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Higher profits and Cheleken ramp up boost Dragon Oil


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Oil and gas producer Dragon Oil (DGO) unveiled a sharp rise in revenue and operating profit as it continues to ramp up production at the Cheleken Contract Area, offshore Turkmenistan.

Revenue rose 91% to a record $527 million during the six months ended 30 June, while operating profit soared 135% to $407 million. The considerably firmer numbers were on the back of a 25% jump in average gross production and higher oil prices.

The Dubai-headquartered group churned out 58,000 barrels of oil per day (bopd) during the period, compared to 46,420 bopd achieved in the first half of 2010, as the drilling programme progressed on schedule. Seven wells were put into production, while one well was completed in early January as part of the 2010 drilling campaign.

Chief executive Abdul Jaleel Al Khalifa said: “We continue to successfully ramp up production from the Cheleken Contract Area. With five more wells to be completed by the end of the year plus a sidetrack and the work over of an existing well, we are set to achieve strong production growth over last year.”

The company is on track to hit its production growth target for 2011 of up to 20%.

Vugar Aliyev, analyst at Matrix Group, said: “In the last few days the stock has come down significantly on the back of general market sale off and oil price concerns. Our total valuation for Dragon at $100/bbl is 656p. Even assuming an $80/bbl long-term oil price, our total valuation of 545p still suggests more than 25% upside. Dragon remains one of our top picks in the sector and we maintain our ‘buy’ rating with a 650p target price.”

Çeleken, also written Cheleken, is a city in Turkmenistan on the Caspian Sea, part of the Balkan Province. Its new name is Hazar.

This city and area is within a rich petroleum oil reserves. As far back as 1st century, the Greek philosopher Strabo write:

They say, diggers opened oily springs near the Okh River. Indeed, if a country has alkaline, asphalt, sticky, sulphurous waters, it is most likely to have oily springs. Only, their scarceness makes this fact miraculous.

In 1743, a Captain Woodruff of a British merchant company remarked that there were 36 Ogurdjali families resided on the island. They had 26 large boats and some oil wells.

Prior to 1917, the Moscow Society, Cheleken-Dagestan Society, Kuzmin and Co, Bostondjoglo, South Caucasian Mining Society, and Second Moscow Group were among established Russian oil companies. By 1925, after the establishment of Soviet Turkmenistan, wells had been nationalized and oil production decreased. By the late 1950s, oil production index went up again.

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