Activist investor Elliott Advisors has become the latest Dragon Oil shareholder to say Emirates National Oil Company's (Enoc) takeover bid "substantially undervalues the company".
Enoc, which owns 54 per cent of the Turkmenistan-focused oil producer, offered 750p per share in June. But Dragon Oil's second- and third-largest shareholders, Baillie Gifford and Setanta Asset Management, have said they want more.
And Elliott Advisors, which has a 3.3 per cent stake in Dragon Oil, agrees, arguing the company is worth more due to its higher production potential and ability to draw further value from the oil-rich Cheleken area, just off the coast of Turkmenistan.
It comes after Enoc said yesterday Dragon Oil is likely to face operational challenges at its Cheleken field in Turkmenistan and should lower its production target to 90,000 barrels in the near-term.
"Elliott believes that Dragon Oil benefits from the opportunity to grow oil production meaningfully in excess of management's guidance of 100,000 barrels of oil per day over the near term as well as to monetise the Cheleken Contract Area's considerable gas reserves over the medium term," Elliot said.
"Elliott sees scope for the discount to Brent, at which Cheleken Contract Area output is sold by Dragon Oil to narrow significantly over the coming years."
"Elliott views Dragon Oil as being very well placed to secure an extension of the current Cheleken contract area [production sharing agreement with the Turkmenistan government] beyond its original expiry on favourable terms."
Additionally, Elliott Advisors also it thinks Dragon Oil is set to benefit from a field in Iraq which it "believes that the value of Dragon Oil's 30 per cent working interest in Block 9 in Iraq is likely to become significantly clearer over the coming 12 months".
However Enoc hit back saying that they had based their estimates a on information provided by Dragon Oil's technical team.
"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," an Enoc spokesperson said today.
"The technical team of Dragon Oil have 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."