DANA Petroleum, Scotland's second-largest independent oil company, continued its rise yesterday as is revealed a major jump in profits and talked up its latest exploration prospects.
Aberdeen-based Dana, which has interests around the world but produces about 75 per cent of its oil from the North Sea, said pre-tax profits for 2007 rose 48 per cent to £143.3 million.
The earnings were driven by higher oil and gas prices and a h
ike in production, which increased 37 per cent to 30,514 barrels a day last year.
Chief executive Tom Cross said the company had already stepped up production significantly this year. Average production in the first quarter was around 45,000 barrels a day and the company is expecting to maintain production of at least 40,000 barrels in 2008.
Despite major cost inflation for exploration and development projects, Dana is increasing its spend, planning some £200m in capital expenditure this year.
Cross said the company, currently producing oil and gas from 20 wells, was planning to bring three new projects on line this year and drill 17 new exploration wells.
Last week, the company revealed a major oil discovery in the West Rinnes prospect, which analysts believe probably contains at least 40 million barrels of oil.
Cross said yesterday that while the well tested at a rate of 7,800 barrels of oil a day, the rate was limited by the test rig and given the pressure "could have probably done double that".
Now attention has switched to the nearby East Rinnes prospect, one of four prospects Dana has in the immediate vicinity of West Rinnes. While it is still fundamentally an exploration well with no guarantee of success, the geology and proximity to the nearby find has increased Dana's hopes.
Cross added: "I think the widespread opinion is that the chances of (finding oil in East Rinnes] have increased markedly because of the success of West Rinnes."
Besides Rinnes, in the northern North Sea, Dana is currently drilling wells in the Gulf of Suez and the Nile Delta. Initial results for all three wells are expected within a month.
Profits are expected to increased to well over £250m this year with the company's production unhedged, meaning it is currently reaping the rewards of record oil prices. Cross said the company may review its position on hedging in the future, there was no immediate need to change strategy.
"If investors want to play the futures market they don't need to do that through an oil company," he added.
Shares in Dana closed up 39p to 1,729p yesterday, valuing the company at £1.49 billion.
The shares are up 25 per cent since the firm announced the West Rinnes discovery and are up 42 per cent since a month ago.
The full article contains 472 words and appears in The Scotsman newspaper.
