Dubai’s Emirates National Oil Co to buy Dragon Oil

Oil Company Emirates National Oil Co. on Monday agreed to buy out the shares of Dragon Oil PLC that it doesn’t already own for £1.15 billion ($1.89 billion), underscoring the race to develop Turkmenistan’s vast oil and gas reserves.

Dubai-based Emirates National Oil Co., or ENOC, agreed to pay 455 pence ($7.47) a share in cash to acquire the remaining 48.5% of Dragon Oil shares. The offer represents a 35% premium to the share price June 3—the day before Dragon Oil said it had received an approach—and values the whole company at £2.36 billion.

The independent oil and gas company, which is listed in Dublin and London, managed to extract a significant premium despite ENOC’s majority ownership limiting the chances of a rival bid.

The operation also represents a rare merger-and-acquisitions foray into emerging oil and gas producer Turkmenistan. The principal asset of Dubai-based Dragon Oil is the Cheleken contract area, in Turkmenistan’s Caspian Sea section. The contract area, operated and 100%-owned by the company, contained proven and probable reserves of 645 million barrels of oil and contingent gas resources of 3.2 trillion cubic feet, as of June 2008.

International oil companies are trying to enter the Central Asian nation after a consultant’s study last year identified a big natural-gas field there as the fifth-largest in the world. Dragon Oil also owns minority interests in exploration in Yemeni acreage.

ENOC has agreed not to accept any offer for its Dragon Oil shares for a 12-month period started Aug. 10, making any counter bid for the company impossible during this time. Dragon Oil said its independent committee, which consists of directors not appointed by ENOC, unanimously recommends the offer.

The offer drove Dragon Oil shares higher. The stock was up 8.8% in midafternoon trading in London. Taleh Musayev, an analyst at Bank of America Merrill Lynch in London, said in a note to clients that 450 pence a share was the minimum Dragon’s minority investors would accept and many will be happy with 455 pence a share for their stakes.

For ENOC, the transaction will increase a diversification away from energy-distribution assets and into oil exploration and production. It owns refining, marketing and gas-processing assets in the United Arab Emirates.

Tags:  Dragon Oil, Emirates, oil company