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Focusing Resources on World Class Assets

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Focusing Resources on World Class Assets Dana Gas PJSC Annual Report & Accounts 2019 & Accounts Annual Report Focusing resources on world class assets Dana Gas PJSC Annual Report & Accounts 2019 Dana Gas is the Middle East’s first and largest regional private sector natural gas company. It was established in December 2005 with a public listing on the Abu Dhabi Securities Exchange (ADX). Dana Gas has exploration and production assets in Egypt, the Kurdistan Region of Iraq (KRI) and the United Arab Emirates (UAE), with an average production output of 66,200 boe/d in 2019. With sizeable assets and reserves in Egypt, the KRI and the UAE and further plans for expansion, Dana Gas aims to play an important role in the rapidly growing natural gas sector of the Middle East, North Africa and South Asia region (MENASA). Chairman’s Statement Operational Review Our People The oil and gas sector faces one KRI operations remain the Our people are the most 04 of its biggest crises in decades 20 key focus for the Company 48 important factor contributing to the Company’s success CEO Message Financial Corporate Social Review 2019 Responsibility 08 A strong financial and 32 50 operational performance Profit’s in 2019 rose to the Engage with and support in 2019 highest in seven years the local communities in which we operate Contents Overview Financial Statements 1 Highlights 56 Independent Auditor’s Report to the 2 Dana Gas at a Glance Shareholders of Dana Gas PJSC 60 Consolidated Income Statement Business Review 61 Consolidated Statement of Other 4 Chairman’s Statement Comprehensive Income 8 CEO Message 62 Consolidated Statement of 12 Board of Directors Financial Position 16 International Advisory Board 63 Consolidated Statement of 18 Senior Executive Management Cash Flows 20 Operational Review 64 Consolidated Statement of 30 Financial Review Changes in Equity 34 Market Overview 65 Notes to the Consolidated 36 Health, Safety, Security and Financial Statements Environment (HSSE) 40 Risk Management 44 Corporate Governance 48 Our People 50 Corporate Social Responsibility (CSR) Overview Overview Business Review Financial Statements Highlights We delivered both increased production and increased earnings and 2019 saw us post our highest annual profit in over seven years. Gross revenue (million US$) EBITDA (million US$) US$2018: US$470mm459mm US$2018: US$230mm341mm 2019 459 2019 341 2018 470 2018 230 2017 450 2017 334 Net profit (million US$) Cash balance (million US$) US$2018: US$64mm157mm US$2018: US$407mm425mm 2019 157 2019 425 2018* 64 2018 407 2017 83 2017 608 *Execluding one off impairment of $250mm Production (kboe/d) 2P reserves (mmboe) kboe/d mmboe 66.22018: 63.1 kboe/d 1,1602018: 1,079 mmboe 2019 66.2 2019 1,160 2018 63.1 2018 1,079 2017 67.6 2017 1,132 Dana Gas PJSC Annual Report & Accounts 2019 1 Dana Gas at a Glance The Middle East’s first and largest regional private sector natural gas Company kboe/d mmscf bbl 66.2Group production (kboe/d) Average294 daily gas production 9,940Average daily condensate in 2019 production in 2019 mmboe 1,1602P reserves US$Collections 285mm US$Cash balance425 – 31 Decembermm 2019 Why invest in Dana Gas Our vision Our values • MENA’s largest independently listed, To be the leading private sector natural • We set and apply the highest standards natural gas-focused E&P Company gas company in the Middle East, North of conduct and accountability • Strong balance sheet and growth- Africa and South Asia region (MENASA) • We respect and value everyone and oriented, cash-generative portfolio generating value for our stakeholders. embrace diversity • Highly experienced leadership and • We aim to provide a safe, healthy and management team committed Our strategy environmentally friendly workplace for to governance, transparency, HSSE • Focus on sustainable growth in the our employees and business partners and sustainability MENASA region across the natural and to minimise any adverse effects of • World class assets in Kurdistan Region gas value chain our operations on communities and the environment of Iraq and Egypt with significant • Leverage strategic relationships to exploration upside potential maintain competitive advantage • Continuously enhance our technical and commercial skills to develop and operate assets safely and efficiently 2 www.danagas.com Overview Business Review Financial Statements Iraq UAE Egypt Where we exist Dana Gas has exploration and production assets in Egypt, the Kurdistan Region of Iraq (KRI) and the United Arab Emirates (UAE). KRI Egypt UAE 31,500 boe/d 33,000 boe/d 1,000 boe/d • Largest independent producer • 14 development leases and 2 • Produced 1,000 boe/d in 2019 in Iraq – 100,000+ boe/d (gross) exploration concessions • In September 2019, the • 11+ years of continuous • Top 5 gas producer in-country Company ceased production production • Significant offshore exploration from the Zora Field • Two fields comprising the KRI’s potential • Project to transport and process largest gas reserves • Production optimisation 600 MMscf/d of gas to the UAE • Plans underway to increase measures significantly mitigated current production by 125% natural field decline • Reserves up 10% to over • Record collection from condensate 1 billion mmboe export shipments to 3rd parties and direct sale to EGPC Dana Gas PJSC Annual Report & Accounts 2019 3 Business Review Chairman’s Statement Dana Gas’s profit in 2019 rose to the highest in seven years Our ability to add production Dear Shareholders, Our ability to add production and and strengthen our operations Whilst it gives me great pleasure to report strengthen our operations in 2019 has in 2019 has made us resilient to that Dana Gas’s profit in 2019 rose to the made us, for now, resilient to the tough the tough trading conditions. highest in seven years, it comes at a time trading conditions. The leadership team when the oil and gas sector faces one of has worked tremendously hard over the its biggest crises in decades. From the last years to ensure that Dana Gas is beginning of 2020, global oil prices financially robust. Over half of our income weakened further from last year due to is protected in low oil price environments, persistent oversupply into the market and owing to the long-term gas sales the anticipation of reduced demand in agreements we have in place both in Egypt China as a result of travel restrictions put and the Kurdistan Region of Iraq (KRI). in place in response to the spread of the Furthermore, precautionary measures and Coronavirus throughout the country. contingency plans have already been put From March, and as the WHO declared in place with respect to the Coronavirus the Coronavirus as a global pandemic, the pandemic to safeguard our personnel and consequent response by governments all assets and ensure that our production over the world to restrict travel and lock continues to be unaffected. down, led to massive further reductions in demand. This supply-demand imbalance Financial performance summary resulted in oil prices crashing by 50% or The Company’s profit for the year more, falling to the mid-twenties. Indeed increased to $157 million versus a net many analysts predicted further price falls loss of $186 million in 2018, buoyed by into single digits as global stocks were an uplift in production in the Kurdistan rapidly approaching full capacity, until the Region of Iraq (KRI) as well as earn-out fortunate OPEC++ agreement put on the and deferred income entitlements. It brakes to decelerate this trend. However, is worthy of note that on a like-for-like the oversupply situation is continuing, basis, profit from core operations albeit at a less alarming rate which has increased by 80% to $115 million halted the downward price spiral at least compared to $64 million in 2018. for the time being. In the meantime, the global macro-economic outlook is gloomy, creating uncertainty on the timing of an upturn in oil demand and consequently oil and gas prices. Under these circumstances the outlook is therefore very uncertain. 4 www.danagas.com Overview Business Review Financial Statements As a result of the Company’s strong In 2019 we also achieved other important As previously announced, we launched a performance last year, which includes milestones in the KRI. We are developing Strategic Review of our Egypt assets last starting 2020 with a strong balance sheet two gas processing trains of 250 MMscf/d year. This was driven by the need to of $425 million in cash, and in keeping each, boosting our gas and condensate review our portfolio of assets comparing with our objective of ensuring a regular production to 900 MMscf/d. We signed a the resources required and the benefits annual dividend to shareholders, the new 20-year Gas Sales Agreement with delivered in terms of increasing Board has recommended to pay a the government for the gas production production and further growth potential. dividend of 5.5 fils for 2019, which will be from the first train, to power the Region’s The KRI holds over 90% of the presented to shareholders at the coming electricity production. An international Company’s proven plus probable (2P) annual meeting. If approved, it will be the engineering, procurement and reserves of over 1 billion barrels of oil Company’s third consecutive dividend construction (EPC) contractor was equivalent. The Strategic Review has and highlights the positive financial and appointed earlier this year and the work resulted in bids for the Egyptian business. operational results that have been was initiated immediately following final Discussions with the interested parties delivered to all our shareholders. approval by the KRG Ministry of Natural continue and further announcements will Resources. Unfortunately, as a result of be made in due course. Operational performance - KRI the government restrictions imposed It is gratifying that the investments we due to the Coronavirus pandemic, the Demerger have made in the KRI to date have contractor has had to declare Force The Board and management continue to flourished.
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