Dragon Oil (DGO) shrugged off last year's earnings dip with a robust first-half performance. Shareholders were rewarded with a one-third hike in the interim dividend after Dragon bumped up net profits by almost a fifth to $289m (£171m).
More importantly, the Turkmenistan-focused driller seems firmly on track to meet its 2015 plateau production target of 100,000 barrels of oil per day (bopd). Dragon reported average gross production of 73,440 bopd over the half year, but the daily rate now stands at around 81,000 barrels.
The benefits of the production ramp-up have been amplified by higher realised crude oil prices and improved sales volumes. This also drove up operating cash flow by two-thirds to $364m. The improvement in sales volumes was linked to an increase in Dragon's share under the entitlement agreement for the Cheleken Contract Area (CCA) in Turkmenistan. This was the result of a more than doubling of first-half capital expenditure in the CCA.
Looking ahead, Dragon plans to complete another seven to nine wells by the end of 2014, with a planned exit rate of 87,000-90,000 bopd. The company also revealed progress with its drilling operations in Iraq. One exploration well has reached its initial target and work continues on the second. Goodbody predicts adjusted EPS of 116¢ for 2014, rising to 119¢ in 2015.
| DRAGON OIL (DGO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 574p | MARKET VALUE: | £2.8bn | |
| TOUCH: | 571-573p | 12-MONTH HIGH: | 646p | LOW: 544p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 700¢ | NET CASH: | $2.47bn* | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2013 | 491 | 330 | 49.3 | 15 |
| 2014 | 547 | 394 | 58.8 | 20 |
| % change | +11 | +19 | +19 | +33 |
Ex-div: 13 Aug Payment: 15 Sep £1=$1.69 *Includes $613m of abandonment and decommissioning deposits | ||||
