ENOC: Dragon Oil Should Aim for 90,000 bopd Not 100,000 bopd
Emirates National Oil Company Ltd (ENOC) L.L.C., as majority shareholder in Dragon Oil Plc provides further detail on its future strategy for Dragon Oil and further clarity on operational aspects of the business.
Key points
· Whether or not Dragon Oil is delisted, ENOC no longer sees the need to maintain a dividend profile
· ENOC believes that there are operational challenges associated with sustaining production at Dragon Oil’s stated levels of 100,000 barrels per day for the next five years
· ENOC views these operational challenges as including pressure decline, increase in gas & water production, wax deposition, sand production and cease to flow well
· ENOC believes that mitigating these operating issues to sustain a de-risked production profile will likely require additional investments above Dragon Oil’s stated budget of up to $700 million for capital expenditure in 2015
· ENOC would set sustainable and de-risked operating targets for Dragon Oil, targeting a near term production profile of c. 90,000 barrels per day. These targets should maximize recoverable reserves by ensuring that a balanced production profile is followed
Saif Al Falasi, Group Chief Executive of ENOC commented:
“As majority shareholders in Dragon Oil we believe there is a need to refocus the Turkmenistan operations and ensure field life sustainability. My initial view is that Dragon Oil should target a more sustainable and de-risked Turkmenistan production profile of c. 90,000 barrels per day over the near term in lieu of its stated target of 100,000 barrels per day.
As we see it, there are operating challenges associated with sustaining production at Dragon Oil’s forecast levels. Mitigating these operating issues will likely require additional investments. That’s why I don’t see a need for Dragon Oil to maintain a dividend profile in the near term. These are difficult decisions for any publicly listed company and we see this as another reason for delisting Dragon Oil.
I personally have great respect for the Board and Management of Dragon Oil, who have done an excellent job of taking the company to where it is today, but I now want to enable Dragon Oil to draw upon ENOC’s financial and operating strength to overcome these challenges.”
