Dragon Oil shares plummet 10%

SHARES in Dragon Oil dived 10% yesterday after the oil exploration company said talks on a takeover deal had collapsed.

The price fall came just two days after the shares had risen sharply in response to confirmation that a potential strategic investor was eyeing up Dragon and considering a move to acquire a 48% stake in the company.

The investor was not named. Dragon’s majority shareholder, the United Arab Emirates-based Emirates National Oil Corporation (ENOC), had been expected to retain its shareholding, irrespective of the outcome of the negotiations.

“Following the announcement on June 6 that the board of Dragon Oil had received an approach which may or may not lead to a partial offer for the company, the board now confirms that it is no longer in talks in relation to any possible offer,” the company told the stock exchange yesterday. The company is quoted on the London and Dublin stock exchanges and had seen heavier trading patterns in its shares as speculation of a partial takeover gathered momentum.

Dragon shares fell to 97p in London, slightly below the level where they started the week and wiping about €80 million off its market value. But they remain over 50% ahead of their price at the start of the year.

The increase was largely fuelled by improved sentiment towards oil and gas exploration companies on the back of soaring oil prices, as well as positive updates from Dragon’s operations.

The company’s main interests lie in oil fields off the coast of the former Soviet republic of Turkmenistan, which lies to the north of Iran and Afghanistan, and borders on the Caspian Sea. But it suffered a setback last month after it was forced to suspend testing at a well in the region.

Dragon was headquartered in Dublin prior to its takeover and relocation to Dubai by ENOC. It retained a large number of Irish investors on its shareholder register after the move and announced plans to raise about €80 million in fresh funding earlier this year through a share placing. The money will be used to repay debt and finance ongoing work on its sites in Turkmenistan.

ENOC, which is owned by the Dubai government, recently denied reports in the Russian media it had been in talks with Russian oil outfit Lukoil about a potential sale of its stake.