21st Sep 2006 07:01
Dragon Oil PLC21 September 2006 DRAGON OIL PLC ("Dragon") ("Dragon" or the "Company") 2006 INTERIM RESULTS Dragon, an international oil and gas exploration and production company, todayannounced its interim results for the period ended 30 June 2006. Dragon'sprincipal producing assets are in the Cheleken Contract Area, in the easternsection of the Caspian Sea, offshore Turkmenistan. SUMMARY RESULTS 1H 2006 1H 2005Turnover US$143.6 million US$112.8 millionOperating profit US$95.3 million US$77.6 millionProfit after tax US$80.8 million US$49.6 millionNet cash generated from operating activities US$99.3 million US$83.6 millionBasic earnings per share 15.83 Cents 11.46 Cents HIGHLIGHTS • 23% increase in operating profit to US$95.3 million (1H 2005: US$77.6million) primarily due to strong oil prices. • Average gross production of 18,576 bopd during the first six monthswas 5% lower than the comparative period in 2005 (1H 2005: 19,533 bopd). Ofthat gross production, 13,444 bopd (1H 2005: 14,044 bopd) was attributable toDragon. Lower production is primarily due to a blockage in a LAM field feederpipeline, which was restored in April 2006. • Net cash generated from operating activities of US$99.3 million was19% higher than 1H 2005. • Two successful development wells were completed from the LAM 10platform using the 'Iran Khazar' rig and four wells were successfully workedover from two other platforms. CURRENT OPERATIONS AND OUTLOOK • As part of Dragon's continuous drilling programme, the 'Iran Khazar'jack-up rig has recently completed well 10/115 and has since been moved toplatform LAM 21, where it is currently jacking up with a view to drilling adevelopment well. • The 'Astra' jack-up rig has been contracted and is currently beingmobilized to drill from the LAM 13 platform. • Following completion of the well from the LAM 13 platform, the 'Astra'is planned to spud an exploration/appraisal well before the year-end, on the LAMWest structure, which was identified by the recently-interpreted 3D seismicsurvey. • Dragon's own platform-based rig is also in the process ofrefurbishment and plans are in hand to procure a second platform-based rig, bothof which are planned to commence drilling in 2007. • The LAM 'A' wellhead and production platform and the new onshore50,000 bopd processing facility are expected to be commissioned by the end ofthe year. Mr Hussain M. Sultan, Chairman, commented: "Dragon has had an operationally challenging first half of 2006, with notabledrilling successes offset by an early and temporary blockage in a feederpipeline. Despite this difficulty, the strong oil price led to a 23% increasein operating profit in the first half of the year. Our drilling programme has continued with the completion of two developmentwells in the first half of the year. The first of three additional developmentwells planned for the second half of 2006, well 10/115, has recently beensuccessfully completed. The 'Iran Khazar' jack-up rig, which drilled andcompleted well 10/115, has moved on to drill a further development well atplatform LAM 21. Upon completion of this well, the Iran Khazar will move tospud the first in a series of wells at the LAM 'A' platform. With the imminentdeployment of the 'Astra' jack-up rig, Dragon will have two jack-up rigsoperating concurrently for the first time. Dragon will also deploy two platform-based rigs in the Cheleken Contract Area in2007. Dragon's own 'Rig 40' will be refurbished and a letter of award has beensigned for the second platform-based rig. Deployment of multiple rigs will go along way to achieving our stated goal of accelerating the field development planand consequently, driving up production. Going forward through the end of 2006 and into 2007, Dragon will continue tofocus on development of its core asset through an ambitious drilling programme.The 3D marine seismic survey completed in 2005 confirmed the existence ofpromising prospects in the LAM West structure, which we are keen to exploit.Dragon is also actively reviewing its options for expansion of its portfolio byinvestment in additional acreage elsewhere. I am very excited by the acceleration of the field development plan in thecoming months and I look forward to the future with confidence." Enquiries:Dragon Oil plc (+971 4 305 3600) Citigate Dewe Rogerson (+44 20 7638 9571) Hussain M. Sultan Analyst enquiries: Nina SoonChairman & Chief Executive Officer Media enquiries: Martin Jackson, George Cazenove CHAIRMAN'S STATEMENT I am pleased to announce that, despite early operational problems which havebeen overcome, Dragon has achieved positive operating results for the half yearended 30 June 2006. Operating Performance Total field production from the Cheleken Contract Area, for 1H 2006 was 3.4million barrels of oil (1H 2005: 3.5 million barrels) and the average grossproduction for the half-year was 18,576 bopd (1H 2005: 19,533 bopd), with 13,444bopd (1H 2005: 14,044 bopd) attributable to Dragon. Lower production in 1H 2006 was primarily due to a blockage in one of theCompany's LAM field feeder pipelines. In January, the pipeline between the LAM22 wellhead platform and the Block 2 riser platform became blocked, resulting ina short term loss in production of about 5,600 bopd. On 11 April, following thesuccessful installation of a new 8-inch pipeline between the LAM 22 and LAM 10platforms, production was restored fully from all five wells on the LAM 22platform. Barrels of oil sold during 1H 2006 amounted to 2.3 million bbls (1H 2005: 2.6million bbls), of which 1.8 million bbls were sold through Neka using theIranian swap agreement and the remainder were sold through Baku. The weightedaverage sales price in 1H 2006 was US$61.1 per barrel (1H 2005: US$43.6 perbarrel). Dragon has not hedged its oil price exposure during 2006; however,management will continue to review this on a regular basis. Two development wells have been drilled and completed from the LAM 10 platformand four wells have been worked over from two other platforms during 1H 2006.Well 10/113 was spudded on 29 December 2005, drilled to a total depth of 3,753metres and tested at a combined rate of 3,453 bopd. The second well, 10/114, wasspudded on 13 March 2006 and put on production with a combined rate of 1,700bopd. The workover programme continued throughout 1H 2006, with wireline operationsand using hydraulic workover units, although the second hydraulic workover unithas since been demobilised because of a change in the Turkmenistan Government'splan for the plug and abandonment programme. Wells 21/53, 60/68, 21/51 and 60/66 were all worked over as part of the programme and were tested at a combinedrate of 1,735 bopd. None of the worked over wells were producing prior toworkover operations but all are now on production. Financial Review • Profit after tax of US$80.8 million in 1H 2006 was 63% higher than the corresponding period (1H 2005: US$49.6 million), mainly reflecting strong oil prices, partly offset by the temporary disruption in production. • Depletion charge for the period was US$27.1 million (1H 2005: US$15.6 million). The increased charge is attributable to an increase in the capital expenditure forecast for the long-term field development and an upward revision (from US$35 per barrel to US$40 per barrel) in Dragon's long-term oil price assumption, effective 1 January 2006. • Net cash generated from operating activities in 1H 2006 of US$99.3 million was 19% higher than for the corresponding period last year. • Basic earnings per share of 15.83 Cents were 38% higher than the corresponding period (1H 2005: 11.46 Cents). • Capital expenditure in the first six months of the current year was US$65.7 million (1H 2005: US$36.3 million) mainly on drilling new wells and construction of the new well-head platform and the new, onshore 50,000 bopd processing facility. Operational Outlook Since the half-year ended 30 June 2006, well 10/115 has been drilled andcompleted. The well was spudded on 7 July 2006 and will be perforated and testedin the coming days. Workover operations on well LAM 86/86 have also beencompleted and tested at an initial rate of 1,287 bopd. Dragon is expecting to increase rig deployment and to complete engineering worksto support the drilling programme: • The 'Iran Khazar' jack-up rig is currently jacking-up to drill from the LAM 21 platform. Following completion of well 21/117, the rig is scheduled to spud the first development well from the new LAM A platform before the end of this year. • Engineering works to support the planned well activities for the 'Astra' jack-up rig have been completed and the 'Astra' is scheduled to commence drilling a development well from the LAM 13 platform shortly, followed by an exploration/appraisal well from the LAM 28 platform on the LAM West structure. • In addition to making use of jack-up rigs, Dragon is looking to use platform-based rigs in its operations: Dragon is refurbishing its own 'Rig 40' and is in the process of contracting for a second platform-based drilling rig which will be deployed to drill a development well on platform LAM 22. Engineering works are in progress to support the planned well activities for the two platform-based drilling rigs. • The workover programme will continue during 2H 2006 and into 2007, with both wireline operations and the remaining hydraulic workover unit. Two of Dragon's major projects, namely installation and construction of the LAM'A' platform and the new onshore processing facility, are scheduled forcompletion before the end of the current year. Construction and commissioningof the processing facility has been delayed because of difficulties in procuringelectricity from the main supply grid. The project is now scheduled to becommissioned in Q4 2006, with a view to processing the anticipated, increasedproduction flow. Following on from the successful completion of the 3D seismic survey in 2005,interpretation and remapping for the LAM field was completed in Q1 2006, andinterpretation and remapping for the ZHDANOV field is ongoing. Hussain M. SultanChairman & Chief Executive OfficerDragon Oil plc 21 September 2006 NOTE This interim financial report may contain forward-looking statements concerningthe financial condition and results of operations of Dragon. Forward-lookingstatements are statements of future expectations that are based on management'scurrent expectations 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 does not undertake any obligation to publicly update or reviseany forward-looking statement as a result of new information, future events orother information. Glossary/definitions:- bopd barrels of oil per day Cents United States cents tcf trillion cubic feet US$ United States dollars Interim consolidated statement of income Unaudited Unaudited Audited 6 months ended 6 months ended Year ended Notes 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 Revenue 5 143,576 112,790 248,813 Cost of salesOperating and production costs (17,821) (18,820) (33,981)Depletion 8 (27,059) (15,584) (43,610) ------------------- ------------------- -------------------Gross profit 98,696 78,386 171,222 Administrative expenses (4,473) (3,193) (9,726)Other income 1,059 2,419 1,371 ------------------- ------------------- -------------------Operating profit 95,282 77,612 162,867 Finance costs (1,003) (7,200) (8,557)Finance income 6,217 1,001 5,005 ------------------- ------------------- -------------------Profit before income tax 100,496 71,413 159,315 Income tax expense 11 (19,732) (21,853) (52,894) ------------------- ------------------- -------------------Profit for the period 80,764 49,560 106,421 ========= ========= ========= Earnings per share Cents Cents Cents per share per share per share Basic 7 15.83 11.46 22.58 Diluted 7 15.76 11.27 22.46 ========= ========= ========= The results for the above mentioned periods have been derived from continuingoperations. No gains or losses were recognised other than those reflected in theabove income statement. The notes to the accounts on pages 10 to 15 form an integral part of thefinancial information. Interim consolidated balance sheet Unaudited Unaudited Audited Notes 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000ASSETSNon-current assetsProperty, plant and equipment - development and production assets 8 437,341 362,576 398,681Property, plant and equipment - others 302 64 50 ------------------- ------------------- -------------------Total non-current assets 437,643 362,640 398,731 ------------------- ------------------- -------------------Current assetsInventories 14,103 11,284 9,731Held for trading financial asset - 2,347 895Trade and other receivables 30,746 9,806 21,909Cash at bank and in hand 9 265,778 188,773 245,019 ------------------- ------------------- -------------------Total current assets 310,627 212,210 277,554 ------------------- ------------------- -------------------Total assets 748,270 574,850 676,285 ======== ======== ========EQUITYCapital and reserves attributable tothe equity shareholders of the CompanyShare capital 12 79,937 79,212 79,937Share premium 12 216,928 216,036 216,928Capital redemption reserve 77,150 77,150 77,150Other reserve 2,714 283 2,509Retained earnings 265,252 127,627 184,488 ------------------- ------------------- -------------------Total equity 641,981 500,308 561,012 ------------------- ------------------- -------------------LIABILITIESNon-current liabilitiesBorrowings 10 - 21,289 -Provision for deferred income tax 11 49,833 21,853 47,628 ------------------- ------------------- -------------------Total non-current liabilities 49,833 43,142 47,628 ------------------- ------------------- -------------------Current liabilitiesTrade and other payables 38,929 20,600 35,518Current income tax liability 11 17,527 - 5,266Borrowings - 10,800 26,861 ------------------- ------------------- -------------------Total current liabilities 56,456 31,400 67,645 ------------------- ------------------- -------------------Total liabilities 106,289 74,542 115,273 ------------------- ------------------- -------------------Total equity and liabilities 748,270 574,850 676,285 ======== ======== ======== The notes to the accounts on pages 10 to 15 form an integral part of thefinancial information. Interim consolidated statement of changes in shareholders' equity (unaudited) Capital Share Share Redemption Other Retained Capital premium Reserve Reserve Earnings Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2005 66,335 72,688 77,150 - 78,067 294,240Shares issued during the period 12,877 153,087 - - - 165,964 Share issue expenses - (9,739) - - - (9,739)Profit for the period - - - - 49,560 49,560Employee share option scheme:- value of services provided - - - 283 - 283 ------- ------- ------- ------- ------- -------At 30 June 2005 79,212 216,036 77,150 283 127,627 500,308 Shares issued during the period 725 929 - - - 1,654Share issue expenses - (37) - - - (37)Profit for the period - - - - 56,861 56,861Employee share option scheme:- value of services provided - - - 2,226 - 2,226 ------- ------- ------- ------- ------- -------At 31 December 2005 79,937 216,928 77,150 2,509 184,488 561,012 Profit for the period - - - - 80,764 80,764Employee share option scheme:- value of services provided - - - 205 - 205 ------- ------- ------- ------- ------- -------At 30 June 2006 79,937 216,928 77,150 2,714 265,252 641,981 ======= ======= ======= ======= ======= ======= The notes to the accounts on pages 10 to 15 form an integral part of thefinancial information. Interim consolidated cash flow statement Unaudited Unaudited 6 months 6 months Audited ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 Profit for the period/year 80,764 49,560 106,421Adjustments for:Tax 19,732 21,853 52,894Depletion and depreciation 27,121 15,640 43,681Employee share options - value of services provided 205 283 2,509 Net gain on recognition of held for trading financial asset - (2,347) (1,251)(Profit)/loss on disposal of held fortrading financial asset (253) - 210Interest expense and loan issue costs 1,073 (1,001) 4,689Interest on bank deposits (6,217) 3,438 (5,005) Changes in working capital:- inventories (4,372) 2,254 3,807- trade and other receivables (8,837) (4,255) (16,358)- trade and other payables (4,116) 1,612 3,040 --------------------- --------------------- ---------------------Cash generated from operating activities 105,100 87,037 194,637Interest paid (539) (3,423) (5,404)Income tax paid (5,266) - - --------------------- --------------------- ---------------------Net cash generated from operating activities 99,295 83,614 189,233 Investing activitiesAdditions to property, plant and equipment - development and production assets (58,301) (44,780) (96,217) Interest received on bank deposits 6,217 1,001 5,005Amounts withdrawn/(placed on deposit) in interest collateral account 6,569 (1,697) (5,756)Proceeds from sale of held for trading financial asset 1,148 (5,646) 146 --------------------- --------------------- ---------------------Net cash used in investing activities (44,367) (51,122) (96,822) --------------------- --------------------- ---------------------Financing activitiesProceeds from issue of share capital - 165,964 167,618Share issue expenses - (9,739) (9,776)Repayment of borrowings (27,600) (40,500) (45,900) --------------------- --------------------- ---------------------Net cash (used in)/provided by financing (27,600) 115,725 111,942activities --------------------- --------------------- ---------------------Net increase in cash and cash equivalents 27,328 148,217 204,353 Cash and cash equivalents at the beginning of the period/year 238,450 34,097 34,097 --------------------- --------------------- ---------------------Cash and cash equivalents at the end of the period/year (Note 9) 265,778 182,314 238,450 ========= ========= ========= The notes to the accounts on pages 10 to 15 form an integral part of thefinancial information. Selected notes to the financial information 1 General information Dragon Oil plc ("the Company") and its subsidiaries ('Dragon" or "the Group")are engaged in upstream oil and gas development and production activitiesprimarily in Turkmenistan. The Company is a public limited company, incorporated in Republic of Ireland inSeptember 1971. The address of its registered office is 6th Floor, South BankHouse, Barrow Street, Dublin 4, Ireland and the Company is managed from Dubai,United Arab Emirates. The registration number is 35228. The Company's ordinary shares are listed on the official lists of the Irish andLondon Stock Exchanges. This financial information was approved for issue by the Board of Directors on21 September 2006. 2 Basis of preparation The Group's financial information for the period ended 30 June 2006 has beenprepared in accordance with the Listing Rules of the Irish Stock Exchange. TheGroup's financial information has been prepared in accordance with theaccounting policies that the Group expects to adopt for the 2006 year-end whichare consistent with the principal accounting policies which were set out in theGroup's 2005 consolidated financial statements. The principal accountingpolicies adopted by the Group for the 2005 year-end, as set out in the Group's2005 consolidated financial statements, were consistent with IFRSs issued by theIASB as adopted by the European Commission (EC) for use in the European Union(EU). The Group has chosen not to adopt IAS 34 'Interim Financial Reporting' inpreparing its 2006 interim accounts since adoption of this standard is notmandatory until the EU Transparency Directive is implemented through the IrishStock Exchange's Listing Rules. The preparation of the financial information includes the use of estimates andassumptions that affect items reported in the consolidated balance sheet andstatement of income and the disclosure of contingent assets and liabilities atthe date of the financial information. Although these estimates are based onmanagement's best knowledge of current circumstances and future events andactions, actual results may differ from those estimates, possibly significantly. The accounting policies have been consistently applied to allperiods presented. 3 Accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 December 2005, as described in theannual financial statements for the year ended 31 December 2005. The following new standards, amendments to standards and interpretations aremandatory for the financial year ending 31 December 2006. IAS 19 (Amendment), Employee Benefits (effective from 1 January 2006). Thisamendment has no material impact on the Group. IAS 39 (Amendment), Cash flow hedge accounting for forecast intra-grouptransactions and the fair value option (effective from 1 January 2006). Thisamendment is not applicable to the Group's operations. IAS 21 (Amendment), Net Investment in a foreign operation (effective from 1January 2006). This amendment is not relevant for the Group. IAS 39 and IFRS 4 (Amendment), Financial guarantee contracts (effective from 1January 2006). This amendment is not expected to affect the Group's financialinformation. IFRIC 4, Determining whether an arrangement contains a lease (effective from 1January 2006). IFRIC 4 is not relevant to the Group's operations. IFRIC 5, Rights to interests arising from decommissioning, restoration andenvironmental rehabilitation funds (effective from 1 January 2006). Thisinterpretation is not relevant for the Group. IFRIC 6, Liabilities arising from participating in a specific market - wasteelectrical and electronic equipment (effective from 1 January 2006). Thisinterpretation is not relevant for the Group. The following new standards, amendments to standards and interpretations havebeen issued but are not effective for 2006 and have not been early adopted: IFRIC 7, Applying the Restatement Approach under IAS 29 (effective from 1 March2006). Management do not expect the interpretation to be relevant for the Group. IFRIC 8, Scope of IFRS 2 (effective from 1 May 2006). Management is currentlyassessing the impact of IFRIC 8 on the Group's operations. IFRIC 9, Reassessment of Embedded Derivatives (effective from 1 June 2006).Management do not expect the interpretation to be relevant for the Group. IFRS 7, Financial instruments: Disclosures (effective from 1 January 2007) andIAS 1, Amendments to capital disclosures (effective from 1 January 2007). TheGroup assessed the impact of IFRS 7 and the amendment to IAS 1 and concludedthat the main additional disclosures will be the sensitivity analysis to marketrisk and capital disclosures required by the amendment of IAS 1. The Group willapply IFRS 7 and the amendment to IAS 1 from annual periods beginning 1 January2007. 4 Critical accounting estimates and assumptions The Group's share of proven and probable oil reserves, at 30 June 2006 is 303million barrels (31 December 2005: 323 million barrels) of total field reservesof 647 million barrels (31 December 2005: 651 million barrels). In arriving atthe Group's share of reserves and, consequently, the depletion charge,significant assumptions have been made in the following areas and any materialchange to the underlying assumptions will have a material effect on the Group'sshare of oil reserves and therefore the annual depletion charge: • management's long term view of the crude oil price for the next 30 years;• timing of the capital expenditure spend;• crude oil production profile for the next 30 years;• cost estimates for capital and non-capital expenditure and production costs;• availability of rigs; and• flow rates. The Group revised its long-term view of oil prices from US$35 per barrel toUS$40 per barrel effective from 1 January 2006. The effect of an upward revisionin the long-term oil price is to lower the number of attributable reserves tothe Group and this consequently increases the depletion charge per barrel. As aresult of the revision, the depletion charge has increased by US$1.4m during thesix months to 30 June 2006.. 5 Revenue Revenue arose from a single class of business which is, crude oil sales andrelated activities in Central Asia. Accordingly, no segmental information hasbeen provided. 6 Dividends The Directors do not recommend the payment of a dividend in respect of the sixmonths ended 30 June 2006 (2005: nil). 7 Earnings per share The calculation of basic earnings per ordinary share is based on the weightedaverage number of 510,087,781 ordinary shares in issue during the six months to30 June 2006 (1H 2005: 432,535,574) and on the profit for the period of US$ 80.8million (1H 2005: US$ 49.6 million). Calculation of diluted earnings per ordinary share is based on the dilutednumber of 512,457,553 ordinary shares in issue during the six months to 30 June2006 (1H 2005: 439,745,015) adjusted to assume conversion of all potentialdilutive options over ordinary shares. 8 Property, plant and equipment - development and production assets Development and production assets US$'000Cost At 1 January 2005 391,833Additions for the period 36,307 -------------------At 30 June 2005 428,140Additions for the period 64,131 -------------------At 31 December 2005 492,271Additions for the period 65,719 -------------------At 30 June 2006 557,990 ------------------- DepletionAt 1 January 2005 49,980Charge for the period 15,584 -------------------At 30 June 2005 65,564Charge for the period 28,026 -------------------At 31 December 2005 93,590Charge for the period 27,059 -------------------At 30 June 2006 120,649 ------------------- Net book amountAt 30 June 2006 437,341 =========At 30 June 2005 362,576 =========At 31 December 2005 398,681 ========= The recoverability of amounts recorded as development and production assets isdependent upon the satisfactory completion of the development of the oilreserves in Turkmenistan. 9 Cash at bank and in hand Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 Cash at bank and in hand 265,778 188,773 245,019Less: Interest collateral account - (6,459) (6,569) ------------------- ------------------- -------------------Cash and cash equivalents 265,778 182,314 238,450 ========= ========= ========= Cash at bank includes term deposits of US$ 210.7 million (2005: US$ 115.7million). Term deposits represent interest bearing deposits with a maturity ofless than three months. The interest collateral account relates to the amountthat Dragon was required to maintain in order to meet the interest obligationsunder the terms of the EBRD facility. 10 Borrowings The EBRD loan facility had a term of 7 years commencing from 29 December 2000.This loan was repaid in full on 6 February 2006 under the terms of the loanfacility. 11 Income tax expense Income tax expense is recognised based on management's best estimate of theweighed average annual income tax rate expected for the full financial year. Theestimated average annual tax rate used for 2006 is 19.6%. This rate isapplicable from 1 January 2006. During the period, Dragon recognised an income tax charge of US$ 17.5 million(1H 2005: nil) and a deferred tax charge of US$ 2.2 million (1H 2005: US$ 21.9million). The deferred tax charge is due to temporary differences between thecharges to the income statement and those computed under the tax laws ofTurkmenistan. 12 Capital Number of Ordinary Share shares shares premium Total (thousands) US$'000 US$'000 US$'000 1 January 2005 404,278 66,335 72,688 139,023Shares issued during the period:- Private placement and open offer 99,565 12,799 154,016 166,815- Share options 6,245 803 - 803Share issue expenses - - (9,776) (9,776) ----------------- --------------- ----------------- ------------------At 30 June 2005 and 1 January 2006 510,088 79,937 216,928 296,865Shares issued during the period - - - - ----------------- --------------- ----------------- ------------------At 30 June 2006 510,088 79,937 216,928 296,865 ======== ======= ======== ======== 13 Related party transactions a) Transactions and balances The Company's largest shareholder is ENOC, which owns approximately 52% of theCompany's ordinary share capital. Two members of the Board, Mr. Hussain Sultan(appointed 26 November 1998) and Mr. Mirza Al Sayegh (appointed 21 January 1999)are nominees of ENOC. Dragon entered into a contract for sale of crude oil with ENOC Singapore PrivateLimited ("ENOC Singapore"), a subsidiary of ENOC, on 1 December 2005. Under theterms of the contract, ENOC Singapore lifted 43,219 metric tons with a value ofUS$ 28.5 million during the period. Included in trade and other payables is a balance of US$ 4.9 million (31December 2005: nil) representing an advance received from ENOC Singapore underthe terms of the crude oil sale contract. During the current period, the Group charged US$ 0.3 million (1 H 2005: US$ 0.1million) to the income statement relating to administrative services from ENOC.Amortisation of arrangement and administrative fees of US$ Nil (1 H 2005: US$1.2million) and interest of US$ Nil (1 H 2005: US$ 1 million) were in respect ofthe ENOC loan facility of US$ 40 million which was fully repaid in May 2005. Dragon Resources (Holdings) Plc, a subsidiary of Dragon, charged ENOC US$ 0.07million (1H 2005: US$ 0.07 million) during the period, for use of the Group'sLondon office. The balance owed by the Group to ENOC for administrative services at 30 June2006 was US$0.2 million (31 December 2005:US$ 0.05 million). b) Key management compensation Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 Executive directors' fees 62 43 73Salary and benefits 588 481 519Share based payments 38 121 2,196 ----------- ------------ ------------- 688 645 2,788 ===== ===== ====== 14 Commitments a) Capital commitments The Group's capital commitments as at 30 June 2006 are as follows: Unaudited Audited 30 June 31 December 2006 2005 US$'000 US$'000 Contracted but not provided 187,516 194,258 ======== ======== b) Operational commitments During January 2005, Dragon issued an irrevocable stand-by letter ofcredit in favour of the jack-up rig contractor in the amount of US$ 2.5 millionas security for payments in connection with rental of the jack-up rig andrelevant equipment and services under the contract. The stand-by letter ofcredit is valid until 14 May 2007. Independent review report to Dragon Oil plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated balance sheetas at 30 June 2006 and the related consolidated statements of income, cash flowsand changes in shareholders' equity for the six months then ended and relatednotes. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Irish Stock Exchange require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 2. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in Ireland. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and, based thereon,assessing whether the disclosed accounting policies have been applied. A reviewexcludes audit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditand therefore provides a lower level of assurance. Accordingly we do not expressan audit opinion on the financial information. This report, including theconclusion, has been prepared for and only for the company for the purpose ofthe Listing Rules of the Irish Stock Exchange and for no other purpose. We donot, in producing this report, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shown or into whose handsit may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopersChartered AccountantsDublin 21 September 2006 Notes: (a) The maintenance and integrity of the Dragon Oil plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. (b) Legislation in Ireland governing the preparation and dissemination offinancial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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