Enoc moves upstream with $1.9b Dragon bid

* Dubai’s Emirates National Oil Company (Enoc) will be paying Dh6 billion to take control of Dragon Oil as the state-owned firm makes a further push towards exploration.

Dubai’s Emirates National Oil Company (Enoc) has agreed to pay $1.9 billion (Dh6 billion) to take control of Dragon Oil in a further push by the state-owned refiner into exploration, even as the emirate struggles under a huge debt burden.

Dragon’s committee of independent directors, formed after the bid approach was announced in June, advised investors to accept the 455 pence a share bid for the 48 per cent of Dragon Enoc does not own, valuing the Turkmenistan-focussed oil explorer at £2.36 billion (Dh14 billion).

Analysts said the stock was probably worth more — Werner Riding at Ambrian said he still valued it at 500 pence a share — but that it was the best offer investors were going to get.

‘Going through’

“We believe that 450 pence per share is the minimum share price minority shareholders will accept 
 and given that another bidder is not likely to emerge, the offer is likely to go through,” Taleh Musayev, oil analyst at Merrill Lynch said.

One hedge fund manager, who holds the stock, agreed: “It’s not great but it’s kind of there. I think it has a good chance of success,” he said.

Dragon said in a statement on Monday that the offer represented a 34.6 per cent premium to Dragon’s closing price on the last trading day before it received the bid approach.

However, Peter Hutton, oil analyst at NCB brokers, recommended investors hold out for a higher bid and raised his price target for the stock to 805 pence. Dragon shares traded up 8.5 per cent at 445 pence by 1032 GMT.

Enoc is a downstream-focussed company, operating service stations, fuel terminals and oil tankers in the gulf region.

Its investment in Dragon has largely been a financial one, industry sources said, and one of the key aims of the deal is to bring Dragon’s upstream oil and gas exploration and production expertise in-house, Enoc said.

Its acquisition of Dragon Oil is the first large-scale acquisition by a Dubai government entity in more than two years and comes as the emirate seeks to restructure a debt pile of about $80 billion.