The entitlement barrels are dependant amongst other factors on operating and development expenditure in the period and the realized crude oil price. In first quarter of 2009, lower oil prices and higher capital expenditure than in the comparable period in 2008 resulted in higher entitlement barrels.
Marketing
Dragon Oil sold 2.5 million barrels of crude oil in first quarter of 2009, which is 108 % higher than the volume sold during the corresponding period last year (first quarter of 2008: 1.2 million barrels). During the first two months of 2009, 100% of crude oil was exported via Neka, Iran. The sales of crude oil via Baku, Azerbaijan, resumed in March 2009 after a new crude oil marketing contract was put in place in early 2009.
Dragon Oil continues to assess additional routes to market, including Makhachkala in Russia and the BP plc operated BTC (Baku-Tibilisi-Ceyhan) pipeline.
Drilling
The Group’s platform-based drilling rig, Rig 40 , is currently completing the Dzheitune (L am) 13/133A well; the company expect to commence production from this well during the first half of May 2009 .
On April 9, 2009, Dragon Oil announced that it had reached an agreement to extend the contract for the Iran Khazar rig for another two years. This rig is to complete the Dzheitune (L am) 28/134 well and we expect to have this well on production by the end of May 2009.
FINANCIAL UPDATE
Cash and cash equivalents
The cash and cash equivalents and term deposits at 31 March 2009 were around $833 million (December 31, 2008: $876 million), including $106 million (December 31, 2008: $ 92 million) set aside for abandonment and decommissioning activities.
Capital expenditure
Capital expenditure for first quarter of 2009 was around $81 million (first quarter of 2008: $61 million). Of the total capital expenditure, around 6 5 % was attributable to infrastructure with the balance spent on drilling. The infrastructure spend during the first three months of the year included upgrad ing the processing facility and progressing the construction of the Dzheitune (Lam) B platform and the 30 inch 40 kilometers trunkline. Capital expenditure for 2009 is expected to be weighted towards the second half of the year, subject to approvals.
Realised prices
The average realised crude oil price during first quarter of 2009 was around $44/bbl, which was 52% lower compared to the corresponding period last year (first quarter of 2008: $92/bbl). The Group’s realized crude oil prices achieved a discount of less than 2% to Brent during the first three months of the year.
Abdul Jaleel Al Khalifa, chief executive officer, commented:
Dragon Oil continues to increase production and w e achieved a 19% increase in the gross production in Q1 2009 compared to Q1 2008. The two wells currently being drilled by Rig 40 and the Iran Khazar rig are expected to be completed and come on stream in May this year and add to the production from the existing wells. We expect to complete eight wells in 2009. The recent extension of the contract for the Iran Khazar rig and good progress in the tendering process for another platform-based drilling rig make us confident in proceeding with our drilling programme.
