This morning Dragon Oil (LON:DGO) released their prelims for the year 2009. At first, the share price dropping 2.2% before recovering to where they currently stand at 465p, which is up approx 1%. So why the indifference? Yes, profits were down but so were other oillies and this was expected, and cash was up significantly again, while volumes of oil produced increased by 40% - so what was the issue?
Let’s have a look at their accounts in more detail, starting with the figures reported. Turnover was down 12% to $623m, whilst operating profit was down 34% to $314m, with profit for the year being down 30% to $259m. The fact that these figures are down would normally be an issue, but for Dragon and other oil companies, it is to be expected due to the oil price being much lower this year. So what was the difference in the oil price? Well, the 2008 average oil price for Dragon was $91 compared to a 2009 average oil price of $62, which is a 34% drop. So quickly, let’s restate the 2008 results using $62 per barrel rather than $91. Firstly, turnover would be down to $465m from $704m, and this would mean that the operating profit for 2008 would have been $231m. So if we use these figures, how much would Dragons turnover and profits have grown for the year 2009? Turnover would be up 34%, and operating profit would be up 36% (also operating profit would have been better off if the attempted takeover by ENOC hadn’t increased admin expenses for the year – they increased by $10m and it would be a fair bet a large proportion of this increase came from the takeover attempt, as they state).
Already the accounts are looking better, but is this the true picture? Let’s look deeper again and have a look at the level of oil production they are achieving. They state that they increased sales volumes by 40% for the year - from 7.5m to 10.5m. They also state that gross production increased by 9% over the year increasing to 45,000 bopd from 41,000 bopd, and that they achieved their landmark production target of gross 50,000 bopd at the end of the year. They also state that their net entitlement bopd had decreased from 60%…
