Dragon Oil (LON:DGO), the Turkmenistan based oil and gas production and exploration company, recently released their interim management statement. This statement, it has to be said, was a little lacking on the information side, though it did in a way bring to an end a few factors that had been worrying investors recently. To go through the statement:
The key highlights were stated as:
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‘The average daily production rate reached 47,654 barrels of oil per day ("bopd") in Q1 2010, an increase of 9% over the comparable period in 2009 (Q1 2009: 43,787 bopd);
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Three development wells came on stream at combined rates of 2,103 bopd, 2,168 bopd and 1,895 bopd;
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Capital expenditure on infrastructure and drilling was approximately US$67 million for Q1 2010 (Q1 2009: US$81 million);
- Financial position of the Group with a cash balance of US$1,104 million at the end of Q1 2010 and with no debt remains strong.’
The first statement strikes me as a little bit misleading really. As they do not elaborate in the report anywhere, I feel I need to highlight that, although production is up on the comparable period last year, it is actually down a little from the last period. Of course this was expected due to well flows on certain fields reducing, thus it seems to be nothing to worry about, but it would have been better for them to mention this. The next statement seems like very good news for Dragon as it shows that their infrastructure and drilling spend (mentioned in the next statement) has been used well. The final statement is, as expected, a mention of their exceptionally good balance sheet position.
Moving onto the actual details of the report, first they give some information on production:
‘The gross production for Q1 2010 averaged 47,654bopd. This represents a 9% increase over the comparable period in 2009 when the average daily production rate was 43,787bopd. The entitlement production for Q1 2010 was approximately 50% of the gross production compared to 65% for the comparable period in 2009. The entitlement barrels are dependant amongst other factors on operating and development expenditure in the period and the realised crude oil price. In Q1 2010, higher oil prices and lower capital expenditure than in the comparable period in 2009 resulted…
