Dana company buys stake in Russian group for £3.5 million

DANA Petroleum has acquired a 5 per cent stake in Evikhon, a Russian company with interests in a number of Siberian oil fields, for £3.5 million. The consideration consists of £1.7 million in cash and the issue of 13.5 million new ordinary Dana shares.

The cash is being funded by a placing of 12.5 million new ordinary shares at 14p per share, to raise £1.75 million. This is at a 5.9 per cent discount on the mid-market price on July 16th, the date the placing was arranged.

The placing is in addition to the placing of 28.5 million new shares announced earlier this week. The proceeds of that placing are to be used to fund an early production programme at the company's Sortymskoye oil field and to provide Dana with addition working capital.

The 5 per cent stake in Evikhon has been gained through the purchase of the entire share capital of Antra from Waterford Finance and Investment. Evikhon's main asset is a 50 per cent stake in a joint venture with Shell Salym Development, a wholly owned subsidiary of Shell Oil Company.

The joint venture, said Dana, was set up to develop the onshore west Salymskoye, upper Salymskoye and Vadelipskoye oil fields. These, Dana added, "are reported to have recoverable oil reserves in the range 500 to 750 million barrels" which is expected to rise to a peak production of 120,000 barrels of oil per day.

Evikhon also has a minority stake in the Yugranefl joint stock company which has interests in three fields, one of which is being jointly developed by Yuganskneftegaz which is Dana's main partner in the Sortymskoye oil field.

Two of the oil fields are still at the development stage but Dana noted that the expected participation of Shell Salym and Amoco Oil would reduce substantially the degree of technological risk.

Mr Tom Cross, Dana's chief executive, told The Irish Times that the company "in the near term" expects to get dividends from its investment in Evikhon as the oil starts to flow. After that, there is the possibility that Evikhon, which is controlled by a number of Russian companies, will have a share flotation.

The latest accounts from Evikhon were for 1994 and these show a loss of $6.2 million and net liabilities of $7.8 million. The audit certificate, from Arthur Andersen, is qualified because there are no cash flow statements, there are question marks over the physical inventory and uncertainty as to the recoverability of certain long term receivables.

However, the auditors also note that the oil and gas properties are carried at an historical cost of only $2.3 million which compares with the estimate of its share of the net present value of recoverable reserves, disclosed in notes, of $541 million.