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Focused on Operational Excellence Dana Gas PJSC Annual Report & Accounts 2017 & Accounts Annual Report Focused on Operational Excellence Dana Gas PJSC Annual Report & Accounts 2017 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, Kurdistan Region of Iraq (KRI) and UAE, with an average production output of 67,600 boepd, in 2017. With sizeable assets and reserves in Egypt, 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). Contents Overview 18 Operational Review 56 Consolidated Statement of IFC Introduction 28 Financial Review 2017 Other Comprehensive Income 01 Highlights 34 HSSE 57 Consolidated Statement of 02 Dana Gas at a Glance 37 Risk Management Financial Position 40 Corporate Governance 58 Consolidated Statement of Business Review 44 Our People Cash Flows 04 Chairman’s Statement 46 Corporate Social Responsibility 59 Consolidated Statement of 06 Chief Executive’s Review Changes In Equity 10 Board of Directors Financial Statements 60 Notes to the Consolidated 13 International Advisory Board 50 Independent Auditors’ Report to Financial Statements 15 Management The Shareholders of Dana Gas PJSC 16 Market Overview 55 Consolidated Income Statement Dana Gas PJSC Annual Report & Accounts 2017 www.danagas.com Overview Business Review Financial Statements Highlights Gross revenue (million US$) EBITDA (million US$) US$450m US$334m 2016: US$392m 2016: US$207m 2017 450 2017 334 2016 392 2016 207 2015 417 2015 232 Net profit (million US$) Cash balance (million US$) US$83m US$608m 2016: US$-88m 2016: US$302m 2017 83 2017 608 2016 88- 2016 302 2015 126 2015 470 Production (mboed) 2P reserves (mmboe) 67.6mboed 1,132 mmboe 2016: 67.1 mboed 2016: 1,155 mmboe 2017 39.5 25.75 1.650.7 0.7 2017 990 117 25 2016 37.6 26.0 2.60.8 0.75 2016 990 132 33 2015 33.9 29.3 0.70 0.7 2015 990 130 31 Egypt KRI KRI Egypt UAE EBGDCO UAE www.danagas.com Dana Gas PJSC Annual Report & Accounts 2017 01 Dana Gas at a Glance 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). Our Vision Our Strategy Our Values To be the leading private sector natural • Focus on sustainable growth in the • We set and apply the highest gas company in the Middle East, MENASA region across the natural standards of conduct and North Africa and South Asia (MENASA) gas value chain. accountability. region generating sustainable value • Leverage strategic relationships • We respect and value everyone for our stakeholders. to maintain competitive advantage. and embrace diversity. • Continuously enhance technical • We strive to devise and implement and commercial skills to develop and innovative ways to improve operate assets safely and efficiently. our business and fulfil our commitments. • We aim to provide a safe and environmentally friendly workplace for our employees and business partners and to minimise the adverse effects of our operations on communities and the environment. 67.6 1,132 500 Group production (mboed) 2P reserves (mmboe) mmscfd planned gas production increase in KRG 20.0 US$608m US$83m mbbld planned condensate cash balance Net profit production increase in KRG – 31 December 2017 02 Dana Gas PJSC Annual Report & Accounts 2017 www.danagas.com Overview Business Review Financial Statements Where We Operate Dana Gas has exploration and production assets in Egypt, Kurdistan Region of Iraq (KRI) and UAE. With sizeable assets and reserves in Egypt 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). Egypt Kurdistan UAE Region of Iraq 39,500boed 25,750 boed 1,650boed • Top 5 gas producer in-country • 2 world class fields – largest • Zora – offshore • 14 development leases and gas reserves in KRI gas field project 3 exploration concessions • 9+ years of historical production • UAE pipeline • Significant upside exploration • Supplies two major power stations with gas See more on page 18 See more on page 22 See more on page 26 www.danagas.com Dana Gas PJSC Annual Report & Accounts 2017 03 Chairman’s Statement We worked hard this year to navigate our way through a host of challenges and issues to deliver a strong operational performance and to post an outstanding set of financial results. Dear Shareholders, year. Our revenue was US$450 million, up future we will continue our policy of balancing In 2017, for the second successive year, 15% from 2016 drive by improved Group collections with levels of capital expenditure the average oil price rose and ended the production, higher oil price and the successful and our strict disciplinary approach with year higher than the year before. As a result, settlement agreement. We finished the year respect to expenditures and costs. In the the outlook for the global industry continues with net cash balance of US$608 million, our UAE, the Zora Gas Field’s performance has to strengthen. Whilst it has been a difficult highest cash position in ten years, due to the not met our expectations since it started three years, we have overcome the Egyptian government industry payments producing in February 2016. The fields’ challenges resulting from the low price mid-year totalling US$110 million, the KRG output is less than a quarter of what it was environment and are now in a strong cash payment of US$210 million as part planned to be. Extensive subsurface studies position to benefit from the operational of the settlement agreement, as well as have revealed unexpected complexity with and organisational improvements that have our regular income from our operations. respect to reservoir deliverability. The latest been implemented during that period and Our collections this year in the KRI have reserves report has led us to recognise a to realise our full potential. been consistent, the KRG has been paying reduction in our 2P reserves for the field, us regularly since the Settlement Agreement. leading to an impairment on the asset. We will A key part of our strategy over the last few The Company cash balance at the end of continue to manage the reservoir closely with years has been to resolve the outstanding 2017 does not include US$140 million which a view to maximising overall ultimate recovery. contractual dispute with the Kurdistan is held by Pearl for investment in further Regional Government (KRG) which has been developing the assets in the KRI. The need to refinance and restructure our subject to arbitration since October 2013. Sukuk, which fell due for repayment at the I am very pleased to tell you that we managed In the light of our strong financial position end of October 2017, has occupied much to resolve the dispute amicably and in good the Board of Directors and I have been attention from management and Board faith in August 2017 with the signing of the reconsidering our dividend policy and we alike. The Company started this process Settlement Agreement. The terms of the are pleased to tell you that we have consensually in May 2017 and asked the settlement agreement with the KRG are recommended for the approval of our Sukuk holders to form an Ad-Hoc Committee favourable for all concerned. The long-term shareholders a dividend payout this year. Going and appoint advisors so that an organised potential of our two fields in the Kurdistan forward, the Board of Directors and I will review consensual process could be pursued. Region of Iraq (KRI) is world-class, the any additional dividend payments prudently, However, shortly thereafter, we were Company estimates in place resources of taking into consideration the Company’s unexpectedly and shockingly threatened by 75 Tcf of gas and 7 billion bbls oil. There are financial strength, collections, working capital the Delegate and Trustee with a Dissolution ambitious plans to grow production in the needs and future investment requirements. Event and Notice of Default. Had this next three years by 170%. Furthermore, happened it would have been catastrophic our relationship with the KRG is back on Over the last few years we have continued for the Company and to all its stakeholders solid ground. It is worth noting that, despite to invest in our countries of operation. In the as it put billions of dollars of value at risk. our ongoing dispute, we never stopped KRI levels of production and investment have The Company had no alternative but to take investing or operating in the KRI. Despite all remained steady. In Egypt it has been a good urgent injunctive measures to protect itself of the geopolitical and security challenges year for us with annual production up by 5% and its assets and to give itself the time for that we have faced, we have been producing despite a cautious level of capital expenditure its consensual restructuring proposition to be continuously for nine years and our on new wells and work-overs in the light discussed and agreed. Regrettably, however, investment represents one of the largest of uncertainty in the timing and level of our attempts to pursue a consensual private sector investments in the country’s collections. Other than the bullet payment negotiated outcome were rebutted by oil and gas sector. received mid-year, collections in Egypt the Ad-Hoc Committee in favour of a in the second half have been sporadic non-consensual legal solution.
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