Dragon Oil: 2014 Full Year Results

Dragon Oil, an international oil and gas exploration, development and production company, today announces its full-year results for the year ended 31 December 2014. These results are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

KEY OPERATIONAL AND CORPORATE HIGHLIGHTS
Turkmenistan
 Fourteen wells completed during 2014;
 Average gross daily production increased by 6.8% to 78,790 barrels of oil per day (bopd);
 December 2014 average gross production of 89,680 bopd;
 2014 exit rate of 92,008 bopd reached;
 The Caspian Driller jack-up drilling rig arrived to the Cheleken Contract Area and is being commissioned to commence operations;
 Drilling in the Dzhygalybeg (Zhdanov) field commenced with one well completed during 2014;
 Water injection pilot ongoing in the Dzheitune (Lam) 75 area;
 Artificial lift in the form of jet pumping systems commissioned for two wells;
 New marketing contracts put in place until 31 December 2015 using two routes; and
 Approx. 60% organic reserves replacement of 2P oil and condensate reserves achieved.
Exploration
 Iraq: successful discoveries in both formations targeted in Block 9;
 Algeria: two exploration blocks won in partnership with Enel;
 Egypt: the contract for East Zeit Bay signed in May 2014; and
 The Philippines: unsuccessful Baragatan-1A exploration well.
Financial and corporate developments
 The Board recommends the payment of a final dividend of 16 US cents per share for 2014; the full-year dividend for 2014 amounts to 36 US cents (2013: 33 US cents);
 Cash generating capabilities remained strong: US$0.8bn was generated from operations during 2014;
 The Group considered but decided not to pursue a significant corporate acquisition in 2014; and (US$mn, unless stated) 2014 2013 Change Revenue 1,093.1 1,047.9 4% Operating profit 578.6 687.7 (16%) Profit for the year 650.5 512.6 27% Basic EPS (US cents) 132.32 104.4 27% Full-year dividend per share (US cents) 36.0 33.0 9% Cash and cash equivalents and term deposits* 1,974.9 1,923.6 3% Debt Nil Nil –
 Amendment to the Production Sharing Agreement signed to make the tax rate consistent with the provisions of the Tax Code of Turkmenistan at 20% resulting in tax credit of US$160 million to current income tax expense in respect of the reversal of the accrual made in prior years, and to formalise a commitment from Dragon Oil to spend approximately US$10mn a year on social projects and training programmes in Turkmenistan.
Outlook
 Complete between 15 and 20 wells a year in 2015 and in 2016;
 Target annual production growth of around 10% or higher in 2015 and exit 2015 at 100,000 bopd;
 Grow gross production in 2016 to average 100,000 bopd and maintain this rate as plateau from 2016 for at least five years;
 US$500mn to US$600mn estimated capital expenditure for infrastructure and drilling excluding the Gas Treatment Plant cost in Turkmenistan in 2015;
 Annual exploration spend of around US$50-100mn; and
 Actively pursue the diversification strategy to add development assets to the portfolio.

Dr Abdul Jaleel Al Khalifa, CEO, commented:

“With 14 development and appraisal wells completed in 2014 as well as solid field performance, we grew average gross production in the Cheleken Contract Area by 6.8% to 78,790 bopd. Drilling accelerated significantly in the second half of the year allowing us to exit at 92,008 bopd – well above our expectations of 87,000-90,000 bopd.

“Revenues grew by 4% to US$1.1 billion as a result of higher sales volumes, which were offset by lower realised prices. Our cash generating abilities remained strong: US$0.8 billion was generated from operations.

“Among our exploration assets, the exploration well in Iraq yielded encouraging oil discoveries in both targeted formations. We also added two exploration blocks in Algeria and looked at bidding to acquire a major E&P company towards the end of the year, but subsequently withdrew our interest in the uncertain crude oil price environment.

“The Board is pleased to announce a final dividend of 16 US cents bringing the total dividend for 2014 to 36 US cents.”