14 August 2012
DRAGON OIL PLC
(the "Company" or together with its subsidiaries "Dragon Oil" or the "Group")
2012 Interim Results
Dragon Oil plc (Ticker: DGO), an international oil and gas exploration, development and production company, today announces its interim financial and operational results for the period ended 30 June 2012. These results are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
Financial highlights
|
(US$ million, unless stated otherwise) |
1H 2012 |
1H 2011 |
Change |
|
Revenue |
588.4 |
527.4 |
+12% |
|
Operating profit |
404.2 |
407.3 |
-1% |
|
Profit for the period |
308.9 |
309.4 |
-0.2% |
|
Earnings per share, basic (US cents) |
60.47 |
59.98 |
+1% |
|
Interim dividend per share (US cents) |
15.00 |
9.00 |
+67% |
|
Capital expenditure |
207.9 |
151.5 |
+37% |
|
Net cash generated from operating activities |
483.7 |
413.7 |
+17% |
|
Cash and cash equivalents and term deposits, excluding A&D funds |
1,666.5 |
1,256.7 |
+33% |
|
|
|
|
|
Operational Performance
· Production reached 70,017 barrels of oil per day ("bopd") on 11 August 2012;
· Average gross production growth of 10.7% to approximately 64,200 bopd (1H 2011: 58,000 bopd) achieved in 1H 2012;
· 12 development wells completed to-date;
Corporate and Commercial Developments
· Interim dividend of 15 US cents per share announced;
· US$200 million share buyback programme launched to acquire up to 5% of the share capital;
· Dragon Oil within a consortium of companies, has been awarded a contract for Block 9 in Iraq;
· Dragon Oil has been pre-qualified for bidding for exploration blocks in Afghanistan;
· An Independent Non-executive Director appointed to the Board;
· The Group hired an Exploration Manager.
Outlook for 2H 2012
· Production growth target for 2012 set in the range of 10 to 15%;
· 2012 drilling programme upgraded to complete up to 16 wells, including two sidetracks, versus 13 wells previously stated; up to four development wells remain to be completed by the year-end;
· Delivery of the Caspian Driller jack-up rig expected by the end of the year.
Outlook for 2012-15
· Maintain the target of average annual production growth in the range of 10% to 15%;
· The Dzhygalybeg (Zhdanov) A and B platforms expected to be installed in 1Q 2013 and 1H 2013,
respectively;
· Award contracts for a number of wellhead and production platforms;
· Award contracts for platform-based and new jack-up rigs.
Dr Abdul Jaleel Al Khalifa, Chief Executive Officer, commented:
"I am pleased to report strong financial results for the first half of this year despite oil price volatility during the period and the temporary impact on gross production from controlling sand flow from certain wells.
"Progress has been made with our diversification strategy. Dragon Oil, in a consortium of companies, has been awarded Block 9 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. For our shareholders, we have begun a US$200 million share buyback programme; today the Board also recommends a higher interim dividend of 15 US cents."
Analyst conference call details:
A conference call for analysts will take place today at 9.30a.m. BST. For details, please contact Kate Lehane at Citigate Dewe Rogerson on +44 (0)20 7282 2870 or at kate.lehane@citigatedr.co.uk.
A replay of the call will be available from around 12.00pm today for one week on the following telephone number:
|
UK/International |
+44 (0)20 3427 0598 |
|
Ireland |
+353 (0)1 486 0902 |
|
USA/International |
+1 347 366 9565 |
|
The passcode is |
9083340 |
For further information please contact:
Investor and analyst enquiries
Dragon Oil plc (+44 (0)20 7647 7804)
Anna Gavrilova
Media enquiries
Citigate Dewe Rogerson (+44 (0)20 7638 9571)
Martin Jackson
Kate Lehane
About Dragon Oil
Dragon Oil plc is an international oil and gas exploration, development and production company, quoted on the London and Irish Stock exchanges (Ticker symbol: DGO). Its principal producing asset is in the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan.
Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil plc, holds 100% interest in, and is the operator of, the Production Sharing Agreement for the Cheleken Contract Area. The operational focus is on the re-development of two oil-producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).
Disclaimer
This news release may contain forward-looking statements concerning the financial condition and results of operations of Dragon Oil. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. No assurances can be given as to future results, levels of activity and achievements and actual results, levels of activity and achievements may differ materially from those expressed or implied by any forward-looking statements contained in this report. Dragon Oil does not undertake any obligation to update publicly or revise any forward-looking statement as a result of new information, future events or other information.
Glossary/Definitions/Abbreviations
|
A&D |
Abandonment and decommissioning |
|
bopd |
barrels of oil per day |
|
Dragon Oil / the Group |
Dragon Oil plc and its various subsidiary companies |
|
Dual completion |
Two pay zones in the same well that produce independent flow paths in the same well |
|
EPS |
Earnings per share |
|
FEED |
Front End Engineering Design |
|
mmscfd |
million standard cubic feet per day |
|
Overlifts and underlifts |
Crude oil overlifts and underlifts arise on differences in quantities between the Group's entitlement production and the production either sold or held as inventory |
|
Platform |
Large structure used to house employees and equipment needed to drill wells in a reservoir to extract oil and gas for transportation to shore |
|
PSA |
Production Sharing Agreement is a contractual arrangement for development and production of hydrocarbon resources in the Cheleken Contract Area,Turkmenistan |
|
Sidetrack |
An efficient way to drill a new well via re-entering and then deviating from an existing wellbore with drilling equipment to access reserves from alternate zones or pools of hydrocarbons |
|
Single completion |
One pay zone in a development well that produces an independent flow path |
|
US cents |
United States Cents |
|
US$ |
United States Dollars |
|
Workover |
Well intervention involving invasive techniques, such as wireline, coiled tubing or snubbing |
2012 Interim Results
Chief Executive Officer's Statement
OVERVIEW
Dragon Oil has achieved solid financial results in the first half of the year. The oil price volatility during the period was significant ranging from a high of US$128/barrel to US$89/barrel on fears stemming from the eurozone crisis and supply concerns around the world. As we have entered the second half of the year, we expect the oil price volatility to continue.
On the production side, the 10.7% growth over the 1H 2011 level is a significant growth considering that we had to choke down certain wells to control sand production in the second quarter of this year. This was achieved by the impressive 12 wells put into production since the beginning of the year, as compared to only eight wells completed during the same period last year. We are now aiming to drill four additional wells taking the total to up to 16 wells before the end of 2012.
We have taken various measures leading us to reach the production of 70,017 bopd on 11 August 2012.
We are expecting the delivery of the Caspian Driller jack-up rig at the end of the year to prepare it for commencement of drilling in 1Q 2013. We are in the process of securing two platform-based rigs and another jack-up rig to support our offshore operations in 2013 and in the future.
Later this year and throughout 2013, we will be awarding contracts to construct up to five platforms in the Dzheitune (Lam) field and, hence, we anticipate a considerable pick-up of the level of infrastructure build during the next three years. Bids from contractors to construct two of the new platforms in the Dzheitune (Lam) field are currently being reviewed and we expect to see more bids as we tender out for new contracts.
As we mentioned earlier this year, we have the approval to start the tendering process for an Engineering, Procurement, Installation and Construction project for the Gas Treatment Plant and will proceed with the tendering process later this year.
The Group remains debt-free with a strong cash balance allowing us to continuously grow production in the Cheleken Contract Area and pursue acquisition targets in the regions of interest to us. Furthermore, we commenced a significant US$200 million share buyback programme and with today's announcement on the interim dividend, we increase dividend payments to our shareholders.
The focus for our long-term strategy of becoming a multi-asset company continues to be on acquisitions. We aim to enter such countries and regions where our financial and operational capabilities, as well as our cultural fit, provide us with competitive advantage. In less than a year, we have added exploration assets in two countries, Tunisia and Iraq. We are constantly looking and assessing targets as ever evolving market conditions offer new opportunities.
OPERATIONS OVERVIEW
Turkmenistan
Production and Entitlement
For 1H 2012, the gross field production averaged 64,200 bopd (1H 2011: 58,000 bopd) at observed temperature. This represents a growth of 10.7% over the comparable period in 2011. As stated in previous announcements, a number of producing wells were choked down to minimise production of sand in 2Q 2012. That had an impact on the oil flow from these wells. We are installing desanders on certain platforms in areas prone to sand production. The sanding issue is under control, and all new wells are being completed with a sand management mechanism.
The entitlement production for 1H 2012 was approximately 49% (1H 2011: 52%) of the gross production. Entitlement barrels are finalised in arrears and are dependent on, amongst other factors, operating and development expenditure in the period and the realised crude oil price. The lower proportion of entitlement barrels in 1H 2012 is primarily due to the higher realised crude oil prices partially offset by higher development expenditure during the period.
Marketing
Dragon Oil sold 5.8 million barrels of crude oil in 1H 2012 (1H 2011: 4.9 million barrels). Higher production was the main factor contributing to the 18% increase in the volume sold over the comparable period in 2011.
Baku, Azerbaijan remains our main marketing route and, in 1H 2012, 100% (1H 2011: 100%) of crude oil was exported via this route, primarily using the BP-operated Baku-Tbilisi-Ceyhan pipeline.
The Brent oil price continued to be strong albeit volatile throughout the first half of the year and averaged US$113/barrel (1H 2011: US$111/bbl). Overall, the Group continued to benefit from strong oil prices resulting in high realised oil prices during the period.
The average realised crude oil price during 1H 2012 was approximately US$102/bbl (1H 2011: US$100/bbl), which was only marginally higher compared to the price during the corresponding period last year. During the first six months of the year, the Group's average realised crude oil prices were at a discount of approximately 10% (1H 2011: approximately 10%) to Brent.
We continue to review alternative routes for marketing our crude oil in line with our strategy to have a number of routes available to access international markets and maintain flexibility in operations.
Drilling
Since the beginning of the year, Dragon Oil completed 12 development wells, including two sidetracks. This compares to eight wells completed during the same period last year. The following table summarises the results of the development wells drilled in the Dzheitune (Lam) field to-date.
|
Well |
Completion date |
Depth (metres) |
Type of completion |
Initial test rate (bopd) |
|
13/140A |
January |
2,237 |
Single sidetrack |
2,123 |
|
A/165 |
January |
3,060 |
Dual |
2,272 |
|
28/166 |
February |
2,810 |
Single |
1,975 |
|
C/167 |
March |
2,765 |
Dual |
3,396 |
|
13/168 |
April |
2,791 |
Single |
1,008 |
|
28/169 |
May |
2,010 |
Single |
2,097 |
|
C/170A |
June |
2,730 |
Dual |
2,072 |
|
13/171 |
June |
Under further testing and optimisation |
||
|
28/172 |
June |
2,007 |
Single |
1,976 |
|
C/173 |
July |
3,015 |
Dual |
2,918 |
|
28/174 |
July |
1,976 |
Single |
1,705 |
|
13/144C |
July |
2,637 |
Single sidetrack |
956 |
We are currently adding intervals on the Dzheitune (Lam) 13/171 well, while we expect to complete the Dzheitune (Lam) C/175 development well in the next few weeks. After the leased platform-based rig undergoes planned maintenance, it is scheduled to spud the next well on the Dzheitune (Lam) 28 platform. This well is covered under the extension to the contract we secured for use of this rig to drill a further three wells.
The delivery of the new build Caspian Driller jack-up rig is expected towards the end of 2012 and the rig is scheduled to be ready for drilling in 1Q 2013.
The tendering process to secure two land rigs is ongoing with an aim to deploy them onto the Dzhygalybeg (Zhdanov) A and B platforms when these platforms are ready for drilling.
The tendering process to secure another jack-up rig is ongoing. We anticipate being able to award this contract in early 2013.
Water Injection
In 2011, a preliminary water injection study using a dynamic simulation model was completed for the Dzheitune (Lam) 75 area. Subsequently, based on the simulation results, an injectivity test was conducted in June 2011. We are conducting a workover on one of the wells in the target area to convert it into an injector-type well. We are currently finalising the procurement of equipment for the project in anticipation of being able to commence injection of water and monitoring towards the end of the year.
Infrastructure
The Dzhygalybeg (Zhdanov) A platform is due for delivery by the end of this year and we expect it to be ready for drilling in 1Q 2013. Work on the Dzhygalybeg (Zhdanov) B platform is progressing as planned and the platform is scheduled to be delivered and ready for drilling in 1H 2013. Both platforms have 16 slots each: eight for drilling with a jack-up rig and eight for drilling using a land rig. It is currently planned that we will deploy platform-based rigs to begin with; as stated above the rigs are to be secured and mobilised closer to the time these platforms are ready for drilling.
Completion of the Dzhygalybeg (Zhdanov) Block-4 gathering platform and installation of the associated in-field pipelines are almost finalised. Block-4 will act as a gathering station for the production from new wellhead and production platforms in the Dzhygalybeg (Zhdanov) field.
We are evaluating the bids from contractors to build and install the Dzheitune (Lam) D and E platforms and associated pipelines and anticipate the contracts to be awarded by the end of 2012. These platforms will be suitable for drilling with a jack-up rig with eight slots each initially; structural upgrades may be performed and slots added in the future depending on drilling results from these areas.
As stated earlier this year, we intend to start tendering processes to award contracts for the construction and installation of another three platforms in the Dzheitune (Lam) field, namely F, G and H platforms and associated pipelines. Subject to the timing of the tendering process, we envisage being able to award contracts for the construction of these platforms in 2013.
Geophysical and geotechnical investigations to evaluate locations for future platforms are undertaken on an ongoing basis. Later in 3Q 2012, we expect to receive a completed survey for 10 sites for platforms and gathering stations.
The Group has recently awarded a contract to perform a FEED study to increase its crude oil storage capacity at the Central Processing Facility. This would include, among other aspects, application for land use and construction of bigger storage tanks. We anticipate the results of the FEED towards the end of 3Q 2012; following that we will commence a tendering process to select a contractor. The construction phase is likely to take two years with a number of tanks built on a priority basis.
Dragon Oil is reviewing internally a strategy for plugging, abandonment and decommissioning of the old non-producing wells and non-producing platforms in the Cheleken Contract Area as part of the abandonment and decommissioning activities the Group is to undertake under the PSA. The cost of the project is to be covered from the abandonment and decommissioning funds.
Gas Treatment Plant
We are currently supplying a major portion of unprocessed gas into the compressor station; this allows us to reduce considerably flaring of the associated gas. We have secured the approval to start the tendering process for an Engineering, Procurement, Installation and Construction project for the Gas Treatment Plant and will proceed with the tendering process later this year. We anticipate the construction phase to take two to three years to complete after the contract is awarded.
The processing capacity of the plant is expected to be 220 mmscfd of gas, which should allow us in the future to strip around 2,900 barrels of oil equivalent per day of condensate and blend our share of condensate with our entitlement share of crude oil. The split of the produced condensate is subject to the same terms under the PSA as crude oil.
Iraq
A consortium of companies, comprising Dragon Oil (30%), the Turkish Petroleum Corporation (TPAO) (30%) and Kuwait Energy (40% and operator), has been awarded an exploration, development and production service contract for Block 9 in Iraq's fourth bidding round. On 16 July 2012, the Iraqi Ministry of Oil and the consortium initialled the contract for this block. This is the first step in a formal process before the signing of the final contract, which is anticipated later this year.
The consortium's bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent. If Block 9 is found to be commercial during the five-year exploration period, the consortium may make an application to the Iraqi Government to develop the block over a 20-year development period.
Block 9 is located in the Basra province. The block spans over 900 km². The work commitment on the block within the initial five-year exploration period will include de-mining of the area in the first instance, followed by seismic acquisition and interpretation. Based on this seismic analysis, a location for an exploration well will be selected and drilling performed. The capital expenditure will be incurred in proportion to each partner's share in the consortium and given the exploration nature of the block the cash outflow is not expected to be significant.
Tunisia
Progress has been made with securing a drilling rig and well management services for drilling an exploration well in the Bargou Exploration Permit, offshore Tunisia. The contract for the well management services was awarded to AGR Petroleum (ME) Ltd - Dubai. Recently, our partner and operator for the permit, Cooper Energy, has entered into a legally binding Letter of Intent with Grup Servicii Petroliere SA ("GSP") with respect to the rig contract for the jack-up rig "GPS Jupiter" to drill the Hammamet West-3 well, offshore Tunisia. Drilling is scheduled to commence between December 2012 and March 2013 depending on when the rig is released from previous commitments. The drilling of the well will be managed by Cooper Energy.
Dragon Oil is to contribute 75% of the cost to drill the Hammamet West-3 well, according to an agreed well plan scope, up to a cost cap of US$26.6 million (on a 100% basis). If the well cost exceeds US$26.6 million, costs in excess of this amount will be shared among the joint venture partners pro rata to their participating interest. The well plan consists of a pilot hole followed by a slanted or horizontal section to intersect the fractures within the Abiod formation thereby increasing the flow potential of the reservoir.
Afghanistan
Dragon Oil has been pre-qualified to participate in a bidding round in the upcoming tender for the Afghan-Tajik oil and gas blocks in Afghanistan. According to the press release issued by the Afghanistan Ministry of Mines, Afghanistan is offering for bidding six blocks in the western portion of the Afghan-Tajik Basin in the country's north for exploration, development and production of oil and gas. The Ministry estimates these blocks to contain several hundred million barrels of oil equivalent. The tender is preliminarily scheduled to take place in October 2012. The tender process is expected to be completed with the award of contracts to the winning bidders in early 2013.
MATERIAL EVENTS
Board and Management Appointments
Mr Thor Haugnaess was appointed to the Board of Directors on 20 February 2012 as an additional Independent Non-executive Director. Mr Haugnaess has been working in the upstream oil and gas industry for over 25 years, predominantly within the oilfield services sector with the Schlumberger group of companies in a variety of management roles.
Mr Ali Al Hauwaj was appointed Exploration Manager to head Dragon Oil's exploration team and develop the Group's exploration expertise in line with the Group's strategy. Prior to joining Dragon Oil, Mr Al Hauwaj worked for Saudi Aramco for over 30 years and for the last seven years as Manager of the Exploration Department.
Share Buyback Programme
On 6 June 2012, Dragon Oil commenced a US$200 million share buyback programme to purchase up to a maximum of 5% of the issued share capital of the Company (the "share buyback programme"). The Board of Directors of Dragon Oil recommended the share buyback programme in recognition of the Group's strong financial position and significant cash generating abilities. A share buyback programme offers an efficient route to return some of the cash resources to shareholders and will not impact upon the Group's ability to grow production organically to reach its stated production targets and to pursue its diversification strategy by acquiring new assets outside of Turkmenistan.
The share buyback programme will run until the requisite number of shares has been acquired or, in any event, no later than 31 December 2012. As of 10 August 2012, Dragon Oil has spent US$139.3 million having acquired 15.7 million shares, at a weighted average price of GBP 5.61 per share.
Interim dividend
The Board is pleased to announce the interim dividend of 15 US cents per share. The final dividend in respect of 2012 will be announced at the time of publication of the 2012 full-year results in February 2013. The interim dividend is not subject to shareholder approval.
The following is the dividend timetable for the shareholders' information:
14 August 2012: Declaration of interim dividend
22 August 2012: Ex-Dividend Date
24 August 2012: Record Date
20 September 2012: Dividend Payment Date.
Corporate Social Responsibility
Construction of a polyclinic in the town of Hazar, Turkmenistan, has commenced. The design envisages building a high quality facility, which is expected to cost US$5 million and will significantly improve the healthcare services offered to our employees, their families and local citizens from Hazar and neighbouring towns. The polyclinic is expected to be completed in 1Q 2013.
2012 Principal risks and uncertainties
In accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, a description of the principal risks and uncertainties facing the Group in the six months to 31 December 2012 is set out below:
§ Oil prices
The Group's business is the production of hydrocarbons from the Cheleken Contract Area in the Caspian Sea, Turkmenistan. The financial performance of the Group and its ability to fund development plans may, therefore, be negatively affected by adverse movements in the price of oil. The Group actively monitors its exposure to oil prices and retains flexibility in sizing its development programme.
§ Export routes
Opportunities exist to sell crude oil from the Caspian Sea region to international markets via Azerbaijan, Russia and Iran. The Group currently exports all of its crude oil via Azerbaijan, following the expiry of the swap agreement with Iran. The success of this marketing arrangement will continue to be evaluated over the longer term. At the same time, we are also evaluating alternative routes.
§ Other
Other medium to long-term principal risks and uncertainties facing the Group are as disclosed in the 2011 Annual Report, available on Dragon Oil's website at www.dragonoil.com. These include, among other risks and uncertainties, the following: risk related to having a sole producing asset; country risk; ability to attract, retain and motivate highly skilled and qualified personnel; availability of drilling rigs; quality of contractors to undertake projects; risks related to Health, Safety and Environment hazards; asset integrity regarding pre-PSA infrastructure; uncertainty of estimates of oil and gas reserves and future net revenues; risks related to economics under the PSA; risks related to the gas development project; security of cash balances; risks related to approval processes, licences and visas; impact from sanctions against Iran; adequacy of internal controls.
FINANCIAL OVERVIEW
|
US$ million (unless stated) |
1H 2012 |
1H 2011 |
Change |
|
Revenue |
588.4 |
527.4 |
+12% |
|
Cost of Sales |
169.3 |
109.7 |
-54% |
|
Operating profit |
404.2 |
407.3 |
-1% |
|
Profit for the period |
308.9 |
309.4 |
-0.2% |
|
Net cash generated from operating activities |
483.7 |
413.7 |
+17% |
|
Earnings per share, basic (US cents) |
60.47 |
59.98 |
+1% |
|
Earnings per share, diluted (US cents) |
60.34 |
59.80 |
+1% |
|
Interim dividend per share (US cents) |
15.00 |
9.00 |
+67% |
|
Total equity |
2,791.5 |
2,332.2 |
+20% |
|
|
|
|
|
Income Statement
Revenue
In 1H 2012, on a working interest basis the Group produced approximately 11.7 million barrels of crude oil as compared to 10.5 million barrels produced in the comparative period in 2011.
In the first half of 2012, the Group's revenue increased by 12% to US$588.4 million (1H 2011: US$527.4 million). Of this increase, 94% was attributed to a higher volume of crude oil sold, with the balance due to higher realised sales price.
Operating profit
Gross profit is measured on an entitlement basis. The entitlement production for 1H 2012 was approximately 49% of the gross production compared to approximately 52% for the comparable period in 2011. Entitlement barrels are dependent, amongst other factors, on operating and development expenditure in the period and realised crude oil prices. Lower proportion of entitlement barrels in 1H 2012 arise from the operation of the fiscal terms of the PSA and are marginally lower due primarily to higher realised crude oil prices offset by higher development expenditure. The PSA includes provisions such that parties to the agreement may not lift their respective crude oil entitlements in full, and as such, underlifts or overlifts of crude oil may occur at period-ends.
At the end of 1H 2012, the Group was in an overlift position of approximately 0.2 million (31 Dec 2011: underlift position of approximately 0.05 million) barrels of crude oil measured at market value less cost to sell.
The Group generated an operating profit of US$404.2 million in 1H 2012 (1H 2011: US$407.3 million), which was lower by 1% over the comparable period.
The decrease in operating profit of US$3.1m was primarily on account of higher administrative expenses. The cost of sales increased by US$59.6 million to US$169.3 million (1H 2011: US$109.7 million). Cost of sales includes operating and production costs and depletion charges. The depletion charge of US$105.7 million (1H 2011: US$87.6 million) was higher by 21% than the charge in the corresponding period in 2011 due to an upward revision in the estimated long-term oil price and increased entitlement barrels during the period. The increase in the operating and production costs over the comparable period is attributed to higher field costs and change in the lifting position.
Administrative expenses (net of other income) at US$15 million (1H 2011: US$10.4 million) were higher by 44%, primarily due to an increase in head office and other corporate costs.
Profit for the period
The profit for the first six months of 2012, at US$308.9 million (1H 2011: US$309.4 million), includes a taxation charge of US$105.4 million (1H 2011: US$106.9 million), and finance income of US$10.2 million (1H 2011: US$9 million). The taxation charge was marginally lower during the period on account of lower profits. The finance income was higher due to the higher cash and cash equivalents and term deposits maintained during the first six months of the year.
During 2008, the effective tax rate applicable to the Group's operations in Turkmenistan was increased to 25% by the Hydrocarbon Resources Law of 2008. The Group has continued to apply this rate in determining its tax liabilities as at 30 June 2012. The Group is in discussions with the authorities in Turkmenistan about the applicability of this rate to periods prior to 2009, but it does not believe that prior periods are affected by the new rate. A provision has been made in respect of the additional tax that could become payable if the increased tax rate were applied to periods prior to 2009 based on the expected value (weighted average probability) approach.
Basic EPS of 60.47 US cents in the first half of this year was 1% higher than the Basic EPS in the same period last year (1H 2011: 59.98 US cents) primarily due to lower number of shares in issue on account of the shares bought back.
Balance Sheet
Net book value of property, plant and equipment increased by US$102.2 million due to capital expenditure of US$207.9 million incurred (1H 2011: US$151.5 million) offset by the depletion and depreciation charge of US$105.7 million (1H 2011: US$87.7 million) during the period. Of the total capital expenditure, approximately US$96 million (1H 2011: US$83 million) was attributable to drilling with the balance spent on infrastructure. The infrastructure spend during the period included construction of the Dzhygalybeg (Zhdanov) A and B platforms and Block 4 gathering station, and structural upgrades of the Dzheitune (Lam) A platform.
Current Assets and Liabilities
Current assets increased by US$155.9 million, primarily due to higher cash and cash equivalents offset by lower trade receivables, as compared to 2011 year-end.
Cash and cash equivalents and term deposits as at 30 June 2012 were US$2,018.3 million (31 December 2011: US$1,805.8 million), including US$351.8 million (31 December 2011: US$279 million) set aside for abandonment and decommissioning activities. At the period end, term deposits that are held for a maximum tenure of six months increased by US$0.2 million to US$1,718.4 million.
Current liabilities increased by US$38.5 million due to an increase of US$102.6 million in trade and other payables partly offset by a reduction of US$64.2 million in current income tax liability.
Cash flows
Net cash generated from operating activities in 1H 2012 of US$483.7million was 17% higher than net cash generated in the same period last year (1H 2011: US$413.7 million), with the increase primarily attributed to a higher volume of crude oil sold during the period and movement in working capital, offset by higher tax paid.
Net cash used in investing activities in 1H 2012 was US$163.6 million (1H 2011: US$350.5 million) comprising of capital expenditure of US$173.6 million and amounts of US$0.2 million placed on term deposits, offset by interest income of US$10.2 million received during the period.
Net cash used in financing activities in 1H 2012 was US$107.8 million (1H 2011: US$71.1 million) primarily due to the payment of dividends of US$56.2 million and an amount of US$52.7 million used for the share buy-back programme.
OUTLOOK
For 2012, the updated target is to put into production up to 16 development wells, including two sidetracks of existing wells. This represents an upgrade from the 13 wells target stated at the beginning of the year. Twelve wells have been competed to-date with up to four more wells to be put into production by the end of the year.
The extra three wells will be drilled and completed by the jack-up rig (one extra well) and by the leased platform-based rig (two extra wells).
As stated in the Trading Statement issued on 24 July 2012, taking into account the current steps to improve production from the field following the choking down of certain wells to control sand production, we revised forecasts for the remainder of the year. As a result, we expect the gross production growth rate for the full year in 2012 to range between 10% and 15%.
We maintain our medium-term guidance over the 2012-15 period of average gross production growth of 10% to 15% per annum, taking our gross field production to the target level of 100,000 bopd in 2015 and maintaining this plateau for a minimum period of five years.
Dr Abdul Jaleel Al Khalifa
Chief Executive Officer
Dragon Oil plc
- end -
Group balance sheet
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
Note |
30 June 2012 |
31 December 2011 |
|
|
|
US$'000 |
US$'000 |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
6 |
1,456,137 |
1,353,978 |
|
Intangible asset |
7 |
1,574 |
- |
|
|
|
------------------------ |
------------------------ |
|
|
|
1,457,711 |
1,353,978 |
|
|
|
------------------------ |
------------------------ |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
|
9,434 |
6,988 |
|
Trade and other receivables |
|
125,459 |
184,581 |
|
Term deposits |
8 |
1,718,449 |
1,718,271 |
|
Cash and cash equivalents |
8 |
299,849 |
87,499 |
|
|
|
------------------------ |
------------------------ |
|
|
|
2,153,191 |
1,997,339 |
|
|
|
------------------------ |
------------------------ |
|
Total assets |
|
3,610,902 |
3,351,317 |
|
|
|
========== |
========== |
|
EQUITY Capital and reserves attributable to equity shareholders |
|
|
|
|
Share capital |
9a |
79,505 |
80,169 |
|
Share premium |
9a |
233,322 |
231,635 |
|
Capital redemption reserve |
9b |
78,588 |
77,825 |
|
Other reserve |
|
6,147 |
5,489 |
|
Retained earnings |
|
2,393,932 |
2,193,427 |
|
|
|
------------------------ |
------------------------ |
|
Total equity |
|
2,791,494 |
2,588,545 |
|
|
|
------------------------ |
------------------------ |
|
LIABILITIES |
|
|
|
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
10 |
983 |
623 |
|
Deferred income tax liabilities |
|
133,637 |
115,815 |
|
|
|
------------------------ |
------------------------ |
|
|
|
134,620 |
116,438 |
|
|
|
------------------------ |
------------------------ |
|
Current liabilities |
|
|
|
|
Trade and other payables |
10 |
505,587 |
402,981 |
|
Current income tax liabilities |
|
179,201 |
243,353 |
|
|
|
------------------------ |
------------------------ |
|
|
|
684,788 |
646,334 |
|
|
|
------------------------ |
------------------------ |
|
Total liabilities |
|
819,408 |
762,772 |
|
|
|
------------------------ |
------------------------ |
|
Total equity and liabilities |
|
3,610,902 |
3,351,317 |
|
|
|
========== |
========== |
Groupincome statement
|
|
|
Unaudited |
Unaudited |
|
|
Note |
6 months ended 30 June 2012 |
6 months ended 30 June 2011 |
|
|
|
US$'000 |
US$'000 |
|
|
|
|
|
|
Revenue |
11 |
588,394 |
527,366 |
|
|
|
|
|
|
Cost of sales |
|
(169,287) |
(109,655) |
|
|
|
------------------- |
------------------- |
|
Gross profit |
|
419,107 |
417,711 |
|
|
|
|
|
|
Administrative expenses |
|
(15,173) |
(10,598) |
|
Other income |
|
220 |
147 |
|
|
|
------------------- |
------------------- |
|
Operating profit |
|
404,154 |
407,260 |
|
|
|
|
|
|
Finance income |
|
10,205 |
8,969 |
|
|
|
------------------- |
------------------- |
|
Profit before income tax |
|
414,359 |
416,229 |
|
|
|
|
|
|
Income tax expense |
15 |
(105,435) |
(106,878) |
|
|
|
------------------- |
------------------- |
|
Profit attributable to equity holders of the Company |
|
308,924 |
309,351 |
|
|
|
======== |
======== |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
US Cents per share |
US Cents per share |
|
Basic |
13 |
60.47c |
59.98c |
|
Diluted |
13 |
60.34c |
59.80c |
|
|
|
======== |
======== |
Group statement of comprehensive income
|
|
|
Unaudited |
Unaudited |
|
|
|
6 months ended 30 June 2012 |
6 months ended 30 June 2011 |
|
|
|
US$'000 |
US$'000 |
|
|
|
|
|
|
Profit attributable to equity holders of the Company |
|
308,924 |
309,351 |
|
|
|
------------------- |
------------------- |
|
Total comprehensive income for the period |
|
308,924 |
309,351 |
|
|
|
======== |
======== |
Group statement of changes in equity (unaudited)
|
|
Share capital |
Share premium |
Capital redemption reserve |
Other reserve |
Retained earnings |
Total |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
For the six months ended 30 June 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2012 |
80,169 |
231,635 |
77,825 |
5,489 |
2,193,427 |
2,588,545 |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
Total comprehensive income for the period |
- |
- |
- |
- |
308,924 |
308,924 |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
Shares issued during the period |
99 |
1,687 |
- |
- |
- |
1,786 |
Employee share option scheme: |
|
|
|
|
|
|
-value of services provided |
- |
- |
- |
1,854 |
- |
1,854 |
|
Transfer on exercise of share options |
- |
- |
- |
(1,196) |
1,196 |
- |
|
Dividends (Note 12) |
- |
- |
- |
- |
(56,231) |
(56,231) |
|
Shares repurchased and cancelled |
(763) |
- |
763 |
- |
(52,713) |
(52,713) |
|
Employee share purchase plan contribution |
- |
- |
- |
- |
(671) |
(671) |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
|
Total transactions with owners |
(664) |
1,687 |
763 |
658 |
(108,419) |
(105,975) |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
At 30 June 2012 |
79,505 |
233,322 |
78,588 |
6,147 |
2,393,932 |
2,791,494 |
|
|
======= |
======== |
======= |
====== |
========== |
========== |
|
For the six months ended 30 June 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2011 |
80,774 |
230,296 |
77,150 |
4,074 |
1,700,652 |
2,092,946 |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
Total comprehensive income for the period |
- |
- |
- |
- |
309,351 |
309,351 |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
Shares issued during the period |
56 |
1,074 |
- |
- |
- |
1,130 |
Employee share option scheme: |
|
|
|
|
|
|
-value of services provided |
- |
- |
- |
987 |
- |
987 |
|
Transfer on exercise of share options |
- |
- |
- |
(1,046) |
1,046 |
- |
|
Dividends (Note 12) |
- |
- |
- |
- |
(72,242) |
(72,242) |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
|
Total transactions with owners |
56 |
1,074 |
- |
(59) |
(71,196) |
(70,125) |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
At 30 June 2011 |
80,830 |
231,370 |
77,150 |
4,015 |
1,938,807 |
2,332,172 |
|
|
----------------- |
------------------- |
----------------- |
--------------- |
---------------------- |
---------------------- |
|
|
|
|
|
|
|
|
All amounts are attributable to equity holders of the Company.
Group cash flow statement
|
|
Note |
Unaudited 6 months ended 30 June 2012 |
Unaudited 6 months ended 30 June 2011 |
|
|
|
US$'000 |
US$'000 |
|
|
|
|
|
|
Cash generated from operating activities |
14 |
635,499 |
503,105 |
|
|
|
|
|
|
Income tax paid |
|
(151,765) |
(89,379) |
|
|
|
------------------ |
------------------ |
|
Net cash generated from operating activities |
|
483,734 |
413,726 |
|
|
|
------------------ |
------------------ |
|
Cash flows from investing activities |
|
|
|
|
Additions to property, plant and equipment |
|
(172,008) |
(215,883) |
|
Additions to intangible assets |
|
(1,574) |
- |
|
Interest received on bank deposits |
|
10,205 |
8,969 |
|
Amounts placed on term deposits (with original |
|
|
|
|
maturities of over three months) |
|
(178) |
(143,626) |
|
|
|
------------------ |
------------------ |
|
Net cash used in investing activities |
|
(163,555) |
(350,540) |
|
|
|
------------------ |
------------------ |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital |
9a |
1,786 |
1,130 |
|
Dividends paid |
|
(56,231) |
(72,242) |
|
Shares repurchased |
|
(52,713) |
- |
|
Employee share purchase plan contribution |
|
(671) |
- |
|
|
|
------------------ |
------------------ |
|
Net cash used in financing activities |
|
(107,829) |
(71,112) |
|
|
|
------------------ |
------------------ |
|
|
|
|
|
|
Net increase / (decrease) in cash and cash equivalents |
|
212,350 |
(7,926) |
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
|
87,499 |
141,457 |
|
|
|
------------------ |
------------------ |
|
Cash and cash equivalents at the end of the period |
|
299,849 |
133,531 |
|
|
|
======== |
======== |
1 General information
Dragon Oil plc (the "Company") and its subsidiaries (together, "the Group") are engaged in upstream oil and gas exploration, development and production activities primarily in Turkmenistan under a Production Sharing Agreement ("PSA") signed between Dragon Oil (Turkmenistan) Limited and The State Agency for Management and Use of Hydrocarbon Resources at the President of Turkmenistan ("the Agency"). The production of crude oil is shared between the Group and the Government of Turkmenistan as determined in accordance with the fiscal terms as contained in the PSA. The Group headquarters is based in Dubai, United Arab Emirates.
The Company is a public limited company, incorporated in the Republic of Ireland in September 1971. The address of its registered office is 6th Floor, South Bank House, Barrow Street, Dublin 4, Ireland. The registration number is 35228.
The Company's ordinary shares are listed on the official lists of the Irish and London Stock Exchanges.
This condensed consolidated interim financial information ("interim financial information") was approved for issue by the Board of Directors on 13 August 2012.
This interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Irish Financial Services Regulatory Authority and with International Accounting Standard 34, "Interim financial reporting" ("IAS 34") as adopted by the European Union. The interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union. The interim financial information has been prepared under the historical cost convention except for the measurement at fair value of share options and underlift receivables/overlift payables.
The preparation of the interim financial information includes the use of estimates and assumptions that affect items reported in the Group balance sheet and the Group income statement. Although these estimates are based on management's best knowledge of current circumstances and assumptions about future events and actions, actual results may differ from those estimates.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
3 Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those annual financial statements, except for the adoption of new standards and interpretations as of 1 January 2012, as noted below.
New standards, interpretations and amendments thereof, adopted by the Group
· IAS 12 - Deferred Tax: Recovery of Underlying Assets (Amendment)
This amendment to IAS 12 includes a rebuttable presumption that the carrying amount of investment property measured using the fair value model in IAS 40 will be recovered through sale and, accordingly, that any related deferred tax should be measured on a sale basis. The presumption is rebutted if the investment property is depreciable and it is held within a business model whose objective is to consume substantially all of the economic benefits in the investment property over time, rather than through sale. Specifically, IAS 12 will require that deferred tax arising from a non-depreciable asset measured using the revaluation model in IAS 16 should always reflect the tax consequences of recovering the carrying amount of the underlying asset through sale. Effective implementation date is for annual periods beginning on or after 1 January 2012. This amendment does not have any impact on the Group's financial position or performance as the Group currently does not have any investment property or non-depreciable assets.
3 Accounting policies (continued)
The following amendments to IFRSs did not have any impact on the accounting policies, financial position or performance of the Group:
· IFRS 7 - Disclosures - Transfers of financial assets (Amendment)
The IASB issued an amendment to IFRS 7 that enhances disclosures for financial assets. These disclosures relate to assets transferred (as defined under IAS 39). If the assets transferred are not derecognised entirely in the financial statements, an entity has to disclose information that enables users of financial statements to understand the relationship between those assets which are not derecognised and their associated liabilities. If those assets are derecognised entirely, but the entity retains a continuing involvement, disclosures have to be provided that enable users of financial statements to evaluate the nature of, and risks associated with, the entity's continuing involvement in those derecognised assets. Effective implementation date is for annual periods beginning on or after 1 July 2011 with no comparative requirements.
· IFRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendment)
When an entity's date of transition to IFRS is on or after the functional currency normalisation date, the entity may elect to measure all assets and liabilities held before the functional currency normalisation date, at fair value on the date of transition to IFRS. This fair value may be used as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. However, this exemption may only be applied to assets and liabilities that were subject to severe hyperinflation. Effective implementation date is for annual periods beginning on or after 1 July 2011 with early adoption permitted.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
4 Segment information
The Group is managed as a single business unit and the financial performance is reported in the internal reporting provided to the Chief Operating Decision-maker ("CODM"). The Board of Directors ("BOD"), which is responsible for allocating resources and assessing performance of the operating segment, has been identified as the CODM that makes strategic decisions.
The Group's development and production assets are located in Turkmenistan in the Caspian region.
The exploration and evaluation assets represent the Group's interest in certain exploration blocks in Tunisia. Presently, it does not constitute a reportable segment under IFRS 8.
The financial information reviewed by the CODM is based on the IFRS financial information for the Group.
5 Critical accounting judgements and estimates
The preparation of the interim financial information in conformity with IAS 34 requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as well as contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during a reporting period. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The critical accounting judgements and estimates that could result in material adjustments to the income statement and the carrying amounts of assets and liabilities are discussed below:
Carrying value of development and production assets
In arriving at the carrying value of the Group's development and production assets, significant assumptions in respect of the depletion charge have been made. These significant assumptions include estimates of oil and gas reserves, future oil and gas prices, finalisation of the gas sales agreement and future development costs including the cost of drilling, infrastructure facilities and other capital and operating costs.
The Group revised its estimated long-term view of oil prices from US$75 per barrel to US$80 per barrel from 1 January 2012. The effect of an upward revision in the estimated long-term oil price is to lower the level of reserves attributable to the Group and to increase the depletion charge per barrel.
The Group's estimated long-term view of netback prices for gas is US$3.5 per Mscf, based on the current outlook.
· If the estimate of the long-term oil price had been US$20 per barrel higher at US$100 and the netback price of gas had been US$1 per Mscf higher at US$4.50 from 1 January 2012, the reserves attributable to the Group would decrease, with a consequent increase in the depletion charge of US$5.5 million for the six months period ended 30 June 2012.
· If the estimate of the long-term oil price had been US$20 per barrel lower at US$60 and the netback price of gas had been US$1 per Mscf lower at US$2.50 from 1 January 2012, reserves attributable to the Group would increase, with a consequent decrease in the depletion charge of US$9.9 million for the six months period ended 30 June 2012.
If the gas sales were delayed to 2016, the depletion charge would increase by US$2.5 million.
The depletion computation assumes the continued development of the field to extract the assessed oil and gas reserves and the required underlying capital expenditure to achieve the same. For this purpose, it also assumes that the PSA, which is valid up to 2025, will be extended on similar terms up to 2035 under an exclusive right to negotiate for an extension period of not less than ten years, provided for in the PSA.
6 Property, plant and equipment
During the six months period ended 30 June 2012, the Group acquired development and production assets with a cost of US$207.9 million (31 December 2011: US$351 million). The depletion and depreciation charge was US$105.7 million (31 December 2011: US$205.4 million).
7 Intangible assets
The intangible assets of US$1.6 million (31 December 2011: nil) comprises exploration and evaluation assets relating to the Group's interest in certain exploration blocks in Tunisia.
8 Cash and bank balances
Cash and cash equivalents include term deposits of US$150.7 million (31 December 2011: US$45.1 million), representing interest bearing deposits with original maturities of less than three months.
Cash and bank balances include an amount of US$351.8 million (31 December 2011: US$279 million) held on deposit for abandonment and decommissioning activities. The related liability is shown under trade and other payables (Note 10).
9a Share capital and premium
|
|
Number of |
Ordinary |
Share |
|
|
|
shares |
shares |
premium |
Total |
|
|
('000) |
US$'000 |
US$'000 |
US$'000 |
|
|
|
|
|
|
|
At 1 January 2011 |
515,628 |
80,774 |
230,296 |
311,070 |
|
Shares issued during the year in respect of share options vested |
390 |
56 |
1,074 |
1,130 |
|
|
------------------ |
---------------- |
------------------ |
------------------ |
|
At 30 June 2011 |
516,018 |
80,830 |
231,370 |
312,200 |
|
|
======== |
======= |
======== |
======== |
|
At 1 January 2012 |
511,118 |
80,169 |
231,635 |
311,804 |
|
Shares issued during the period in respect of share options vested |
762 |
99 |
1,687 |
1,786 |
|
Shares repurchased and cancelled |
(6,153) |
(763) |
- |
(763) |
|
|
------------------ |
---------------- |
------------------ |
------------------ |
|
At 30 June 2012 |
505,727 |
79,505 |
233,322 |
312,827 |
|
|
======== |
======= |
======== |
======== |
|
|
Unaudited 30 June 2012 |
31 December 2011 |
|
|
US$'000 |
US$'000 |
|
|
|
|
|
Trade payables |
41,877 |
47,640 |
|
Accruals |
79,601 |
46,448 |
|
Crude oil overlift payable |
14,737 |
- |
|
Abandonment and decommissioning liability |
369,835 |
308,806 |
|
Other creditors |
520 |
710 |
|
|
------------------- |
------------------- |
|
|
506,570 |
403,604 |
|
Less: Non-current portion |
983 |
623 |
|
|
------------------- |
------------------- |
|
|
505,587 |
402,981 |
|
|
======== |
======== |
Trade payables and accruals include amounts of US$36.4 million (31 December 2011: US$45.1 million) and US$69.6 million (31 December 2011: US$25 million) respectively, relating to additions to property, plant and equipment - development and production assets.
The abandonment and decommissioning liability represents amounts relating to the sale of crude oil set aside to cover abandonment and decommissioning liabilities under the terms of the PSA.
11 Revenue
Revenue of US$588.4 million (1H 2011: US$527.4 million) comprises an amount of US$592.8 million (1H 2011: US$493.8 million) arising from the sale of crude oil through Azerbaijan, US$0.05 million (1H 2011: US$0.2 million) arising from other sales and an adjustment of the 2011 year end underlift position of US$4.4million (1H 2011: underlift position of US$33.4 million).
Revenue from the sales of crude oil was from one customer (1H 2011: one customer).
12 Dividends paid and proposed
|
|
Unaudited 6 months ended 30 June 2012 |
Unaudited 6 months ended 30 June 2011 |
|
|
US$'000 |
US$'000 |
|
Dividends on ordinary shares declared and paid during the six month period:
|
|
|
|
Final dividend: US cents 11 per share (2010: US cents14 per share) |
56,231 |
72,242 |
|
|
---------------- |
------------------ |
|
|
56,231 |
72,242 |
|
|
======= |
======== |
|
Interim dividends on ordinary shares approved subsequent to the period-end (not recognised as a liability as at 30 June): |
|
|
|
Interim dividend US cents 15 per share (Interim 2011: US cents 9 per share) |
75,859 |
46,418 |
|
|
======= |
======== |
|
The 2012 proposed interim dividend was approved on 13 August 2012 |
|
|
13 Earnings per share
The calculation of basic earnings per ordinary share is based on the weighted average number of 510,881,685 ordinary shares in issue during the six months to 30 June 2012 (1H 2011: 515,751,755 ordinary shares) and on the profit for the period of US$309 million (1H 2011: US$309 million).
The calculation of diluted earnings per ordinary share is based on the number of 512,004,021 ordinary shares in issue during the six months to 30 June 2012 (1H 2011: 517,349,283 ordinary shares) adjusted to assume conversion of potential dilutive options over ordinary shares.
14 Cash generated from operating activities
|
|
|
Unaudited 6 months ended 30 June 2012 |
Unaudited 6 months ended 30 June 2011 |
|
|
|
US$'000 |
US$'000 |
|
|
|
|
|
|
Profit before income tax |
|
414,359 |
416,229 |
|
Adjustments for: |
|
|
|
|
- Depletion and depreciation |
|
105,716 |
87,663 |
|
- Crude oil underlifts |
|
4,445 |
(33,422) |
|
- Crude oil overlifts |
|
14,737 |
(12,680) |
|
- Employee share option schemes - value of services provided |
|
1,854 |
987 |
|
- Interest on bank deposits |
|
(10,205) |
(8,969) |
|
|
|
------------------- |
------------------ |
|
Operating cash flow before changes in working capital |
|
530,906 |
449,808 |
|
|
|
|
|
|
Changes in working capital: |
|
|
|
|
- Inventories |
|
(2,446) |
(1,397) |
|
- Trade and other receivables |
|
54,677 |
(4,433) |
|
- Trade and other payables |
|
52,362 |
59,127 |
|
|
|
------------------- |
------------------ |
|
Cash generated from operating activities |
|
635,499 |
503,105 |
|
|
|
======== |
======== |
15 Income tax expense
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for 2012 is 25%.
During the period,the Group recognised a current tax charge of US$87.5 million (1H 2011: US$82.3 million) and a deferred tax charge of US$17.9 million (1H 2011: US$24.6 million).
During 2008, the effective tax rate applicable to the Group's operations in Turkmenistan was increased to 25% by the Hydrocarbon Resources Law of 2008. The Group has continued to apply this rate in determining its tax liabilities as at 30 June 2012. The Group is in discussions with the authorities in Turkmenistan about the applicability of this rate to periods prior to 2009, but it does not believe that prior periods are affected by the new rate. A provision has been made in respect of the additional tax that could become payable if the increased tax rate were applied to periods prior to 2009 based on the expected value (weighted average probability) approach.
16 Related party transactions
a) Transactions and balances
The Company's largest shareholder is Emirates National Oil Company Limited (ENOC) L.L.C ("ENOC"), which owns approximately 52.50% of the Company's ordinary share capital. ENOC is ultimately a wholly owned entity of the Government of Dubai. Two members of the Board, Mr. Ahmad Sharaf and Mr. Mohammed Al Ghurair are nominees of ENOC. All transactions with related parties are on an arm's length basis.
|
|
Unaudited 6 months ended 30 June 2012 |
Unaudited 6 months ended 30 June 2011 |
|
|
US$'000 |
US$'000 |
|
|
|
|
|
Trading transactions: |
|
|
|
(i) Sale of goods & services - companies under common control |
291 |
203 |
|
|
----------------- |
----------------- |
|
(ii) Purchase of services - companies under common control |
479 |
657 |
|
|
----------------- |
----------------- |
|
Other transactions: |
|
|
|
(i) Finance income - companies under common control |
3,976 |
4,768 |
|
|
----------------- |
----------------- |
|
|
Unaudited 30 June 2012 |
31 December 2011 |
|
|
US$'000 |
US$'000 |
|
|
|
|
|
Period end balances: |
|
|
|
(i) Receivables - companies under common control |
62 |
61 |
|
|
----------------- |
----------------- |
|
(ii) Term deposits - companies under common control |
|
|
|
a) Term deposits |
282,066 |
651,102 |
|
b) A&D funds |
351,761 |
278,957 |
|
|
----------------- |
----------------- |
|
(iii) Cash and cash equivalents - companies under common control |
7,906 |
49,717 |
|
|
----------------- |
----------------- |
|
(iv) Payables - companies under common control |
6 |
379 |
|
|
----------------- |
----------------- |
b) Key management compensation
|
|
Unaudited 6 months ended 30 June 2012 |
Unaudited 6 months ended 30 June 2011 |
|
|
US$'000 |
US$'000 |
|
|
|
|
|
Non-executive directors' fees |
434 |
392 |
|
Salaries and short-term benefits |
1,692 |
1,363 |
|
|
-------------- |
-------------- |
|
Short term benefits |
2,126 |
1,755 |
|
End of service benefits |
155 |
69 |
|
Share-based payments |
592 |
371 |
|
|
-------------- |
-------------- |
|
|
2,873 |
2,195 |
|
|
====== |
====== |
17 Commitments and contingencies
a) Capital commitments
Committed future expenditure for property, plant and equipment for which contracts were placed at 30 June 2012 amounted to US$580.2 million (31 December 2011: US$655.3 million).
b) Operational commitments
Irrevocable letters of credit of US$16 million were in issue at 30 June 2012 towards the supply of equipment and services (31 December 2011: US$20.4 million).
c) Taxation
At 30 June 2012, there was a contingent liability with respect to taxation. Details of the contingent liability are outlined in Note 15.
d) Others
The Group's operations in Turkmenistan, conducted through Dragon Oil (Turkmenistan) Ltd., are undertaken in accordance with the terms of the PSA, which became effective on 1 May 2000 between Dragon Oil (Turkmenistan) Ltd. and the Turkmenistan government. The agreement determines the rights and obligations of Dragon Oil (Turkmenistan) Ltd, inter alia, to carry out development activities through work plans and annual budgets. It also grants various tax, currency control and related concessions. However, there are no financial commitments, other than those disclosed above, arising from the terms of the PSA.
However, the Group's operations in Turkmenistan are ultimately subject to the political, socio-economic and legal uncertainties arising from the Turkmenistan political and legal systems.
In accordance with the terms of the farm-in agreement in respect of the Tunisian oil permit, the Group is liable to compensate Cooper Energy for the pro rata share of past costs for approximately US$5.6 million (31 December 2011: nil) contingent upon the successful drilling of the well.
18 Statutory accounts
The interim financial information presented in this report does not represent full statutory accounts. Full statutory accounts for the year ended 31 December 2011, prepared in accordance with IFRS, as adopted by the European Union, and containing an unqualified audit report, have been delivered to the Registrar of Companies.
19 Subsequent event
The Board has declared an interim 2012 dividend of US cents 15 per share for the half year to 30 June 2012 to be paid on 20 September 2012 to shareholders on the register on 24 August 2012 (1H2011: US cents 9 per share). No liability has been recognised as at 30 June 2012.
As of 10 August 2012, Dragon Oil has spent US$139.3 million having acquired 15.7 million shares, at a weighted average price of GBP 5.61 per share.
Statement of directors' responsibilities
We, the Board of Directors, confirm our responsibility for the half year report and that to the best of our knowledge:
(a) the interim financial information comprising the Group balance sheet, the Group income statement, the Group statement of comprehensive income, the Group statement of changes in equity, the Group cash flow statement and related notes 1 to 19 have been prepared in accordance with IAS 34 as adopted by the European Union.
(b) the interim management report includes a fair review of the information required by:
(i) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the current financial year and their impact on the interim financial information; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(ii) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
The Directors are confident that the Group will have adequate financial resources to continue in operational existence for the foreseeable future after reviewing the Group's plans for 2012 and future years. We have therefore continued to adopt the going concern basis in preparing the accounts.
The directors of Dragon Oil plc are listed in the Dragon Oil plc Annual Report for the year ended 31 December 2011. A list of current directors is maintained on the Dragon Oil plc website www.dragonoil.com.
The maintenance and integrity of the Dragon Oil plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. Legislation in the Republic of Ireland governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.
On behalf of the Board
Mohammed Al Ghurair
Chairman
Saeed Al Mazrooei
Director
Date: 13 August 2012
INDEPENDENT REVIEW REPORT TO DRAGON OIL PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the Group balance sheet, Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group cash flow statement and the related explanatory notes 1 to 19. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Irish Financial Services Regulatory Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom and Ireland. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of the Irish Financial Services Regulatory Authority.
Ernst & Young
Dublin
Date: 13 August 2012
Supplementary information - Movement in oil, condensate and gas reserves and resources (Not reviewed by auditors)
PROVED AND PROBABLE COMMERCIAL RESERVES AND RESOURCES
|
|
Working interest |
Entitlement |
||||
|
|
Oil and condensate mmbbl |
Gas bscf |
Total Petroleum mmboe |
Oil and condensate mmbbl |
Gas bscf |
Total Petroleum mmboe |
|
Commercial reserves - Turkmenistan |
|
|
|
|
|
|
|
As at 1 January 2012 |
658 |
1,496 |
907 |
314 |
593 |
413 |
|
Revisions |
- |
- |
- |
(9) |
- |
(9) |
|
Gas reserves |
- |
- |
- |
- |
(4) |
(1) |
|
Production |
(12) |
- |
(12) |
(6) |
- |
(6) |
|
As at 30 June 2012 |
646 |
1,496 |
895 |
299 |
589 |
397 |
|
|
|
|
|
|
|
|
|
Contingent resources- Turkmenistan |
|
|
|
|
|
|
|
As at 1 January and 30 June 2012 |
88 |
1,400 |
321 |
- |
- |
- |
Notes:
1. Commercial reserves are estimated quantities of proven and probable oil and gas reserves that available data demonstrates, with a specified degree of certainty, to be recoverable in future from known reservoirs that are considered commercially producible. The working interest of the proved and probable commercial reserves and contingent resources are based on a reserves report produced by an independent engineer. The Group's entitlement to the proved and probable commercial reserves are derived based on the terms of the PSA and certain assumptions made by the management in respect of estimates of oil and gas reserves, future oil and gas prices and future development costs.
2. Revisions are attributed to the change in cost estimates and long-term price assumptions in accordance with the fiscal terms of the PSA.
3. Contingent resources relate to resources in respect of which development plans are in the course of preparation or further evaluation is under way with a view to development within a foreseeable future.
