Enoc offer for Dragon criticised

Another minority shareholder in Irish-listed exploration firm, Dragon Oil has criticised the takeover offer from majority investor, Emirates National Oil Company (Enoc) as undervaluing the company.

London-based hedge fund manager, Elliott Advisors —which owns a 3.3% stake in Dragon — yesterday joined Scottish investment firm, Baillie Gifford and Dublin-based Setanta Asset Management (which, between them, control around 10% of Dragon) in suggesting Enoc’s recently improved 750p per share/€5.1bn offer for the 46% of Dragon Oil, it doesn’t already own doesn’t accurately value the asset.

Dragon this week reported a 25% year-on-year increase in first-half production, to just over 92,000 barrels of oil per day; but noted it breached the 100,000 mark in early June — an average level it hopes to sustain for the next five years.

Enoc has since said it won’t back any future dividend payments, whether or not Dragon is delisted, on account of it seeing challenges to the stated production targets; it sees a 90,000 barrel daily average as being more realistic.

However, this didn’t stop Elliott Advisors suggesting that Dragon could increase production “meaningfully in excess” of its 100,000 barrel daily target.

It also said the value of Dragon’s asset in Iraq and its key production asset in Turkmenistan should also increase over the medium term.

In a brief statement, Enoc yesterday attacked Elliott’s production claim. “We, like all shareholders, must base our valuation on information provided by Dragon Oil and its technical team. They know more about the assets and their potential than those citing unsubstantiated speculation,” said a spokesperson.

They added: “The technical team of Dragon Oil has clearly stated that production will plateau for the next five years. We are surprised that a few financial investors claim to know more about the assets than the people that operate them on a daily basis.”

At least three other funds invested in Dragon have backed Enoc’s offer as representing a fair deal and Enoc has said that it remains confident of securing the necessary approval.

It needs another 23% acceptance by the end of July to be able to de-list Dragon from the Dublin and London markets — based on ongoing engagement with investors.