Dragon Oil (LON:DGO) shares were up 2.4% today after the oil producer increased its dividend, whilst confirming financial results in line with market expectations.
Average production increased 9.1% to 73,750 barrels of oil per day (bopd) as 10 wells were completed during the year. Profits fell in 2013 as lower prices were received for its oil.
The full-year dividend was increased by 10% to 33 US cents.
Dragon chief executive Abdul Jaleel Al Khalifa says Dragon Oil will continue to reward shareholders with dividend growth.
But, he also confirmed much of the group’s US$2bn cash pot is earmarked for investment, with new work programmes getting underway this year.
“We will definitely pay for the existing expansion and exploration targets,” he said in a Proactive Investors interview.
“This year we’re going to sidetrack the well in Tunisia, we’re going to drill a well in Iraq, we’ll drill a well in the Philippines. We’ll also seismic acquisition in Afghanistan, Iraq and Egypt.”
The Dragon Oil chief emphasised that from an exploration point of view there was more to come, he also points to the possibility for M&A in the future.
“And we keep looking for excellent acquisition targets, both at corporate or asset level. We feel there is hopefully a growth plan in the company that would definitely need the cash that is on the balance sheet.”
The continued expansion of Dragon’s flagship operation on the Cheleken area will of course be part of that growth plan.
In the coming year the company expects to complete between 14 and 16 wells, including one sidetrack, this year and around 20 wells in 2015 when it hopes to achieve its 100,000 bopd production target.
Oriel Securities this morning described Dragon’s results as “largely steady” and emphasised that free cash flow of more than US$400m per year appears intact, and will probably be at a similar level going forward.
Elsewhere, Dublin based Davy concurred. “Dragon's results are in line with forecasts and we do not anticipate any significant change to our 2014 and 2015 estimates,” Davy analyst Caren Crowley said in a note.
“Cash generation continues to be good and more than covers capex, taxes and dividends.
“Dividend growth of 10% is in line with net cash growth but the extent of the return of cash may disappoint given the $1.9bn net cash pile and marginally lower interest yields in 2013.”