21st Apr 2015 07:26
LONDON (Alliance News) - Dragon Oil PLC Tuesday said production rose in the first quarter of 2015, edging the company closer to its 100,000 barrels per day target, but said that although sales significantly, oil prices more than halved.
The oil and gas explorer and producer said average gross production from the Cheleken Contract area in Turkmenistan rose to 88,700 barrels of oil per day in the first quarter of 2015, up 23% from a year earlier, adding that production has increased further in the second quarter.
In March, average gross production amounted to 89,600 barrels of oil per day, rising again in April to over 93,000 barrels per day as the company aims to hit 100,000 barrels of oil per day in 2015.
"We plan to complete 15 to 20 wells a year in 2015 and 2016 given the present and future availability of drilling rigs. We aim to average the gross production at 100,000 barrels of oil per day in 2016 and maintain this level of production for a minimum period of five years," it said.
The increase in production comes after a series of new development wells with strong flow rates were put into production, and Dragon Oil also benefited from increasing its production entitlement. Of the average gross production, 71% was net to Dragon Oil, up from only 47% a year earlier.
Higher entitlement barrels in the first quarter was a result of workings of the fiscal terms of the Production Sharing Agreement and are due primarily to lower realised oil prices and higher development expenditure, it said.
As a result of production and entitlement barrels increasing, sales rose to 4.8 million barrels in the quarter, from 2.7 million barrels a year earlier. Of its total sales, 87% was exported through Azerbaijan with the balance exported through Russia. A year earlier, all of its sales were exported through Azerbaijan.
Although sales substantially increased, the company was hit by the fall in oil prices with the company's average selling price more than halving to USD40 per barrel from over USD92 per barrel a year earlier.
At the end of March, the company reported a cash balance of USD1.92 billion, which excludes funds set aside for abandonment and decommissioning activities.
Dragon Oil spent USD153 million in capital expenditure in the first quarter, with around half spent on development and appraisal drilling and the balance spent on infrastructure and exploration. Capital expenditure was higher than the USD107 million spent a year earlier.
The company expects to invest between USD500 and USD600 million in infrastructure and drilling, excluding the cost of the gas treatment plant in the Cheleken Contract Area in Turkmenistan, as well as around USD50 to USD100 million on its exploration assets in 2015.
Dragon Oil shares were trading flat Tuesday morning at 635.00 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
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