Dragon Oil gets buyout approach from Emirates National Oil

Emirates National Oil, owner of 53 per cent of Dragon, has offered to buy the remaining shares “for a premium” to its 509.5 pence closing price on March 13.

Dubai-based Dragon Oil has received an offer from Emirates National Oil Company (Enoc) for the 46 per cent of the company that it does not already own, according to statements made by both companies via the London and Irish stock exchanges, where Dragon is listed.

Enoc, which is owned by the Dubai government, said it had approached the gas exploration and production company this week with an offer at “a premium” to its closing share price on March 13, which was 509 pence per share. Enoc did not specify what the premium was.

Dragon Oil’s shares were trading at 600 pence mid-afternoon UAE time.

Dragon Oil has struggled to diversify away from its main asset, the Cheleken project in Turkmenistan, and had to abandon a £492 million (Dh2.6 billion) bid it made to acquire Petroceltic, another exploration and development company with a wider spread of assets, when the collapse in oil prices changed the economics of the offer. In its trading statement in January, Dragon said it plans to spend US$500m to $600m in the coming year on capital expenditure, down from $677m last year.

The spending will be mainly concentrated on its Cheleken project, from which the company derives most of its revenue. The figure excludes other spending on exploration prospects that include blocks in Iraq and Algeria.

Dragon has had mixed success recently, with lower oil prices and higher volume leading to lower operating profit (down 16 per cent at $579m last year) but higher net profit (up 27 per cent at $132m).

Dragon has said it expects revenue to be about $1 billion this year but hopes to make up some lost ground because of lower oil prices with higher production.

Its aim for 2015 is to boost production by 10 per cent and end the year producing at 100,000 bpd at Cheleken and keep pumping at that level for at least five years.

Last year, the company increased production by 6.8 per cent to an average of 78,790 bpd with output reaching 92,008 bpd at the end of the year.

Dragon’s shares had fallen from 615 pence to about 530 pence from September to December last year as oil prices fell, but the shares then sank to 460 pence after the deal with Petroceltic was scuppered before recovering to 509 pence last week.

Despite its reliance on one asset and the impact of lower oil prices, Robin Haworth, an analyst at the stockbrokers Stifel, in London, said the company has a strong (4.3 per cent) and stable dividend yield and is under no pressure from its other shareholders to sell.

Therefore, Mr Haworth reckoned, the company should sell for somewhere between 650 and 700 pence a share, leaving Enoc upside if oil prices rise above $75 per barrel.

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