Dana Gas swings to net profit in 2017 boosted by settlement

United Arab Emirates energy producer Dana Gas swung to a net profit of $83m in 2017 from a net loss of $88m a year earlier after a $1bn payment as part of a settlement with the Kurdistan Regional Government (KRG).

The company’s revenues were also boosted by higher oil prices and higher production in Egypt and Kurdistan, where the Abu Dhabi-listed producer has its main assets.

However, Dana posted a net loss of $42m in the fourth quarter of last year, Reuters calculated in the absence of a quarterly breakdown, compared with a $7m profit in the same period a year earlier.

Profits in the fourth quarter were affected by an impairment charge of $34m against the Zora gas field in the United Arab Emirates following the year-end reserve report, the company said in a statement on Sunday.

As part of the Pearl Petroleum consortium, which includes Austria’s OMV, Hungary’s MOL and Germany’s RWE, Dana started a case in 2013 against the KRG in the London Court of Arbitration, accusing it of underpaying for gas liquid production.

The company and its partners reached a financial settlement last August by which the Kurdish government agreed to pay $600m immediately to the consortium, and $400m to invest in the development of the region.

Dana, which has struggled to collect receivables from Kurdistan and Egypt over the past four years, collected $466m from the KRG and $164m from Egypt last year. Dana’s cash balance at the end of 2017 amounted to $608m, more than double the $302m it had at the end of 2016.

Dana Gas is at the centre of a legal dispute with the holders of a $700m sukuk, or Islamic bonds, that the company refused to redeem last year on the grounds that the notes were no longer sharia-compliant and therefore unlawful under UAE law.

Read: Weeks of talks fail to resolve Dana Gas sukuk dispute, say sources

Legal proceedings in English and UAE courts are continuing.

In the latest development of the debt dispute, a London High Court judge found again for the creditors earlier this month when he rejected Dana’s attempt to overturn his previous decision that the purchase undertaking, part of the sukuk contract, was valid and enforceable.