Operational Update

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29th Jan '10 by AnonymousUser858

17 comments 4147 reads

Detailed Op Update out this morning

full text at

http://miranda.hemscott.com/servlet/HsPublic?context=ir.access&ir_option=RNS_NEWS&item=342066227839593&ir_client_id=2235

Also separate RNS out re award of new 9 licence blocks in Norway

http://miranda.hemscott.com/servlet/HsPublic?context=ir.access&ir_option=RNS_NEWS&item=342066227839418&ir_client_id=2235

will discuss detail after school run

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AnonymousUser858

Premium Member

17 comments

emptyend

29th Jan '10

First attempt at reply lost in browser crash (memo to self - replace IE)......

I notice two things in particular:

1) the block 7 well is confirmed but is targetting gas. This suggests to me that divestment may be on the cards there, as commercialisation of Cormoran/Pelican will be a big company game.

2) the drilling programme is targetting 200-250mn of net reserves (ie a doubling) .....but they still give no detail at all on Anne Marie, despite it clearly being the most significant well in the programme. I keep coming back to the information in my earlier post on this topic! It is possible that the secondary targets are now not going to be drilled, I guess, but I find the continued lack of detail to be fascinating ;-)

AnonymousUser858

29th Jan '10

Very pushed for time this morning so not got time to do the op update justice.

Have just reread it and what stands out to my eye are the following points (in no particular order)

- Fulla declared commercial

- Tax breaks likely to apply to Tornado/Glenlivet

- Rinnes area – renamed Western Isles – reserves now 65 mmboe

- total reserves now 222 mmboe

- Guinea project moving forward
> JOA in place with Hyperdynamics
> Govt approval for farm in
> 2D sesimic in progress
> 3D seismic later this year
>driling 2011

- Norway moving forward
> follows acquisition of Ener (was that last year or one before?)
> explo very cost effective – N govt refunds 85% within 12 months
> additional licences

- Johnston production lower than plan – low gas prices led to shut in – in effect customers decided they didn;t need the gas and suspended their contract –
a) that’s the nature of the business
b) the gas is still there

- E Zeit water cut started and reduced prodn and remaining reserves

- Egypt in fill drilling delayed

- Ettrick compressor problem reduced prodn

- Babbage first production due Q2 2010

- CIECO back-in to Rinnes is being negotiated (wonder if reserves as stated include some reserves that will be reallocated to CIECO?)

- Tax rate for 2009 = 55-59% - How on earth do politicians think that oil cos can be motivated to explore when the co takes all the risk and then has to pay out 55%+ in tax? - situation in Norway vastly better. Govt shares the risk by refunding 85% of explo costs within 12 months.

- Hints at further acquisitions – if Faroe ever make a big discovery I suspect they will be enfolded into Dana’s bosom faster than you can say pickled herring - but also wonder about more aggressive strategy to pick off under capitalised minnows like Aminex.......

Keep making note to self to review valuation and keep failing to get round to it. Tend to think that reserves of 222 mmboe has to underpin enterprise value of approx £1 billion....... without too much difficulty

Dana's problem remains the same as it has been for the past 10 years - it has never had a single major exploration success so it is left with a portfolio comprising lots and lots of rather bitty assets. It really needs a decent sized discovery/group of discoveries like Soco's in VN or Tullow's in Ghana and Uganda. Until then it remains a solid enough co in very safe hands but there appears to be littleprospect of significant growth in value.

That being said, I have to think that the SP is a long long way south of fair value.

AnonymousUser858

29th Jan '10

David Hart of WestHouse Securities commented: "Dana is targeting modest organic production growth this year and as a result we believe the exploration programme will be the value driver in 2010. "We also believe an acquisition/asset swap focused on adding production is not out of the question. Given the significant reserve upside being targeted in the year ahead, we are happy to maintain our buy recommendation."

source: www.iii.co.uk/articles/articledisplay.jsp?section=Markets&article_id=10076211

johnnylite

29th Jan '10

Market cap of £976*1.6 ($/£) / 222m reserves = $7.03 per mboe with minimal debt. Given that some of these reserves are in the North Sea and are in production this appears pretty cheap on very simple valuation metrics. Although agree completely that there are no strategic assets and the value of each individual asset is probably not that high. I personally would like to see a contunuation of the asset trading such that they have a more concentrated portfolio of assets that are actually material in their own right. So sell a few stakes in the small fields and concentrate on the ones where the stakes are meaningful.

I wonder if there will be some asset swaps with Centrica - I haven't seen anything since the acquisition of Venture and I would have thought it should start quite soon.

I will probably look to top up at some point in the near future. Under 1100 seems a good entry point to me.

JL

kyu66

29th Jan '10

In reply to tournesol (post #2)

That being said, I have to think that the SP is a long long way south of fair value.

I'm pretty much in agreement with that.

Tend to think that reserves of 222 mmboe has to underpin enterprise value of approx £1 billion....... without too much difficulty

I know that the asset mix was slighlty different but the VPC take-out price was $9.39/mmboe of P2. DNX currently at $7.35/mmboe P2 so some room for upwards movement in the EV. As an aside the latest MS note was using 196 mmboe as the reserve figure. Will be interesting to see how the brokers adjust their targets after today's update.

emptyend

29th Jan '10

In reply to kyu66 (post #5)

I know that the asset mix was slighlty different but the VPC take-out price was $9.39/mmboe of P2. DNX currently at $7.35/mmboe P2 so some room for upwards movement in the EV. As an aside the latest MS note was using 196 mmboe as the reserve figure.

Good points. Of course, what ISN'T clear in the RNS is exactly how the 222mn is arrived at. In particular, it isn't clear to me how much of that figure relates to Rinnes/Western Isles - but I don't think the point made by Tournesolf here ....

CIECO back-in to Rinnes is being negotiated (wonder if reserves as stated include some reserves that will be reallocated to CIECO?)

....is any concern, because they have always only reported their 65% holding there, as if CIECO had already backed-in.

emptyend

29th Jan '10

Options day today, I notice:

http://www.investegate.co.uk/Article.aspx?id=201001291803434060G

.....funny how often this coincides with a down day. [nb....the price is determined using a single day's close, rather than an average as with some other schemes]. I'd expect the share price to start recovering next week.

AnonymousUser858

25th Feb '10

Exploration Drilling Update out today at

www.investegate.co.uk/Article.aspx?id=201002250700456610H

duster at RAD-3X (edit) in Egypt but lots going on over rest of year

emptyend

25th Feb '10

In reply to tournesol (post #8)

...err...no! Still drilling at Bamboo. I made that mistake at first too!

Also note the Goldman rec on valuation and M&A potential. I believe the latter to be much more likely than the market thinks.

rgds from the beach

djpreston

25th Feb '10

In reply to emptyend (post #9)

RE the GS comment:

0807 GMT [Dow Jones] Goldman Sachs upgrades Dana Petroleum (DNX.LN) to buy from neutral and adds the stock to its Conviction List. Goldman also lifts its target price to 1652p from 1631p. Goldman says the shares' recent underperformance is unjustified, "and see almost 20% upside to the stock's core value at the forward curve which results in a 'free' exploration option." It adds M&A speculation could provide support for the share price at current levels. Shares +1% at 1126p. (PCN)

doverbeach

25th Feb '10

In reply to emptyend (post #9)

rgds from the beach

thanks ee! ... oh, 'from' not 'to' ... :(

emptyend

25th Feb '10

In reply to doverbeach (post #11)

"to" as well, of course...and not with a rapsta' accent ;-)

AnonymousUser858

10th May '10

Duster at Storkollen

www.investegate.co.uk/Article.aspx?id=201005100728216022L

rather feeble attempt at distraction by including this bad news in an "international exploration update" which blethers about other wells currently in progress and imminent.

emptyend

10th May '10

All true of course - but Anne Marie is vastly more important than the Storkollen duster! And an update on Bamboo timing was also warranted.

Nevertheless, the Norwegian explo effort isn't exactly covering itself in glory - so it is perhaps as well that the taxation terms are reasonable. So far, whilst modest discoveries have been made, the bigger prospects have disappointed.

repobear

10th May '10

This sort of 'bull####' RNS is one of the reasons I have only traded in and out of DNX, albeit always very profitably, and not established a core holding. The company isn't interested in communicating properly with the bulk of private investors.

That said I am watching and waiting for the right price to try to trade it again.

I thought the RNS was bizarre. The words 'drilling update' always stimulates my 'cynical' side, The words 'operational update' even more so but 'International exploration update' really does get the cynical juices flowing. The content of the RNS didn't disappoint my initial scepticism. A triumph in how not to do it, IMHO.

repobear

emptyend

10th May '10

Well I have some sympathy with that view - OTOH if you have to convey news of....

a) spud date for Anne Marie (the most important well this year, IMO) and progress on Bamboo (possibly the second most important well this year) and

b) the news of the Storkollen duster

....how would you suggest they do it? What should the "correct" title of an RNS be?

I think there is a tendancy to be unfairly harsh and sceptical of DNX RNSs because of past issues - the fuss over the Faucon well being the prime example in my book. In other words I certainly think that there were very good grounds to criticise in the past (especially when technical discoveries were being bigged-up by more than the market thought reasonable), but I think that this has now spilled over into looking for reasons to rail at DNX's RNSs rather than considering the facts objectively.

I would also observe, having now seen some of these issues from the viewpoint of companies issuing RNSs, that it is extremely difficult to get the balance right for all parties, especially if one is trying to convey news that is part good but part bad. The market tends to want to react in a binary fashion - and sometimes that just isn't appropriate!

Incidentally, Dana is up 5.4% so far this morning - towards the top of the FTSE350 E&P peer group.....so I'd suggest that being overly-cynical isn't always a profit-maximising stance.

rgds

repobear

10th May '10

Hi ee,

Yes indeed these things are never easy, but DNX seem to have form of dressing up 'disappointing news' in various ways and today's RNS is yet another example.

Putting the bad news up front , or in a different RNS, or on a different day would have been preferable in my view. When you've got so many wells on the go as they have disappointments are inevitable. Most investors in DNX will understand that. Why try to dress it up? I don't like spin and my cynical view is that someone took the decision to release three seperate pieces of news together to dilute the disappointment which was slipped in at the end.

Incidentally, Dana is up 5.4% so far this morning - towards the top of the FTSE350 E&P peer group.....so I'd suggest that being overly-cynical isn't always a profit-maximising stance

Maybe that's correct for today, but I have only bought DNX in the big dips and this has served me well to date. Whether the current market uncertainty, some further drilling disappointments and continuing poor communication present further opportunities is more important, in my view, from a trading perspective. One thing is for sure, I am in no hurry to buy much at present.

repobear

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Operational Update

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AnonymousUser858

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