23rd Apr 2008 07:00
Dragon Oil PLC23 April 2008 FOR IMMEDIATE RELEASE 23rd April 2008 Dragon Oil plc ("Dragon Oil" or the "Company") Interim Management Statement Dragon Oil plc, an international oil and gas exploration and production company,today issued its first Interim Management Statement as required in accordancewith the EU Transparency Directive for the period from 1st January 2008 to date.This statement is solely for the purpose of providing information to the marketand it should not be relied upon for any other purpose. Key Highlights • Average daily production for the 3-month period up to 31 March 2008 reached 37,193 barrels of oil per day ("bopd") as compared with 26,945 bopd in Q1 2007 • Development wells Dzheitune (Lam) A22/124 and A/125B were completed producing at combined flow rates of 2,414 bopd and 4,082 bopd respectively • Total capital expenditure amounted to US$61m of which US$21m was spent on infrastructure development • Cash balance at the end of Q1 2008 was US$548m with no debt Hussain Sultan, Chairman & CEO, commented: "Dragon Oil has continued to perform well, increasing production by 38% in thefirst quarter as compared to Q1 2007. This growth was achieved despite adifficult start to the year due to the unusually cold weather experienced in theCaspian Sea region. I would like to commend our employees for demonstratingproactive and resourceful thinking while managing these unforeseen extremeweather conditions and the resulting operational impact. I am also proud toannounce that we have completed 365 days without a single Lost Time Incidentwhich is a significant achievement considering the extremely challengingenvironment within which our staff operate. Going forward, we are aiming toaccelerate our infrastructure investment programme with a number of majorcontracts in the tendering stage." Material Events and Transactions Production Gross field production for the first quarter ending 31 March 2008 was 3.3million barrels of oil (Q1 2007: 2.4 million barrels). The daily averageproduction on a working interest basis was 37,193 bopd (Q1 2007: 26,945 bopd)and on an entitlement basis was 20,749 bopd (Q1 2007: 19,961 bopd). Dragon Oil has faced a number of operational challenges since the beginning ofthe year, primarily due to the severe winter storms experienced in the CaspianSea. In particular, this unprecedented cold weather slowed production from theDzheitune (Lam) 28/120 well. As a result, the Company has taken the opportunityto shut in the well and install coflex pipeline. It is anticipated that fullproduction levels from this well will resume during May 2008. Overall FieldProduction levels have increased as a result of the successful completion of thetwo development wells during the relevant period. Marketing Dragon Oil sold 1.4 million barrels of oil in Q1 2008 (Q1 2007: 1.5 millionbarrels). Sales through the swap agreement with Naftiran Company Limited werelower due to logistical constraints in the south of Iran that resulted in theaccumulation of higher inventory amounting to 0.8 million barrels (year-end2007: 0.2 million barrels). The management team is actively working on reducingthe inventory levels during Q2 2008. The average realized price in Q1 2008 wasUS$92.70 per barrel (Q1 2007: US$55.70 per barrel). Drilling Two development wells were completed in the year to date. The CIS-1 rigcompleted the Dzheitune (Lam) 22/124 well with initial combined production fromthe two strings of 2,414 bopd. Dzheitune (Lam) A/125B was completed using theIran Khazar rig and initial testing of the well yielded a combined flow rate of4,082 bopd from the short and long strings. No workovers have been conducted during the relevant period. However, candidatewells are currently being identified for wireline intervention and this activityis expected to commence later in the year. Dragon Oil is in the process of evaluating tenders for up to four jack-up rigsand the tender process is expected to be finalised in the second quarter of theyear. These rigs will be deployed on long-term leases subject to approval fromthe Government of Turkmenistan. Gas monetisation Commercialisation of the gas resources in the Cheleken Contract Area remains akey priority for Dragon Oil. A proposal has been submitted to the Government ofTurkmenistan and the Company is in the process of conducting a detailedfeasibility study for review and approval by the Government. Subject to finalapproval, Dragon Oil plans to proceed with Front End Engineering Design (FEED)and tendering of the onshore gas processing infrastructure. The tender for thenew 30" trunkline, which will bring both oil and gas onshore, is already inprogress. Yemen Although results from the exploration drilling programme in our non-operatedacreage in Yemen were not commercial, we are pleased that the drilling programmewas executed in a timely manner and within the set budget. We are awaitingfinal government and partner approvals on our participation in these Blocks asper the PSA. Financial position Dragon Oil remains in a strong financial position with no significant changes tothe balance sheet or equity structure since the publication of results for theyear ended 31 December 2007. Cash balance as at 31 March 2008 was US$548m withno debt. Total capital expenditure up to the end of March 2008 amounted to US$61m ofwhich US$21m was spent on infrastructure development and upgrade. This includedthe initial works for the new Dzheitune (Lam) B wellhead and productionplatform, as well as work on a number of infield lines, which are in the processof being installed to maximise the production potential from the Dzheitune (Lam)field and reduce export bottlenecks. Capital expenditure is expected to beweighted towards the second half of the year, subject to Government approvals onall key projects. Current Operations and Outlook The CIS-1 rig is currently completing the Dzheitune (Lam) 22/126 well which isexpected to be on production in May 2008. The Iran Khazar rig is now drillingthe Dzheitune (Lam) A/127 well which is expected to be on production during June2008. In addition, Rig 40 is expected to be drilling on the L13 platform by theend of 2008. Dragon Oil's strategic priorities continue to be driving the drilling programme,investing heavily in infrastructure, progressing the gas commercialisationproject and seeking prospective acquisitions to diversify its asset portfoliofurther. Background Note Dragon Oil Plc is an innovative international oil and gas development andproduction company, quoted on the London and Irish Stock exchanges (Tickersymbol: DGO). Its principal producing asset is in the Cheleken Contract Area, inthe eastern section of the Caspian Sea, offshore Turkmenistan and recentlyacquired interests in Blocks 35, 49 and R2 (10%) in the Republic of Yemen. Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil plc,holds 100% interest in and is the operator of the Production Sharing Agreementfor the Cheleken Contract Area in the Caspian Sea, offshore Turkmenistan.Operational focus is on the re-development of two oil producing fields,Dzheitune (Lam) and Dzhygalybeg (Zhdanov). NB All data on financial, production and sales covers the period from 1 January2007 to 31 March 2008. All other information including details on operations isup-to-date as at the date of this release. www.dragonoil.com For further information please contact: Media enquiries Citigate Dewe Rogerson (+44 20 7638 9571) Martin Jackson George Cazenove Investor and Analyst enquiries Dragon Oil Plc (+971 4 305 3600) Leanne Denman, Investor Relations Officer Disclaimer This statement may contain forward-looking statements concerning the financialcondition and results of operations of Dragon Oil. Forward-looking statementsare statements of future expectations that are based on management's currentexpectations and assumptions and involve known and unknown risks anduncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in these statements. No assurancescan be given as to future results, levels of activity and achievements andactual results, levels of activity and achievements may differ materially fromthose expressed or implied by any forward-looking statements contained in thisreport. Dragon Oil does not undertake any obligation to publicly update orrevise any forward-looking statement as a result of new information, futureevents or other information. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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