17th Feb 2015 07:00
LONDON (Alliance News) - Dragon Oil PLC Tuesday lifted its 2014 dividend, after saying profit after tax benefited from reversing USD160 million in over-provision for tax in Turkmenistan.
The company reported a drop in pretax profit for the year ended December 31 to USD589.4 million from USD687.7 million in 2013. However, profit after tax rose 27% to USD650.5 million compared to USD512.6 million in 2013.
The rise in profit after tax came after the company entered into an agreement with state authorities in Turkmenistan, from which all of its production comes, to bring the tax rate for the production-sharing contract between Dragon Oil and the government in line with the provisions of the national tax code.
The company is now paying a lower 20% tax rate and has used that rate to determine its tax liabilities. The reduction in the tax rate has resulted in the company reversing USD160 million in respect of an over-provision for prior years up to 2013 that it will no longer need to pay, said Dragon Oil.
The USD160 million benefit was partially offset by USD85 million in social expenses and provisions for impairment on exploration during 2014.
The company also received the tax credit partially due to its commitment to spend USD10 million per year on social projects in Turkmenistan, it said.
As a result of the rise in profit, Dragon Oil increased its full-year dividend to 36.0 cents per share compared to the 33.0 cents paid per share in 2013.
Revenue for the year increased by 4% to USD1.09 billion from USD1.04 billion in 2013, driven by increased production but impacted by the low oil price. The company said it sold 17% more crude oil in 2014, partially offset by an 11% decrease in average crude oil prices in 2014. The company achieved an average oil price of USD81 per barrel, down from USD91 per barrel in 2013.
Dragon Oil reported a 6.8% rise year on year in average gross daily production to 78,790 barrels of oil per day in 2014. Production increased in December, when production averaged 89,680 barrels of oil per day, and the company reported an exit rate at the end of the year of 92,008 barrels of oil per day.
The exit rate is the average production over a specific date toward the end of the year to indicate where production is heading in 2015.
Dragon Oil?s production comes from the Cheleken contract area in Turkmenistan, and the company is targeting a 10% rise in production in 2015, with production expected to hit 100,000 barrels of oil per day by the end of the year and staying at that level for at least five years.
The company spent USD679 million in capital expenditure in 2014 on drilling and infrastructure projects in Turkmenistan and exploration assets in Afghanistan, Iraq, Egypt and the Philippines.
For 2015, Dragon Oil has committed between USD500 million to USD600 million in capital expenditure, excluding the cost of the company?s gas treatment plant in Turkmenistan which will be under construction in 2015 and completed three to four years later. The company is currently evaluating bids for the engineering, procurement, installation and construction contract for the plant.
On top of the capital expenditure budget, Dragon Oil will spend between USD50 million to USD100 million on exploration during 2015.
?The board continues to consider and strike the right balance of capital investment requirements for the Cheleken contract area, investment needs for our exploration assets, return of value to shareholders and opportunities to acquire development assets in addition to prospective exploration blocks on a selective basis, and will exercise prudence in the current low crude oil price environment,? said the company in a statement.
In 2014, Dragon Oil drilled 14 production wells on the Chekelen Contract Area and made successful discoveries in Block 9 in Iraq. In 2015 and 2016, the company plans on drilling between 15 to 20 production wells per year.
The company is currently trying to diversify its portfolio by adding further exploration and production assets in Africa. Dragon Oil currently has exploration blocks in Tunisia, Iraq, Afghanistan, Egypt, the Philippines and Algeria.
?Among our exploration assets, the exploration well in Iraq yielded encouraging oil discoveries in both targeted formations. We also added two exploration blocks in Algeria and looked at bidding to acquire a major exploration and production company towards the end of the year, but subsequently withdrew our interest in the uncertain crude oil price environment,? said Dragon Oil.
The company withdrew a 230.0 pence per share offer for fellow-listed Petroceltic PLC in December in light of the current market conditions.
At the end of the year, Dragon Oil reported cash, cash equivalents and term deposits of USD1.97 billion, in addition to a further USD664 million being held in ?abandonment and decommissioning funds", with no debt.
By Joshua Warner; [email protected]; @JoshAlliance
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