Press Release

28 September 2001

DANA PETROLEUM PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2001


Dana Petroleum plc, the British independent oil and gas exploration and production company, is pleased to report on progress during the first half of 2001.

HIGHLIGHTS

Strong Exploration and Appraisal Performance

Strategic Developments

UK Focused Production

Charles M Smith CBE, Chairman of Dana, commented:

"Dana's strategy of focusing its technical excellence to explore in proven petroleum regions has delivered outstanding results, with 8 oil and gas discoveries from its last 10 wells. Substantial new finance is now in place to enable appraisal of these new fields and ensure that the Company can maximize the future returns from its growing asset base."

 

Enquiries:

 
 
Dana Petroleum plc  
Tom Cross, Chief Executive Tel: 01224 652400
 
College Hill Associates  
Archie Berens Tel: 020 7457 2020

 


CHAIRMAN'S & CHIEF EXECUTIVE'S REVIEW


INTRODUCTION

The first half of 2001 has seen Dana make significant progress in line with its strategy of creating shareholder value through high impact exploration in proven petroleum regions. During this period, the Company has continued to build valuable positions through seismic acquisition, successful exploration and appraisal drilling, and the winning of attractive new licences with very high potential.

In particular, Dana's large, operated position offshore Africa has continued to grow in importance. Mauritania has emerged as an exciting new province following the recent oil and gas discoveries by Woodside Petroleum. Dana plans to acquire 3D seismic over the coming months, with a view to commencing drilling operations in 2002. Preliminary interpretation of the Company's extensive 3D seismic data set offshore Ghana is nearing completion with more than a dozen prospects identified so far. These are being studied in greater detail prior to selecting the optimum drilling locations. In April 2001, Dana was also awarded operatorship and an 80% interest in 3 major new licences covering more than half of offshore Kenya.

In the 2001 exploration and appraisal drilling programme further successes were recorded. Appraisal wells at the Pangkah field in Indonesia led to a more than three-fold increase in the gas reserves and an underlying oil reservoir was also confirmed. Exploration well E18-4 in the Dutch sector of the North Sea yielded a new gas discovery, testing at high flowrates. The Porcupine Basin probe west of Ireland found reservoir as predicted but no hydrocarbons. However, in line with Dana's conservative policy towards higher risk areas, our financial exposure was significantly reduced by negotiating a cost sharing deal with neighbouring partners prior to drilling. Considering the exploration programme overall, Dana's strike rate has been excellent, with 8 oil and gas discoveries from the last 10 wells drilled.

Alongside international exploration, the second element of Dana's strategy is to maximise opportunities for enhanced future revenues from the UK. Hence, during the first half, Dana also trebled its working interest in two key areas of the UK Central North Sea: firstly, in several blocks close to the Kittiwake oil field and secondly in Block 23/16, in both cases prior to planned drilling operations. These areas contain a number of good quality, low risk oil and gas prospects, which could be developed via existing fields.

Whilst Dana is progressing well with its plan to build future production, revenues for this half year came in slightly lower than the same period last year. This was due primarily to a month of production shutdown on the Claymore oil field for planned maintenance and upgrades. This important work has significantly enhanced the offshore facilities and will lead to improved productivity and reserve recovery in the longer term.

In order to unlock the latent value within its licence positions, earlier this month Dana secured increased working capital through a placing and open offer, raising £25.5 million. The money will be used to accelerate seismic and drilling as well as to increase the cash generating capability of Dana by supporting a higher degree of gearing as we seek to build oil and gas production.

RESULTS

Dana's balance sheet has strengthened further during 2001 with total net assets at mid-year rising by 7% to £106.4 million (30 June 2000: £99.8 million). The Dana Group had a cash balance of £11.7 million at 30 June 2001, prior to the successful placing and open offer which raised £25.5 million in September 2001.

Between May and June 2001, the Claymore oil field was shut down for approximately one month to allow for extended maintenance and equipment upgrade work. Although this programme will significantly enhance future field performance, it had the short term effect of reducing Dana's average production for the first half of 2001 by around 10% to 6,085 boepd (1H 2000: 6,740 boepd). Correspondingly, turnover was lower by 6% at £14.2 million (1H 2000: £15.2 million). Operating profit was £4.1 million (1H 2000 £5.4 million) and pre-tax profit was £3.8 million (1H 2000: £5.0 million). Earnings per share were 0.31 pence (1H 2000: 0.45p).

In view of Dana's active exploration and appraisal programme, together with pending field developments in the North Sea and Indonesia, the Board believes it is most important to channel the Company's profits into these value adding activities and therefore do not recommend an interim dividend.

REVIEW OF OPERATIONS

Dana has an ambitious and dynamic exploration programme both as operator, principally in West Africa, and as an active partner in Europe and the Far East. Dana plans to drill offshore Ghana again at the earliest opportunity, and we are maturing our Mauritanian prospects in anticipation of the Company's first well there following the 3D seismic programme which is currently being planned. Work has already begun on evaluating our new interests in Kenya which offer material upside. Given the Company's recent track record of discoveries with four in the North Sea, three offshore Indonesia and one offshore Ghana, there will also be extensive field appraisal and development activities undertaken with the aim of realising value from this exploration success.

Dana continues to advance its discoveries through appraisal towards development and this is expected to build earnings in the medium term. Progress has been characterised not only by seismic and drilling, but also by innovative commercial arrangements designed to expedite the development process.


EUROPE

Ongoing UK production performance from the Claymore oil field and the Victor gas field continues in line with expectations. During the period they averaged together 3,542 boepd net to Dana, despite the Claymore shutdown. In conjunction with the programme of facilities upgrades on Claymore, which included improvements to the drilling rig, the joint venture partners have now approved a programme of infill drilling on the field which is designed to arrest natural decline and improve the overall recovery of oil. A very successful infill well was drilled at the start of 2001, flowing at initial rates of 4,700 bopd, and a further infill well is planned before year end. The field is now on track to extend both its productive life and the total reserves recovered.

In the Central North Sea, a well was drilled to look for a possible eastern extension of the Goosander field, in a location deeper than the existing oil accumulation. Although the likelihood of proving up additional oil reserves was low, it was essential to establish information regarding the underlying water aquifer and the extent of the oil sands in order to select the most appropriate development scheme. As expected, the well demonstrated that the Goosander development is likely to be based around production from the central area encompassing the original oil discovery and the crest of the field, which has yet to be drilled, supported by water injection from the flank. Dana believes that development of the proven Goosander oil reserves, as a sub-sea satellite to Shell's Kittiwake platform, is important for this area of the North Sea, particularly given the numerous undrilled structures in the vicinity. Consequently plans to proceed to development will follow once negotiations with the Kittiwake owners are concluded. In July, Dana also announced a deal to treble its stake in Goosander and other nearby prospects to approximately 37.4% by acquiring Burlington Resources' regional licence interests.

Preparations to drill the Barbara prospect in UK Block 23/16 are now advancing, with drilling scheduled to commence in the fourth quarter of 2001. This well will explore for hydrocarbons around a pronounced salt diapir structure, a play type which has yielded several North Sea discoveries such as the Pierce, Banff and Mungo oil and gas fields.

In the UK's Southern gas basin, development of the Orca and Beta gas fields has also moved closer with the signature in May of a unitisation agreement to allow the efficient joint development of the two fields. A further appraisal well is expected to be drilled in the Orca field in 2002.

In the Dutch Sector of the North Sea, Dana has recorded a further exploration success with well E18-4. Successful flow testing has led to an early appraisal well being planned for this autumn, with a view to proceeding rapidly towards development thereafter. Meanwhile, well A15-4 is assessing the possibility of deeper gas bearing sands below the shallow gas sands encountered in the A15-3 gas discovery, drilled in 1999.

Dana continues to study the Atlantic margin around the Faroe Islands, where its Faroese associate Føroya Kolvetni ('FK') has been awarded two of the most sought after licences. FK and operator Eni Agip have just completed a detailed 3D seismic survey and plan to drill their first well in 2002. FK's maiden drilling location will be chosen following assessment of data from wells being drilled by neighbouring licence holders BP, Statoil and Amerada Hess in 2001 under a data sharing agreement. Dana holds options to acquire a stake of up to 20% in FK.


AFRICA

In Ghana, activity in the first half of 2001 has focused on advanced processing and preliminary interpretation of the high resolution 3D seismic data acquired over Dana's Western Tano contract area, following the WT-1X oil discovery last year. This screening work has confirmed the presence of a number of large structures and detailed analysis of these has now begun.

In Mauritania, interpretation of the large 2D seismic survey acquired over Blocks 1, 7 and 8 is well underway with a number of substantial exploration prospects identified. The acquisition of a more detailed 3D seismic survey, designed to allow refinement of these prospects ahead of drilling, has consequently been approved by partners and should commence later this year.

The petroleum potential of Mauritania was highlighted following the announcement by Woodside Petroleum of a significant discovery with its first well drilled on Block 4. The Chinguetti-1 well was reported to have encountered over 290 feet of gross oil column in Miocene sands with no oil-water contact. Woodside has indicated its interest in Dana's acreage by signing a farm-in deal with Dana and its partner, Hardman Resources, in order to acquire a 35% interest in Block 7 by paying 50% of future costs.

In April 2001, Dana won a major strategic position offshore Kenya. The three Production Sharing Contracts spanning Blocks, L5, L7 and L10, cover the majority of Kenyan offshore acreage with a total area of some 35,000 square kilometres. Dana has an 80% interest in each PSC and has been appointed as operator. A review of the available seismic and well data has demonstrated that all the elements necessary for a world-class petroleum system are present offshore Kenya. Dana will now commence a programme of reprocessing old seismic and acquiring new seismic data with a view to maturing drilling targets ahead of making well commitments, mirroring the successful approach taken in Mauritania.


FAR EAST

In Indonesia, a successful campaign of exploration and appraisal drilling within the Pangkah PSC block was completed in February. This programme started at the end of last year with the discovery of the Sidayu oil field and finished with a three well appraisal drilling programme at the Ujung Pangkah field which confirmed recoverable gas reserves of over 450 billion cubic feet of liquids-rich gas, far exceeding expectations prior to drilling. This programme also revealed the presence of a significant oil accumulation underlying the Ujung Pangkah gas.

The Pangkah PSC partners are planning to submit an application for the joint development of the Sidayu and Ujung Pangkah oil accumulations to the Indonesian authorities. Development would commence following government approval with first oil possible in 2002. A parallel plan for development of the Ujung Pangkah gas accumulation is likely to be submitted once ongoing gas sales negotiations are concluded.

A number of additional exploration targets remain in Dana's Far East acreage. A prospect within the Pangkah area is being matured for drilling in 2002. Offshore Western Australia, the Company continues to evaluate opportunities in Licence WA-226-P.


RUSSIA

The South Vat-Yoganskoye Oil Field, operated by the Dana controlled subsidiary Yoganoil, is benefitting from last year's development drilling programme with Dana's net average production rising to 2,543 bopd, a 6% increase over the same period in 2000.

Discussions have continued with Dana's partners in the Yuganskoil joint venture company regarding the optimal long-term development plan for the Sortymskoye oil field. Final agreement between the participants and government on Production Sharing Contract terms for the Salym group of oil fields is anticipated over the coming months. This would allow the first stage of development of this major complex to proceed.

STRATEGY & OUTLOOK

Dana's focus on carefully selected high impact exploration plays, each with the potential to make a step increase in value, remains central to our strategy. The management team has built a quality portfolio of exploration and pre-development assets, underpinned by robust cash-generating fields, mainly in the UK North Sea.

The Company's material positions, particularly in Africa, are attracting interest from larger oil companies and the timing of any asset exchanges or sales will be key to maximising returns. Our personnel are working hard to achieve the best balance between risk and reward and to seek out tax efficient routes by which upside values can be realised. We believe it is very important to increase production revenues in order to finance the strongest possible exploration drive.

Dana will maintain a very active programme of seismic and related technical work to rapidly advance technical understanding of our exploration interests. We will then seek to achieve partner and government consensus to drill as soon as possible in order to crystallise value from our efforts.

The Board is committed to maximising total returns to shareholders. This will be achieved both through the exploration programme and through trading oil and gas interests for cash or producing assets which can further enhance cashflow and maximise onward growth opportunities.

Further to the excellent question and answer session at this year's AGM, the Directors are reviewing whether a consolidation of Dana's ordinary shares would be beneficial to the Company and its shareholders.

We would like to take this opportunity to thank shareholders for their ongoing support highlighted by the successful placing and open offer completed earlier this month. This achievement will not only finance further exploration and appraisal, but has also improved the Company's balance sheet and capacity to leverage bank debt, thereby ensuring that the maximum potential can be realised from our asset base.

The outlook for the Company is very bright and our management team and shareholders are aligned in their desire to capitalise on the strong positions we have created.

Charles M. Smith, CBE
Chairman		 Thomas P. Cross
Chief Executive

 

 

DANA PETROLEUM PLC

Consolidated Profit and Loss Account

 

Unaudited

Unaudited

Audited

 

Six months

Six months

Year to

 

to 30 June

to 30 June

31 December

 

2001

2000

2000

 

£'000

£'000

£'000

       

Turnover

14,161

15,187

29,865

Cost of sales - continuing operations

(8,735)

(8,748)

(16,245)

- exceptional impairment provision

-

-

(3,114)

 
 

5,426

6,439

10,506

       

Administration expenses

(1,309)

(1,016)

(2,399)

 

Operating profit

4,117

5,423

8,107

       

Share of profit/(loss) of associated undertaking

9

(21)

(7)

Interest receivable

434

558

1,063

Interest payable

(723)

(970)

(1,729)

 

Profit on ordinary activities before taxation

3,837

4,990

7,434

       

Taxation

(691)

(530)

(1,813)

 
 

3,146

4,460

5,621

       

Minority interest

(323)

(431)

(787)

 

Net profit for the period

2,823

4,029

4,834

 

Earnings per share

0.31p

0.45p

0.50p

 

 

DANA PETROLEUM PLC

Consolidated Balance Sheet

 

Unaudited

Unaudited

Audited

 

30 June

30 June

31 December

 

2001

2000

2000

 

£'000

£'000

£'000

       

Fixed assets

     

Oil and gas assets

103,854

93,122

95,555

Investments

14,754

12,393

12,515

 
 

118,608

105,515

108,070

       

Current assets

     

Stock

307

48

475

Debtors

2,017

4,334

2,824

Investments

11

11

12

Cash at bank and in hand

11,738

19,874

21,116

 
 

14,073

24,267

24,427

       

Creditors (amounts falling due within one year)

(4,640)

(7,231)

(7,464)

 

Net current assets

9,433

17,036

16,963

       

Total assets less current liabilities

128,041

122,551

125,033

       

Creditors (amounts falling due after more than one year)

(11,664)

(9,867)

(11,357)

Provision for liabilities and charges

(4,364)

(6,161)

(5,988)

Accruals and deferred income

(5,641)

(6,731)

(6,225)

 
 

106,372

99,792

101,463

 

Capital and reserves

     

Called-up share capital

8,984

8,965

8,984

Share premium

8,554

8,306

8,554

Merger reserve

97,679

97,679

97,679

Profit and loss account

(9,906)

(15,485)

(14,440)

 
 

105,311

99,465

100,777

       

Minority interest in subsidiary undertaking

1,061

327

686

 
 

106,372

99,792

101,463

 

DANA PETROLEUM PLC

Consolidated Cash Flow Statement

 

Unaudited

Unaudited

Audited

 

Six months

Six months

Year to

 

to 30 June

to 30 June

31 December

 

2001

2000

2000

 

£'000

£'000

£'000

       

Net cash inflow from operating activities

1,894

2,279

9,152

 

Returns on investments and servicing of finance

     

Interest received

434

558

1,063

Interest paid

(307)

(205)

(747)

 
 

127

353

316

 

Taxation

(985)

(401)

(1,228)

 

Capital expenditure and financial investment

     

Payment to acquire tangible and intangible assets

(8,893)

(6,758)

(11,970)

Loan advanced to investments

(1,999)

(59)

-

 
 

(10,892)

(6,817)

(11,970)

 

Management of liquid resources

     

Short term deposits

(289)

3,351

7,389

 

Net cash (outflow)/inflow before financing

(10,145)

(1,235)

3,659

       

Financing

     

Issue of ordinary share capital

-

-

267

Repayment of loans

-

(4,125)

(2,094)

New loans

-

-

(1,999)

 

Net cash from financing

-

(4,125)

(3,826)

 

(Decrease) in cash in the period

(10,145)

(5,360)

(167)

 

DANA PETROLEUM PLC

Statement of Total Recognised Gains and Losses

 

Unaudited

Unaudited

Audited

 

30 June

30 June

31 December

 

2001

2000

2000

 

£'000

£'000

£'000

       

Profit for the period

2,823

4,029

4,834

Unrealised foreign exchange differences

1,711

1,845

2,085

 

Total recognised gains for the period

4,534

5,874

6,919

 

Reconciliation of Movements in Shareholders' Funds

 

Unaudited

Unaudited

Audited

 

30 June

30 June

31 December

 

2001

2000

2000

 

£'000

£'000

£'000

       

Total recognised gains for the period

4,534

5,874

6,919

New shares issued

-

-

267

 

Net change in shareholders' funds

4,534

5,874

7,186

       

Opening shareholders' funds

100,777

93,591

93,591

 

Closing shareholders' funds

105,311

99,465

100,777

 

Notes

  1. Basis of preparation

    2. These results do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985.

    The comparative figures for the year ended 31 December 2000 have been derived from the statutory financial statements for that year, which have been delivered to the Registrar of Companies and on which the auditors gave an unqualified audit report.

  2. Earnings per share

    3. The calculation of earnings per share is based on the weighted average of shares - 898,360,233 (first half 2000 - 896,485,233).

  3. Dividend

The Directors do not recommend payment of a dividend.

Independent Review Report to Dana Petroleum plc

Introduction

We have been instructed by the Company to review the financial information for the six months ended 30 June 2001 which comprises the Profit and Loss Account, Balance Sheet, Cash Flow Statement, Statement of Total Recognised Gains and Losses, Reconciliation of Movements in Shareholders' Funds and the related notes (i) to (iii). We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

Directors' responsibilities

The Interim Report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceeding annual accounts except where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2001.

Ernst & Young LLP

London

28 September 2001