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Dragon Oil (LON:DGO) revealed production growth of 15% up to 73,600 per day in the first half of this year.
The group repeated its growth target, with full-year production tipped to be at the ‘lower end’ of its medium-term range of 10 to 15%. Six wells were drilled in the first half of the year, and another six are scheduled for the rest of the year.
First half revenues totalled US$491.6mln, which is 16% lower than th efirst half (H1) of 2012; meanwhile, profits came in at US$241.4mln, which is a 22% reduction.
Dragon Oil remains one of London’s most ‘cashed-up’ mid-cap explorers & producers (E&Ps) with US$1.65bn in the bank at the end of the first half.
The company sold 5.7mln barrels of oil in the first half with an average price of US$86 per barrel, a 20% discount to Brent.
Dragon said that its share of production equated to 44%, which was down from 49% in the corresponding period of 2012; under the terms of the production sharing contract, the share due to the group is tied to its level of investment in development work.
"I am pleased to report solid gross production growth in the first half of this year, at a healthy 15%, compared to the corresponding period last year,” said chief executive Dr Abdul Al Khalifa.
“Financial results for the first half of this year reflect the impact of slower than expected progress on the awarding of infrastructure projects and a revised pricing structure under the current crude oil marketing agreement.”
Currently the crude oil is exported via Baku, Azerbaijan, under a marketing agreement which runs until the end of 2014.
Dragon says it continues to review alternative routes to international markets.
The company also revealed progress with its efforts to expand and diversify its business.
It said that testing is expected to start imminently on the Hammamet West-3 well in Tunisia. High gas readings have been taken in the well’s sidetrack, while other oil and gas shows have also been observed.
Meanwhile, a formal contract was signed in Iraq in January for Block 9 in the Basra region. The first meeting of the joint management committee took place in March and a process is now underway to secure a drill rig for the first well.
It is also part of a consortium which has been selected as the ‘winning bidder’ for two exploration blocks in Afghanistan: the Sanduqli and Mazar-i-Sharif blocks. The group of companies is currently in advanced negotiations with the Afghan authorities and this is expected to conclude in the third quarter.
Elsewhere, Dragon Oil continues to screen and evaluate project in Africa, parts of Asia and the Middle East.
In a note to clients Dublin based broker Davy highlighted that contract awards for new platforms will be important in the group’s continued growth.
“Management concedes that limited availability of quality contractors in the Caspian Sea region has held back its plans to add new platforms as quickly as intended,” analyst Caren Crowley said in a note.
“However, Dragon expects to award contracts in H2 2013 and early 2014 for the construction of up to four platforms. These platforms are expected to be constructed and installed in 2015-2016.
“Interestingly, capex guidance for 2013 is now US$450mln and is 34% ahead of our US$336mln estimate. The capex guidance may indicate near-term progress on infrastructure contract awards.”