Enoc raises offer for 46% stake in Dragon Oil

Emirates National Oil Company, owned by the Dubai government, said yesterday that it had slightly increased its offer to buy a 46 per cent stake in Dragon Oil.

The two companies said they had agreed on an offer by Enoc of £7.50 per share for Dragon, which values the entire company at about £3.7 billion (Dh21.09bn). That is an increase of just 15 pence, or 2 per cent, above the offer Enoc made last month, but is a 47 per cent premium to Dragon’s share price of just above £5.09 in early March, when Enoc first formally announced through the London and Irish stock exchanges where Dragon Oil shares are listed that it had approached the company.

An independent committee chaired by Thor Haugnaess, an oil executive who previously had worked at Schlumberger and other international oil companies, was formed after the March approach to haggle over the terms on behalf of Dragon Oil.

Yesterday’s recommended cash offer “is the result of extensive negotiations between the independent committee and Enoc, reflects the achievements and future prospects of the Dragon Oil Group and offers Dragon Oil minority shareholders an opportunity to exit at an attractive price”, Mr Haugnaess said.

A majority of minority shareholders – just above 23 per cent of the company’s shareholders – must agree to the offer for the bid to succeed.

Robin Haworth, who follows Dragon Oil for Stifel, a brokerage, said: “This recommended offer is at the top end of our anticipated valuation range,” though he said he still has not decided whether to change his hold rating on the shares.

For Enoc, Dragon is a fairly easy opportunity in a down market to move towards its goal of diversifying internationally.

Dragon Oil itself has struggled to diversify away from its main asset, the Cheleken project in Turkmenistan. It last year abandoned a £492 million bid 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.

Dragon Oil also said it had reached its targeted production of 100,000 barrels per day (bpd) and expected Cheleken to keep producing at that level this year. Average production at Cheleken was 88,700 bpd through the first quarter, up 23 per cent from the year-earlier period, and had reached 93,000 bpd in March.

Dragon oil expects between US$500m and $600m of capital expenditure this year, down from $677m last year.


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