Wednesday, September 29, 2004
Dana does the business
Yesterday, Dana Petroleum, my second-largest holding, impressed followers and confirmed the speculation of a tie-up with a foreign company, announcing a deal with Woodside Petroleum of Australia. The agreement bolsters confidence in Dana's African exploration work, the odds of drilling and discovery in Mauritania, Kenya and Australia boosted by Woodside's involvement.
Dana will acquire a 6.25% interest in the Block 2 Production Sharing Contract ('PSC') offshore Mauritania, with effect from 1 July 2004. In exchange, Dana will assign a 5% interest in the Block 7 PSC offshore Mauritania to Woodside...Dana has invited Woodside to become a strategic exploration partner offshore Ghana, by granting Woodside an option over one half of Dana's interest in the Western Tano Basin. Woodside's option to join Dana remains subject to the completion by Woodside of a study of the exploration potential of the region and the conclusion of ongoing discussions with the Ghanaian authorities to extend the term of the Western Tano Petroleum Agreement to accommodate further deepwater exploration...Dana has agreed to assign a 10% interest in the Block 5 and Block 7 PSCs offshore Kenya to Woodside in exchange for the assignment to Dana of a 10% interest in the Great Australian Bight
Tom Cross, Dana chief executive commented:
'This deal crystallises Dana's African exploration drilling plans for the next 12 to 18 months, with three wells now confirmed. These will test two important prospects offshore Mauritania, namely Dorade and Petrel, and a major first structure in Block 5 offshore Kenya. If results are encouraging, two further high-graded targets could be drilled within this period, at Faucon in Mauritania and in Block 7 Kenya.
The goods news has helped put paid to some market followers' doubts about Dana. These qualms centred on the Mauritanian acreage where Dana's blocks were supposedly peripheral to the real action elsewhere, the boondocks of exploration effort that would apparently never be drilled.
Dana bulls' patience was rewarded this week, Woodside coming on board in Block 7 is a big thumbs up to investors while cocking a snook to those pesky bears.
Dana's deal-making didn't stop there however, the company also announced an asset swap of the Indonesian interest in Ujung Pangkah for more North Sea production:
Dana Petroleum announces that its wholly owned subsidiary, Dana Petroleum (E&P) Limited, has reached agreement with Amerada Hess Limited to acquire an additional 28% interest in the Hudson Oil Field in the UK North Sea, thus increasing Dana's total stake in Hudson to 47.5%. In exchange, Dana will transfer its wholly owned subsidiary Dana Petroleum (Indonesia) LLC to Amerada Hess (Indonesia) Limited, along with a balancing cash consideration payable at completion.
this deal will prove earnings enhancing at the next reporting stage, Cross was again positive explaining that Dana was:
trading an undeveloped discovery in a non-core area for cash generative reserves in our core UK producing portfolio. For Dana, such a trade minimises the time between discovery and production and eliminates the capital intensive development phase. This step is an efficient method of realising the value of exploration success whilst continuing to grow the Company.'
and the market just loved the revelation this will add 3,500 barrels of oil per day to Dana's production.
This distracted attention somewhat from the day's scheduled news announcement, interim results. Diluted earnings for the first six months of the year were in fact down to 12.16p from 14.61p. That fall was expected however, with Dana the company now paying tax at a higher rate (a whopping 51%). Typically that would suggest a fair value around 300p but the current strength of the price of crude oil over the price achieved during the interim period (an improvement of around one third), combined with the elimination of company debt and increased production rates promise much higher earnings for the next twelve months.
I'll report again soon with a newly calculated fair price for Dana. At 392p to sell the shares have moved faster than a gang of football hooligans to a Burberry sale, the 75% increase since my purchase last year rating as one of my biggest successes since I started investing.
The Artful Dodger
Dana will acquire a 6.25% interest in the Block 2 Production Sharing Contract ('PSC') offshore Mauritania, with effect from 1 July 2004. In exchange, Dana will assign a 5% interest in the Block 7 PSC offshore Mauritania to Woodside...Dana has invited Woodside to become a strategic exploration partner offshore Ghana, by granting Woodside an option over one half of Dana's interest in the Western Tano Basin. Woodside's option to join Dana remains subject to the completion by Woodside of a study of the exploration potential of the region and the conclusion of ongoing discussions with the Ghanaian authorities to extend the term of the Western Tano Petroleum Agreement to accommodate further deepwater exploration...Dana has agreed to assign a 10% interest in the Block 5 and Block 7 PSCs offshore Kenya to Woodside in exchange for the assignment to Dana of a 10% interest in the Great Australian Bight
Tom Cross, Dana chief executive commented:
'This deal crystallises Dana's African exploration drilling plans for the next 12 to 18 months, with three wells now confirmed. These will test two important prospects offshore Mauritania, namely Dorade and Petrel, and a major first structure in Block 5 offshore Kenya. If results are encouraging, two further high-graded targets could be drilled within this period, at Faucon in Mauritania and in Block 7 Kenya.
The goods news has helped put paid to some market followers' doubts about Dana. These qualms centred on the Mauritanian acreage where Dana's blocks were supposedly peripheral to the real action elsewhere, the boondocks of exploration effort that would apparently never be drilled.
Dana bulls' patience was rewarded this week, Woodside coming on board in Block 7 is a big thumbs up to investors while cocking a snook to those pesky bears.
Dana's deal-making didn't stop there however, the company also announced an asset swap of the Indonesian interest in Ujung Pangkah for more North Sea production:
Dana Petroleum announces that its wholly owned subsidiary, Dana Petroleum (E&P) Limited, has reached agreement with Amerada Hess Limited to acquire an additional 28% interest in the Hudson Oil Field in the UK North Sea, thus increasing Dana's total stake in Hudson to 47.5%. In exchange, Dana will transfer its wholly owned subsidiary Dana Petroleum (Indonesia) LLC to Amerada Hess (Indonesia) Limited, along with a balancing cash consideration payable at completion.
this deal will prove earnings enhancing at the next reporting stage, Cross was again positive explaining that Dana was:
trading an undeveloped discovery in a non-core area for cash generative reserves in our core UK producing portfolio. For Dana, such a trade minimises the time between discovery and production and eliminates the capital intensive development phase. This step is an efficient method of realising the value of exploration success whilst continuing to grow the Company.'
and the market just loved the revelation this will add 3,500 barrels of oil per day to Dana's production.
This distracted attention somewhat from the day's scheduled news announcement, interim results. Diluted earnings for the first six months of the year were in fact down to 12.16p from 14.61p. That fall was expected however, with Dana the company now paying tax at a higher rate (a whopping 51%). Typically that would suggest a fair value around 300p but the current strength of the price of crude oil over the price achieved during the interim period (an improvement of around one third), combined with the elimination of company debt and increased production rates promise much higher earnings for the next twelve months.
I'll report again soon with a newly calculated fair price for Dana. At 392p to sell the shares have moved faster than a gang of football hooligans to a Burberry sale, the 75% increase since my purchase last year rating as one of my biggest successes since I started investing.
The Artful Dodger
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