24/07/2008
Turkmenistan-focused Dragon Oil is optimistic after strong first-half growth, though price hedging has cost it £46 million.
The fully listed company, whose chief producing asset is in the Cheleken area in the eastern Caspian Sea offshore Turkmenistan, says production rose 37 per cent year on year to an average 38,482 barrels of oil a day in the six months to June. Dragon sold 3.5 million barrels for an average $108 (£54) a barrel, a 77 per cent price increase on a year earlier.
The company also hedged 3.8 million barrels with a $45 a barrel floor price and an average ceiling of $102. With market prices breaking through $130, Dragon says this policy resulted in an ‘opportunity loss’ of $91 million (£46 million) and says it is reviewing its hedging strategy, with no hedges undertaken beyond next December.
Executive chairman Hussain Sultan says the company is ‘confident’ of achieving its drilling and production targets this year, having completed four development wells in the first half-year. Dragon, which ended June with £328 million cash, has awarded an £84 million contract for a trunk line to take its oil and gas production to its processing facility.
The company, which is also studying blocks in the Yemen, markets 80 per cent of its crude oil through Neka in Iran, with the rest going through Baku I Azerbaijan to ‘maintain a good level of marketing flexibility’. Recommended by Growth Company Investor at 100p three years ago, Dragon shares hit 568p in May but have since moved lower. At 290p, they now value the company at nearly £1.5 billion.
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