Thursday, July 08, 2004
Dana: ear to the ground
On April 13th, Dana Petroleum, the oil explorer and producer announced appraisal drilling offshore Indonesia:
Two wells will be drilled to test for the presence of a western extension of the Ujung Pangkah gas field. If successful, the wells will also be flow tested to provide additional production performance information ahead of finalising the Ujung Pangkah development well locations. The opportunity may also be taken to test the productivity of the Ujung Pangkah oil rim, directly underlying the gas accumulation, where approximately 450 million barrels are mapped in place. Each well is expected to take around one month to complete, excluding any well testing operations.
With results expected imminently prudence demands I revisit my own appraisal, a fair price for Dana shares. Dana is a company with exciting exploration prospects in Indonesia, Mauritania and Kenya. The expensive exploration activity is bankrolled by strong cashflow from the company's oil producing fields in the North Sea. Very little debt remains on the balance sheet and with 2003's earnings per share of 26.5p, I was happy to apply a P/E of 12 to give fair value of 318p. However, since the final results Dana has enjoyed exceptional operating conditions due to the strong price of crude oil on the energy markets. If production is maintained around the 17,000 barrels per day level this will further improve earnings and advance my exit price. But while the newsflow is thin all that can be done is monitor the industry and try to estimate the effects of this strong oil price. Returning to exploration, a failure in Indonesia would be Dana's second miss of 2004, the Pelican prospect off Mauritania finding a column of gas with the commercial value of a caveman's fart. Another disappointment and opportunities would be less in number and promise. Dana's business is discovering new energy assets, when will this happen?
Meanwhile, I'll be keeping my ear to the ground waiting for the 'Drilling Report' to hit the regulatory newswire.
The Artful Dodger
Two wells will be drilled to test for the presence of a western extension of the Ujung Pangkah gas field. If successful, the wells will also be flow tested to provide additional production performance information ahead of finalising the Ujung Pangkah development well locations. The opportunity may also be taken to test the productivity of the Ujung Pangkah oil rim, directly underlying the gas accumulation, where approximately 450 million barrels are mapped in place. Each well is expected to take around one month to complete, excluding any well testing operations.
With results expected imminently prudence demands I revisit my own appraisal, a fair price for Dana shares. Dana is a company with exciting exploration prospects in Indonesia, Mauritania and Kenya. The expensive exploration activity is bankrolled by strong cashflow from the company's oil producing fields in the North Sea. Very little debt remains on the balance sheet and with 2003's earnings per share of 26.5p, I was happy to apply a P/E of 12 to give fair value of 318p. However, since the final results Dana has enjoyed exceptional operating conditions due to the strong price of crude oil on the energy markets. If production is maintained around the 17,000 barrels per day level this will further improve earnings and advance my exit price. But while the newsflow is thin all that can be done is monitor the industry and try to estimate the effects of this strong oil price. Returning to exploration, a failure in Indonesia would be Dana's second miss of 2004, the Pelican prospect off Mauritania finding a column of gas with the commercial value of a caveman's fart. Another disappointment and opportunities would be less in number and promise. Dana's business is discovering new energy assets, when will this happen?
Meanwhile, I'll be keeping my ear to the ground waiting for the 'Drilling Report' to hit the regulatory newswire.
The Artful Dodger
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