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Dragon makes $789m bid for Dublin oil firm

dragon oilDragon Oil (DGO) proposed a 492 million-pound ($789 million) cash offer for Petroceltic International Plc (PCI) to add exploration and output in North Africa and Kurdistan.

Dragon Oil, backed by Dubai’s state oil company and with production in Turkmenistan, is in talks on a 230 pence-a-share offer, a 29 percent premium to the last closing price, Dublin-based Petroceltic said today in a statement. The target’s board is prepared to recommend the offer subject to shareholder talks.

“It looks a good deal from Petroceltic’s perspective,” David Round, a BMO Capital Markets analyst who has an outperform rating on the stock, said by e-mail. “A lot of the smaller exploration and production companies are looking for an exit at the right price and this price looks pretty reasonable.”

Petroceltic jumped 22 percent to close at 218.50 in London trading on the Alternative Investment Market. That’s the biggest gain since April 2009. Dragon Oil declined by 2.3 percent to 561 pence in London.

Buying Petroceltic would widen the scope of Dragon Oil’s operations to Algeria, Egypt and northern Iraq. Chief Executive Officer Abdul Jaleel Al Khalifa said in August he saw Egypt, where Dragon already has an exploration license, as a prime area for growth. It expects to produce 100,000 barrels a day by the end of next year in Turkmenistan, giving it the cash for deals.

Petroceltic had planned to start trading on London’s main stock exchange in July. The company sold part of its stake in an Algerian oil license in October last year. There is no certainty a firm offer will be made, Dragon said in a separate statement.-Reuters