revealed that its operations generated US$404.2 million in operating profit and it has US$1.66 billion on deposit.
The results also confirmed a record high production tally. And a rate of 70,017 barrels a day being reached last week. This comes after the firm’s operations team had to overcome issues relating to sand ingression into a number of wells.
These problems are now ‘under control’, according to the Dragon Oil chief.
“I want to assure everybody. At first we were quite alarmed and we thought it (the impact) could be dramatic. But over the past few months we now have a much better understanding and much better control of it.”
The Dragon Oil chief explains that the required equipment is relatively inexpensive. A de-sander suited to a well producing 5-6,000 barrels a day costs between US$500,000 and US$1 million at the most, he says and Dragon has only needed to install two de-sanders so far.
Going forward Dragon intends to continue its expansion of its operations in the Caspian Sea, offshore Turkmenistan.
It aims to maintain a target of growing production growth at 10 to 15 per cent a year with output increasing to 100,000 barrels a day in that time.
Investors will be rewarded with a 15 cents a share interim dividend, while in June the group said it would spend US$200 million buying back its own stock – so far around 15 million shares have been bought back.
While Dragon has not secured any major acquisitions, it has added a number of relatively earl stages exploration projects in Iraq, Tunisia and more recently Afghanistan.
In this morning’s statement, Dr Abdul Jaleel Al Khalifa said: "Progress has been made with our diversification strategy. Dragon Oil, in a consortium of companies, has been awarded Block Nine for exploration and development in Iraq and the initialling of the service contract has already taken place.
“In Tunisia, our partner in the Bargou Exploration Permit, Cooper Energy Limited has secured a rig to commence drilling of the Hammamet West-3 well in the Hammamet West Oil Field at the end of this year or early next year.
“We continue our search for oil and gas assets in the regions of interest to us and to this end Dragon Oil has been pre-qualified for bidding for blocks in Afghanistan later this year.
"Board and senior management have been strengthened by appointments at the beginning of this year adding to the Group's expertise and further enhancing the people-driven culture within the organisation.”