Dragon Oil shares dip as production targets missed
SHARES in Dragon Oil slid 3.3pc yesterday, after it missed expectations with its latest drilling update and cut forecasts for the rest of the year.
In a trading statement, the Turkmenistan-focused company said it increased production during the first six months of the year to 64,200 barrels of oil per day (bopd). That was a jump of 10pc year on year but still less than markets had been expecting, as Dragon struggled to prevent sand from blocking wells.
"[During the second quarter of the year], a number of producing wells were choked down to minimise production of sand, Dragon said.
"That had an impact on the oil flow from these wells. We continue to bring the wells back to normal levels of flow by installing sand screens in some of those affected older wells as well as installing desander equipment on certain platforms in areas prone to sand production," the company added.
Describing the first half as ''eventful'', chief executive Dr Abdul Jaleel Al Khalifa said: "We are close to restoring field production to 70,000 bopd after resolving the sand production issue. Given the pace of the drilling programme so far this year, we have optimised the schedule to complete up to 16 wells, including two sidetracks, in total by the end of 2012.''
Dr Al Khalifa said Dragon anticipated production growth for 2012 to be in the range of 10-15pc "and we remain on target to reach the 100,000 bopd gross production level in 2015.
"While diversification remains on top of our agenda, we also commenced a $200m (€160m) share buyback programme to return some of the cash generated through solid growth of our asset in Turkmenistan to our shareholders."
Davy Stockbrokers' Job Langbroek said the production number was at the "lower end" of expectations.
"The knock-on effect has been to change the full year production guidance from a straight 15pc year-on-year expansion to a range of 10-15pc production growth. Importantly, there is no change to the medium-term (2015) 100,000 barrels per day production expectation," he added.
Dragon fell 3.3pc in Dublin to €6.96. It has lost 5pc in the last two days.