Dragon Oil diversifies as it looks to expand

Dubai based oil and gas explorer Dragon Oil, plans to invest $870m (£562m) in oil and gas projects over the next two years, it said in a statement yesterday.

The London-listed company is targeting annual output growth of 10-15 per cent through 2012 as it seeks expansion in the Middle East, North Africa and Central Asia- where it says it has “strategic fits”.

Dragon Oil already has extensive operations in Turkmenistan and is planning a 40km trunk line.

The company says work has already begun on supporting infrastructure amidst discussions about gas pricing with the Turkmenistan government, which it says are moving ahead. Dragon Oil plans to invest $600m-$700m on total oil infrastructure through 2012. “Going forward we have a strong balance sheet with a net cash position of more than $1bn and no debt which provides us with significant financial flexibility”, said chief executive Abdul Jaleel Al Khalifa.

The company is looking to diversify its asset base and commercialise its gas resources, adding, it is considering joint ventures, corporate acquisitions and project farm-ins, according to the statement.

Dragon Oil said it is re-assessing its plans to create an incorporated holding company in Bermuda which it announced last year.

Evolution Securities analyst David Farrell said that Dragon’s portfolio contained no material exploration sites, adding that upside was focused on the monetisation of gas and leverage to the oil price.