Petroceltic may spark bidding war

Any pending formal takeover offer for Dublin exploration firm, Petroceltic from Middle Eastern player, Dragon Oil is expected by analysts to tempt other parties into a bidding war.

Petroceltic’s board yesterday conditionally welcomed an $800m (€636m) takeover proposal from Dragon Oil, sending its share price rocketing by over 26%.

While no firm bid had been made by Dragon — which is listed on the Irish Stock Exchange — the Dubai-based company yesterday confirmed that it was in detailed discussions regarding a possible cash offer of 230p per share for Petroceltic.

The proposal follows the completion of an extensive round of due diligence. The offer would value Petroceltic at around $790m, according to analysts.

In its own statement, Petroceltic said that it would be willing to recommend to its shareholders a firm offer “at the level of the proposed offer”, if conditions were acceptable.

The Irish company’s management will first need to gain acceptance from its major shareholders, including Swiss-based investment firm, Worldview, Middle Eastern-based Dovenby Capital and non-executive chairman, Robert Adair — the founder of Scottish explorer, Melrose Resources which merged with Petroceltic two years ago.

On a wider footing, any deal would also require formal approval from the Algerian government, in relation to Petroceltic’s significant asset base there, and the nod from Dragon’s shareholders. Dragon’s board has started discussions with its majority shareholder — The Emirates National Oil Company, which owns 54% of the business — to garner support for the tabling of a formal offer.

“In our view, if a firm offer for Petroceltic is made by Dragon, we would not be surprised to see a counter offer made by another party,” said James Carmichael, analyst with London brokerage, Peel Hunt, which views a price of 250p per share a more realistic offer.

Dragon& has a number of assets across northern Africa and the Middle East. Its main asset is the Cheleken oil field in Turkmenistan.

A successful takeover of Petroceltic, however, would significantly enhance its portfolio, as it would take in interests in southern Europe (Italy, the Black Sea region, Greece), Kurdistan, Algeria and other parts of northern Africa.

Petroceltic was recently awarded an additional exploration licence in Egypt, boosting its presence in the country. The firm also last month increased its full-year production guidance to 21-23m barrels of oil equivalent per day.

The first half of this year saw it raise $100m via a successful share placing, complete a second farm-out of its Ain Tsila field in Algeria and set in motion a plan to step up to the primary share markets in both Dublin and London.


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