To what extent is the cash liquidity problem affecting your business in Egypt, and where does the debt repayment issue stand?
We managed to increase production targets of 2013 and we shall meet 2014 targets. The cash liquidity problem affects long-term growth plans. The total receivables balance as of mid-November 2014 is $277 million.
What do you think the new government should do to improve investment in Egypt over the fiscal year of 2015?
We would like to see the government develop practical mechanisms for paying the outstanding receivables and secure timely and steady payment of the new and future oil and gas proceeds. Revisiting the gas prices in the current and future gas sales agreements is another necessary improvement. Of course, a greater goal of establishing a secure peaceful living and working environment in Egypt should always be a priority.
Do you think the government needs to provide incentives for companies in order to explore and spend money in high- risk areas? If yes, what type of incentives do you think the government should offer?
Yes, indeed the government needs to provide incentives. Possible incentives for exploring high-risk areas may include defining an attractive minimum production share for the investors and defining an attractive minimum cost recovery percentage. Excess cost recovery should also be shared according to production split, and the signature bonus should be waved.
Can you brief us more about the newly signed production enhancement agreement with the government, and how you were able to reach to such an agreement?
The objective of the agreement is to increase our hydrocarbon production and secure collection of receivables. Dana Gas is entitled to export to third party 100% of the incrementally produced condensate above an agreed profile to reduce outstanding receivables from EGAS/EGPC.
Dana Gas has committed to 7-year drilling/work-over program (ca. 200 MMUSD).
We reached this agreement because of the cooperative attitude of EGAS and EGPC and because it is a win-win deal for all parties.
What were the main challenges you faced in assuring this agreement to go through?
The three main challenges we faced were the alignment and liaison of stakeholders, defining the condensate export route, and finalizing ancillary agreements.
How do you see this agreement being of value to the country?
The agreement will result in increasing gas production, which will secure electricity generation. Meanwhile, the agreement helps EGAS and EGPC to pay part of their debts by applying similar deals with other operators. The agreement encourages Dana Gas and other investors to continue investing in Egypt, and helps growth of the oil and gas industry in Egypt.
After your newly signed agreement with the government to increase production, how would you evaluate your invest ments in Egypt, and would we see new ventures in the near future?
Dana Gas has ambitious exploration and development plans in the existing acreage and in three new ventures: two onshore blocks in the Nile Delta and one offshore block North Al Arish.
How would do you rank Dana Gas compared to other gas companies in Egypt, and what has been the biggest achievement for Dana Gas in Egypt?
Dana Gas Egypt is currently the sixth gas producer in Egypt. Our growth plans should improve this ranking. We’ve unlocked the code for gas exploration opportunities in Egypt, and uncovered the value of the onshore Nile Delta. In just a few years we became the sixth gas producer in Egypt.
How do you see the value of your new partnership with BP in the recently awarded concession?
The objective of the joint operation with BP is mainly to drill and produce the deep targets. BP will benefit in the offshore and Dana Gas in the onshore from sharing the Nile Delta experiences.
What difficulties do you see that the sector faces as a whole and what is your message for investors to succeed in Egypt?
The difficulties we face are continuous increase of overdue payments to operator, delay of gas development projects, and low gas prices, which is related to the greater subsidy problem. Availability of hard currency is also a major issue.
What are Dana Gas’s goals/future plans for 2015?
We plan to drill 13 wells in 2015 and we expect to see a substantial increase in our gas and condensate production during this period. We also plan to activate the gas production enhancement agreement, increase production as mentioned above and secure cash collection via condensate export. In addition, we will be commencing our exploration programs in Blocks 1, offshore Block 6 and in Block 3 with our partner BP. We will Evaluate the offshore block 6 after acquiring new seismic program, and spud the deep Oligocene well in Block-3 by end of 2015.Download