Dragon Oil plcs principal production and exploration interests are located in the Cheleken Contract Area in the Caspian Sea, offshore Turkmenistan. The Cheleken Contract Area covers approximately 950 sq.kms and comprises two offshore oil and gas fields, Dzheitun (LAM) & Dzhygalybeg (Zhdanov), in water depths of 10 to 37 metres.

            Red = 25 day moving average.           Green = 200 day moving average.

Claerly the report of a late trade of 2.08 euro's was a mistake.


Price $2.74 Target: $4.49 Issued: 19/12/08 Previous: $10.62 Issued: 25/08/08
Cairn Energy announced this morning (March 11th) that it plans a 6.5m share
placing, which represents 5% of the existing issued share capital. With respect to
the equity funding, the writing has been on the wall for some time.
For the period 2008 to end-2009, Cairn had curbed or indeed postponed gross
capital expenditure on its key Rajasthani oil project by some $600m. While it
protested that it had enough funds to complete the core development this year,
availability of funds for future years capex was uncertain. While in 2008 Cairn
proposed expanding its debt facility by $400m, this seemed less of an option in
2009 probably because of the poor state of credit markets and possibly because
Tullow took what debt was available for a mid-cap E&P project. Furthermore, at a
recent analyst presentation, management was coy on the topic of raising funds.
Cairn did comment that it was 'looking optimistically to see if there was an
opportunity' to raise capital.
Should Cairns placing be successful, it will remove most of the financial risk in the
stock. However, execution risk remains. Production at its Rajasthani fields has yet
to begin but is due on-stream in H2 2009. Furthermore, marketing of its Rajasthani
crude remains cloudy although the additional funds will help resolve this issue.
By its own admission, Cairn is becoming more highly geared to prevailing oil prices.
As such, we prefer Dragon Oil to Cairn as a proxy for the oil price. Although both
companies projects are of a similar and material scale, Dragons execution risk is
less. It is already producing in excess of 40,000 bopd and has recorded production
growth of 56% and 28% in 2007 and 2008 respectively.
Dragons share price now implies that its 2P reserves are worth 50c per barrel. This
severely underrates the stock. For example, on March 10th Maurel et Prom
announced that it had divested some of its Columbian assets for a minimum of
$8.20 per 2P reserve. These assets were producing at a rate 50% below Dragons
current production and the reserves involved were one-sixth of Dragons. Surely
Dragon's superior scale and strategic asset is worth more?

50c per barrel P2 reserves. "WOW"

cyril

i wonder what ENOC think about this auditor's investigation ..... had not realised they held 52% and certainly gives an interesting insight into how the calmer "mainstream" islamic countries view Turkmenistan

a little 6-month chart showing a likely stiff hurdle where 25 and 50 dmas coincide.

however, one might argue that once this audit nastiness is out of the way, and assuming it is something of nothing, then sp could head north quite sharply ..... except sp has been very dull for some months

Well I am happy to hold for the time being.

Mitzy, are you in AFR, beginning to motor with news and results out 31st?
cyril

took a small profit here the other day and switched to HOIL, which has been very successful .... may be worth dabbling again per my post above and now that sp has teased through 25/50 dma

Missed AFR @15p cyril wished I bought now what with the BLVN bid today.

cynic ref to your post 491, tend to agree regarding the nastiness, as far as the
lull in the SP, low poo along with the former hasn't helped. End of month should clarify and if alls well then 200p is imv quite achievable?
So we should know with 2 weeks, worth hanging on for?
cyril

Bowleven bid and now VPC poss bid where does that leave DGO.

There is an interview with the CEO of Dragon Oil in tomorrow's Shares Magazine available in all good high street newsagents :-0)

here's a teaser

Riding the Dragon

When I spoke to the chief executive of Dragon Oil (DGO), the Turkmenistan-focused oil explorer, there was little hint that the company was about to become embroiled in a potentially damaging internal inquiry. Abdul Jaleel Al Khalifa, 51, was in a relaxed mood and happy to talk about the groups single-country focus and what he intends to spend its significant cash pile on, in order to diversify the portfolio.

Thanks Bullshare.

Awaiting news of their accounting problems is no news good news sp seems to think so?

very difficult to know ...... dubai gov't money may influence any potential untoward comment

at last ......

Dragon Oil plc (Ticker: DGO) will announce its Preliminary Results for the period ended 31 December 2008 on Friday, 27 March 2009.

Grom that RNS,

On 26 February 2009, Dragon Oil announced that the Group's Internal Audit
Department had identified the irregularities. As a result of these findings,
Dragon Oil appointed KPMG to undertake an investigation into improper conduct by
certain former senior managers. The Board sought immediate advice from its
lawyers and sponsors and has acted, and will continue to act, upon the
information available to ensure that the matter is dealt with swiftly and that
procurement policies and procedures continue to operate effectively.

Following a review of KPMG's findings, Dragon Oil can confirm that these
irregularities will have no material impact on the Group's financial position.


Truely amazing that a few with their hands in the till, could have caused the
SP to drop to 106p.
cyril

Agreed cyril.

http://www.oilbarrel.com/news/display_news/article/ahead-of-fridays-results-announcement-dragon-oil-provides-some-reassurance-following-investigation/771.html

March 25, 2009

Ahead Of Fridays Results Announcement, Dragon Oil Provides Some Reassurance Following Investigation Into Procurement Irregularities





After last months shock announcement that it was investigating possible fraud in its marketing and contracts departments, Dragon Oil threw its investors some comfort on Tuesday when it announced that the matter would have no material impact on its financial position. This is welcome news as the current climate would be severely unforgiving for any company facing an unexpected hole in its finances: the Middle East-backed company has a strong balance sheet with US$867 million in cash at the end of 2008 and production of more than 40,000 barrels per day. Investors will, however, be keen for more detail on the scale of the problem and further reassurance that this is now a closed matter with the focus once more on growth from the companys key project in Turkmenistan.
The investigation was launched in late February when the Dubai-headquartered company engaged auditing giant KPMG to assist in an in-depth assessment of possible irregularities in its procurement procedures. The company, which is listed on the London and Irish Stock Exchanges, said it was investigating improper conduct between former senior managers in the suspect departments and, given these alleged irregularities, delayed the publication of its full year results. Those results, which were due out on March 4, will now be released on Friday.

Preliminary findings from the investigation indicate that improper conduct was confined to the Marketing Department and the Contracts Department. Although internal controls were in place, the individuals involved managed to override the various controls in the procurement process through collusion, the company said in a statement. These individuals appear to have obtained financial benefits for themselves by securing improper payments from certain contractors. The managers involved have been removed and the contractors have been contacted by Dragon Oil.

Investors will be relieved by three things. First, the swift action taken by the company, with CEO Dr. Abdul Jaleel Al Khalifa last month decrying the matter as completely unacceptable. Second, the fact that the initial investigation has confirmed there is no material impact on the companys financial position. Finally, that the investigation has not thrown up further areas of impropriety, which, the company will be hoping, should give investors some comfort that this is a well-run and clean ship.

All of this, of course, is an unwelcome distraction for a company that has otherwise been making solid progress on its Cheleken PSA in the Turkmen section of the Caspian Sea. This Soviet-era project covers 950 sq km and lies in shallow waters, no more than 50 metres deep. There is plenty of potential here, with proved and probable reserves of 645 million barrels of oil and condensate (Dragons share comes to 283 million barrels and 3.2 trillion cubic feet of gas) lying in two fields, Dzheitune (LAM) and Dzhygalybeg (Zhdanov).

These are impressive numbers but extracting value from these reserves isnt straightforward. The company, backed by Middle East money after the Emirates National Oil Co took a 52 per cent stake, has had to contend with aging Soviet-era infrastructure, the logistical and commercial issues of exporting oil from a geopolitically sensitive area and the technical challenges of a geologically complex structure. This is a complex faulted structure, with multiple sand layers and thin reservoir sands of variable quality and connectivity. This means its important the company identifies and maps faults in order to optimally position wells and keep costs down.

Given these challenges, Dragon has made good headway. Last year the company increased average gross production by 28 per cent to 40,992 barrels per day compared to 31,997 bpd in 2007, with an exit rate of 45,600 bpd (Dragons entitlement barrels are about 58 per cent of the total). These increases come on the back of continuous drilling of the field, a tactic that will continue this year as three rigs work up the field full time which should lead to a 15 per cent uplift in production by year-end.

Earlier this month Dragon let the CIS-1 platform-based rig go as the company decided to bring in a higher spec rig capable of drilling the higher slanted wells that should deliver higher productivity per well. The tender process for such a rig is underway and the new contract should be awarded in Q2 2009. In all, 13 wells are expected to spud in 2009 under a US$600 million capex budget.

The real upside here lies in the Cheleken contract areas vast gas resource. Dragon is making solid progress towards monetizing this resource, building the new trunkline and commissioning the Phase 2 expansion of the central processing facility, which will increase production capacity to 100,000 bpd of liquids with the capability to handle up to 220 million cubic feet per day of gas. Bids were received late last year for the Front End Engineering Design Study, which will then see the company tender for the additional construction works. And given recent events, all this tendering work is likely to be done to the highest procurement standards.

"These individuals appear to have obtained financial benefits for themselves by securing improper payments from certain contractors.

shock, horror! .... who would ever imagine that such things would go on in "bandit land"!? ...... not the sort of thing that would ever happen in US or Europe or Far East or Arabian Gulf ...... silly boys were obviously not sufficiently discreet!!

on a more serious note, i think the numbers and prospects are likely to be very encouraging and am very happy to be holding a fairly modest number

and have just added

Your telling porky's cynic, what you mean is you've shorted it.