Dana Petroleum: 2005 results

9:30 a.m. Tue 28 Mar 2006

Dana Petroleum announced excellent results for the year to December 2005. The company said average production rose to a new record high of 19,683 boepd (2004: 18,608 boepd) while pre-tax profits rose 232% to £107.8m (2004: £32.5m). Revenue increased 51% to £165.6m.

The company seems to promise strong growth in the medium term; production in 2006 is expected to be ahead of 2005 (though by exactly how much is not clear), a result of Dana’s active development and asset trading programme. The company says it is on target to reach 40,000 boepd by 2007.

An ambitious exploration and development programme has given the company a replacement ratio that would be the envy of any of the oil majors. The company said net additions replaced 375% of North Sea production (most oil majors would be happy to replace 100% of production) while North Sea proven and probable oil and gas reserves at the year end increased 36% to a record high of 94.4 mmboe.

The outlook for oil prices in the medium term is firm and growth prospects seem sound. Trading at 1028.9p, the share is on a prospective PE (2006 earnings) of 9.9x, well within the sector range, surprising given the growth prospects. The only drawback is the lack of a dividend, but with the company investing all its cash in an expansion programme, this is only to be expected.