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Dragon Oil raises dividend as oil revenues increase

Published: 18:04 05 Aug 2014 AEST

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Dragon Oil (LON:DGO) has increased its interim dividend by a third, and told investors it remains on course to achieve its production targets.

In its half yearly results, for the six months to June 30, the company reported average gross production of 73,440 barrels of oil per day.

In the month of June production averaged 76,100 barrels per day, and the daily rate currently stands at around 81,000 barrels.

Dragon expects to hit rates of 87,000 to 90,000 barrels per day by year’s end, which would deliver the targeted 5-10% production growth for 2014.

It then plans to ramp-up further next year to a target of 100,000 barrels per day.

In terms of financials, Dragon revealed an 11% rise in production revenues as its realised oil prices increased.

Profitability improved with gross profits up 25% compared to the corresponding period of last year at US$426.4mln, while operating profit came in at US$388.5mln and profit after tax and financing costs was US$289mln.

Net cash from operating activities increased to US$364.4mln, and the company ended the period with US$2.4bn of cash and equivalents. 

The interim dividend is being increased 33% to 20 cents per share.

Chief executive Dr Abdul Jaleel Al Khalifa said: “The board continues to focus on the diversification opportunities for the group, ongoing capital requirements for all our assets and a strong balance sheet."

Separately, Dragon revealed progress with drilling operations in Iraq, one of its newer projects as part of a diversification programme, where a well has reached its first of two targets and work continues towards the second.

The company said testing would be carried out in the second half, depending upon the well’s findings.

Dublin based broker Davy expected investors would react positively to the update, and indeed this morning Dragon Oil shares rose 2.1% to trade at 572p each.

Analyst Caren Crowley points out that Dragon will drill between seven and nine development wells in order to meet its target, and additionally another drill rig will join the campaign later in the year (and wells drilled by this unit aren’t factored into the H2 programme).

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