Dana Gas’s Kurdistan facility. Image Credit: Courtesy: Dana Gas

Dubai: Dana Gas, the Sharjah-based natural gas company, on Tuesday reported a 77 per cent jump in its net profit for the first half of 2017 on the back of lower costs and higher energy prices.

In the first half, the company recorded $23 million (Dh84.5 million) in net profit, up from the $13 million recorded in the same half of 2016 as operating costs fell 7 per cent. Capital expenditure was also axed by 84 per cent, supporting the increase in profitability, as revenues grew.

The figures put net profit in the second quarter of 2017 alone at $12 million, up 71 per cent from the $7 million recorded in the second quarter last year.

The increase in profitability comes at a time when Dana Gas is in the midst of a legal case regarding $700 million worth of sukuk, which the company issued four years ago and that will mature in October.

The company said it will not pay the Islamic bond holders later this year as the sukuk are no longer Sharia-compliant.

During a conference call with journalists on Tuesday, Dr Patrick Allman-Ward, chief executive officer at Dana Gas, said the outcome of the case will result in “significant liability” for investors.

“The final outcome of the ongoing litigations in UAE courts would likely result in a significant liability for the sukuk holders to repay the company’s excess ‘on account profit payments’ based on a lawful reconciliation matter,” Allman-Ward said.

He declined to comment further on matters around the sukuk as legal proceedings are still ongoing.

Discussing financial performance, Allman-Ward said the gains in Dana Gas’s profits were supported by a 6 per cent increase in production levels in the first half of the year, with the company producing an average of 67,550 barrels of oil equivalent per day. The increase in production levels was supported by higher production across the company’s operations in Egypt.

Average energy prices in the first half were $40 per barrel of oil equivalent compared to the $30 average in the first half of 2016. That, coupled with higher production, drove gross revenues 25 per cent higher year-on-year to reach $222 million in the first half.

The CEO said he anticipated similar production levels for the remainder of this year, and that revenues will depend on energy price outlook.

“I’m not optimistic, I’m not pessimistic. I think what we’ve seen in the first half of the year is pretty much what we’re going to go on seeing for the remainder of the year, which is an oil price between $45-$55 a barrel,” Allman-Ward said.

He added that while there was exciting potential for medium to long-term growth, there’s also a need to “manage the short-term cash collection challenges until we recover affirmed receivables.”

Dana Gas has been struggling to recover overdue payments from parties in Egypt and the Kurdistan Region of Iraq. The company has so far this year collected $198 million in receivables, it said, adding that it continues to hold high-level discussions with officials to secure further payments.