Enoc extends buyout offer for Irish-listed Dragon Oil

Deal to acquire stock it doesn’t own in producer meeting opposition

Enoc said on Friday it was to extend its buyout offer for Dragon from July 30th to August 28th after receiving approximately 14.5 per cent of the issued share capital,

Enoc said on Friday it was to extend its buyout offer for Dragon from July 30th to August 28th after receiving approximately 14.5 per cent of the issued share capital,

 

Irish-listed exploration firm Dragon Oil’s largest shareholder has extended its buyout offer for the company after failing to garner sufficient support from minority shareholders.

Emirates National Oil Company (Enoc), which owns 53.9 per cent of Dragon, agreed last month to buy the stock in the group it doesn’t already own for 750 pence a share in a deal that values the firm at about £3.7 billion (€5.1bn)

The move has met with opposition from a number of shareholders however who say it substantially undervalues the producer.

Baillie Gifford, which holds about 7.1 per cent in Dragon Oil, and Setanta Asset Management, which owns about 3.1 per cent, have previously dismissed Enoc’s offer as has Elliot Advisors, whose clients own 3.3 per cent in the Dublin-listed company.

Enoc said on Friday it was to extend its buyout offer for Dragon from July 30th to August 28th after receiving approximately 14.5 per cent of the issued share capital, representing approximately 30.8 per cent of the voting rights held by independent shareholders.

The group said it had also received a further 2.3 per cent of intended acceptances .

Under Irish takeover rules, a majority of Dragon Oil’s minority shareholders - or slightly more than 23 per cent of voting shares - must back accept Enoc’s offer for it to succeed. Dragon is expected to delist from the Dublin and London markets if the deal goes ahead

Dragon’s principal producing asset is in the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan.

Enoc said earlier this month it would no longer back payment of dividends to shareholders if it succeeds with its bid to acquire Dragon. The group has said it expects there to be operational challenges in Dragon’s plan to produce 100,000 barrels of oil per day for the next five years that would lead to the need for additional investment above Dragon’s budget of up to $700 million for capital expenditure for 2015.

The group has said that if it succeeds with its bid to acquire Dragon, it would set sustainable and de-risked operating targets, targeting a near term production profile of about 90,000 barrels per day.

Several shareholders disagree with Enoc’s prognosis, among them Elliot Advisors, which said recently that Dragon could increase oil production “meaningfully in excess” of the company’s target of 100,000 barrels of oil per day as well as to monetise the Cheleken Contract Area’s considerable gas reserves over the medium term.