Dragon Oil - ENOC offer is insulting

PUBLISHED: 23 May 2015 @ 16:36 | Comments (0) | More info about Long Over Short

ENOC released a statement this week saying they are proposing a cash offer of 735p per Dragon Oil (LSE:DGO) share. I believe this is a truly low-ball offer and should be dismissed by shareholders. ENOC will pay more.

I don’t believe the board will recommend this 735p offer. After failing to buy Dragon in 2009, I don’t think ENOC will walk away this time as acquiring Dragon would be a great step in expanding their upstream presence and becoming truly integrated company they strive to be. They have deep pockets and I believe would be willing to pay more than the 735p per share that they are offering.

I first reviewed Dragon here in October last year, its one hell of a business. The cash pile at Dragon is enormous as is their 2P reserves, production at last check was 93,000 bopd and will be at 100,000 bopd by year end. Turkmenistan is the core of the business but the Iraqi assets are very exiting (Southern Iraq so a good distance from IS troops) as are the other exploration assets. I believe Dragon are in a fantastic position to profit from this oil price decline themselves and put that cash pile to some good use by making acquisitions of their own.

In my models I have Dragon with a net asset value 931p a share, some way off the current offer. This is why I believe shareholders should be dismissing this offer as Dragon is worth much much more than 735p a share.

As we saw in 2009, ENOC need to have a 75% yes vote from the remaining shareholders and I’m very confident this won’t happen at this price. I think whats more likely as initial feedback from institutions will show ENOC they are at least 100p short here and that an offer of 850p+ would gather much more support (thats about a 15% increase).

Get onto longovershort.com to find out more about Dragon and other Oil & Gas companies that I cover and don’t forget to follow me on twitter @longovershort for daily updates in the world of Oil & Gas.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

Follow @longovershort

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.