Enoc acquisition plan will help Dragon Oil to grow

Enoc wants to be a highly competitive global integrated oil and gas company targeting growth across international markets, says chief executive Saif Al Falasi.

Middle Eastern economies have made significant economic progress over recent decades, notwithstanding the fact that the international oil industry has itself changed beyond recognition and the need for energy companies to diversify beyond their natural “home” becomes essential to sustain growth. During the 30 years I have been in the oil and gas industry, the recent structural changes are perhaps some of the most unprecedented and fundamental.

We are currently facing a downcycle across the whole oil and gas industry that no one can predict the end of, or indeed if the world of US$100 oil per barrel will return any time soon. The decline in the oil price since the end of last year combined with the shift in the balance of supply away from the Middle East clearly presents new challenges.

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Better buyout offer

■ Bid to rally Dragon Oil minority shareholders for better buyout offer from Enoc

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But I believe that it also creates opportunities for a company like Enoc. We know and understand the oil and gas industry, and our strong capabilities in the midstream and downstream markets provide us with a strong foundation for future growth.

Our aim is simple – Enoc wants to be a highly competitive global integrated oil and gas company targeting growth across international markets.

The recently announced proposed acquisition of Dragon Oil is a demonstration of our desire to expand our upstream platform, adding a core operating subsidiary to our group. Our cash offer of 750 pence per share has been recommended by the independent committee of Dragon Oil and minority shareholders will vote on this deal by the end of July.

As a long-term supportive shareholder of Dragon Oil for more than 16 years with a 54 per cent interest, we have taken a “hands off” approach to Dragon Oil’s management and operations. This has been the correct approach up until now, not least because of the great respect I personally hold for the board and management, who have done an excellent job, but I believe now is the right time for Enoc to take a more active role.

At this stage in Dragon Oil’s existence, in particular with the plateau in production of 100,000 barrels of oil per day being reached on its core asset, I believe the time is right for Enoc to convert a long-term investment into an integrated operating subsidiary that is suitably enabled to grow. Given that Dragon Oil is at a new stage of investing in infrastructure, largely as a form of risk mitigation to preserve current production on a mature asset, Enoc’s recommended cash offer represents an excellent opportunity for minority investors in Dragon Oil to realise a healthy return.

I am proud of the way that the Enoc team have approached this transaction, listening to shareholders and gaining the support of the management team. We took the time to arrive at the recommended offer price of 750 pence following extensive discussions with shareholders.

Shareholders also expressed a strong desire for speedy execution and deal certainty, which we took into account. Unlike in 2009, our current offer is structured as a tender offer with a lower minimum threshold to provide more deal execution certainty to shareholders.

Finally, I am extremely optimistic for the future of Enoc and see great opportunity for us to fulfil our inherent potential. We want to be an integrated oil and gas company – and one that is established to operate through the cycle and across the oil and gas value chain.

Saif Al Falasi is the chief executive of Emirates National Oil Company (Enoc).

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