Dragon Oil (LSE: DGO) announced further details regarding two contracts awarded for the construction of two new platforms in its Cheleken Contract Area, located in the Caspian Sea, off-shore Turkmenistan.
In an interim management statement in late April, the group already flagged it is spending US$250 million on infrastructure this year with the award of two production platforms Dzheitune (Lam) C and Dzhygalybeg (Zhdanov) A, and US$600-700 million in total on infrastructure projects in the planning period of 2010-12, including the two new platforms.
The first contract was awarded for the construction of the Dzhygalybeg (Zhdanov) A platform which will support both a land rig and jack-up rig. Up to 8 wells can be drilled from this platform which will be installed in the Zhdanov Field and is due to be completed in Q1 2012.
The second contract was awarded for the construction of the Dzheitune (Lam) C platform which will support a jack-up rig. Up to 8 wells can be drilled from this platform which will be installed in the Lam Field and is due to be completed in Q4 2011.
The contract for the construction of the Dzhygalybeg (Zhdanov) A platform was awarded to Caspian Energy Projects LLC., while the contract for the construction of the Dzheitune (Lam) C platform was awarded to ILK Insaat Taah, San. Ve.tic Ltd.
Chief executive Abdul Jaleel Al Khalifa commented: "I am pleased that Dragon Oil has awarded these contracts for the construction of two new platforms which can support a total of up to 16 new wells in the future. This is a significant investment in our infrastructure and will ensure that we are well placed to meet our production targets in the years to come."
Dragon Oil (Turkmenistan) Ltd., a wholly owned subsidiary of Dragon Oil, holds 100 percent interest in, and is the operator of, the Production Sharing Agreement for Cheleken. The operational focus is on the re-development of two oil producing fields, Dzheitune (Lam) and Dzhygalybeg (Zhdanov).
Last month, the group said that, so far in 2010, it had continued to increase production from its assets in the Cheleken Contract Area. In the first quarter to 31 March, the company achieved an average daily production rate of 47,654 barrels of oil per day (bopd), up 9 percent against Q109.
The company has brought three development wells on stream at combined rates of 2,103 bopd, 2,168 bopd and 1,895 bopd. The most recent, Dzheitune (Lam) B/141 was completed in mid-April, initially testing with the short string and long string contributing 761bopd and 1,134bopd respectively - for a total of 1,895 bopd.
Dragon Oil sold 2 million barrels of crude oil in Q1 2010, 20 percent less than the volume sold during Q109. During the first three months of 2010, 86 percent of crude oil was exported via Neka, Iran. The average realised crude oil price during Q1 was approximately US$75 per barrel, 70 percent higher than compared to the corresponding period last year.
Since the inception of its 25 year Production Sharing Agreement (PSA) for the Cheleken Contract Area on 1 March 2000, Dragon Oil has marketed the majority of its entitlement barrels through a crude oil swap agreement with a subsidiary of the National Iranian Oil Company, Naftiran Co (NICO). The 10-year swap agreement expired on March 31 2010.
Whilst Dragon Oil is currently negotiating a new long term swap agreement, it has concluded a short-term agreement, on a rollover basis, on revised terms. The company noted that exports through the alternative western route will increase until more favourable long term swap agreement terms are negotiated.
Dragon Oil is working towards completing 11 new development wells, and up to 3 sidetracks in 2010. The group expects to be able to achieve an average production growth of 10 to 15 percent per annum over the three year period of 2010-12.
Dragon Oil’s financial position, with a cash balance of US$1.1 billion at the end of Q1 2010 and no debt, remained strong.