Oil and gas exploration company Dragon Oil met market expectations with its trading update this morning, reporting an increase in production of 10 per cent in 2012, with revenues for the year at an estimated $1.2 billion (€0.9bn).

According to the company, whose main asset is the Cheleken contract area in the Caspian Sea,15 new development wells were successfully put into production during the year, against an initial guidance of 13, while it achieved a 10 per cent increase in average daily production rate to approximately 67,600 barrels of oil per day (bopd) in 2012, compared to 61,500 bopd in 2011. Dragon Oil's average daily production rate for the month of December 2012 was 73,500 bopd.

Stockbroker Davy noted the update was "strong" and in line with estimates, pointing to "positive surprises", including a better-than-estimated cash position ($1.7 billion, up from $1.5 billion at end-2011) and growth in reserves (180 per cent reserve replacement rate).

"These positive surprises, coupled with the possibility of further share buybacks, should help the stock trade up this morning with a marketing agreement to be finalised shortly," the broker said in a note.

Looking ahead, Dragon Oil expects to achieve a gross production increase in 2013 of 10-15 per cent on average per year, on the basis of 13 to 15 wells expected to be put into production. It plans to drill up to 55 wells over the next three years.

It reiterated its goal of achieving an average production growth of 10-15 per cent per annum, taking its gross field production to a level of 100,000 bopd in 2015 with the aim of maintaining this plateau for a minimum period of five years.

Dragon Oil will publish its 2012 full-year financial results on February 12th, 2013.