<article><p>Dubai-based Turkmenistan producer Dragon Oil again insisted that it intends to leverage its healthy free cash flow of about $2bn to pursue acquisition opportunities. Deterred in recent years by an unfavorable oil price environment, Dragon says it is now looking into several possibilities and intends to conclude a deal in 2015. </p><p>Five years ago, Dragon Oil's chief executive said: "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 as we look to diversify our asset base". But its production has remained confined to the Cheleken field in Turkmenistan although it has exploration assets in Iraq, Tunisia, Afghanistan, Egypt and the Philippines.</p><p>In December last year Dragon pulled out of making an offer for London-listed Petroceltic, citing uncertainty in the oil market and falling prices. Petroceltic has production in Egypt and Bulgaria and a 38pc stake in the Ain Tsila field in Algeria, and holds exploration acreage in Romania, Italy, Greece and the Kurdish region of northern Iraq.</p><p>Dragon's 2014 profits of $650mn were 27pc higher than levels seen the previous year. Though the market for contractors and service providers is tight in the Caspian region, the company says that it will reduce capital expenditure this year by retendering contracts to take into account the downturn in oil prices since mid-2014. </p><p>Dragon is set to drill between 15-20 development and appraisal wells at its Cheleken asset in 2015, though it says that this number might be slightly lower if it is unable to bring the Caspian Driller into operation until the second quarter. Four drilling rigs are currently in service. </p><p>After breaking its crude marketing ties with Azerbaijan's state-owned Socar last month, Dragon secured two export routes for its Cheleken crude to be sold fob via the Aladja jetty through Baku as well as Makhachkala in Russia. Dragon expects to sell its Caspian production at an average discount to Brent crude of $14/bl. </p><p>The company said that it will bring its first gas treatment train at Cheleken online within three years and the second online within an additional year. The trains will yield 3,000-5,000 b/d of condensate, which will be included in the company's targeted production plateau of 100,000 b/d. Gas processing trains will enable output levels of 150mn-200mn ft³/d, but the company has made no progress thus far in securing sales agreements in Turkmenistan. </p><p>The firm's 2014 output averaged 78,790 b/d, a 6.8pc increase from 2013. At the end of the year, Dragon was producing some 92,000 b/d of its Cheleken crude. Dragon hopes to boost its production levels by 10pc in 2015 and exit the year at 100,000 b/d. In Iraq, the consortium of Dragon Oil and operator Kuwait Energy plans to accelerate the evaluation of the Faihaa-1 discovery by drilling two appraisal wells this year in order to fast track the development. Dragon Oil holds a 30pc stake in the consortium. Dragon's chief executive, Abduljaleel al-Khalifa, said that production at Block 9 in Iraq can be brought on line within 2-3 years if the consortium decides to fast-track the development. </p><p>df/ts</p><p><br> Send comments to <a href="mailto:feedback@argusmedia.com" target="_parent"> feedback@argusmedia.com </a></p><p><u><a href="http://www.argusmedia.com/Info/General/News" target="_TOP"> Request more information </a></u> about Argus' energy and commodity news, data and analysis services. </p><p><i> Copyright © 2015 Argus Media Ltd - <a href="http://www.argusmedia.com/" target="_TOP"> www.argusmedia.com </a> - All rights reserved. </i></p></article>
