DUBAI’S state-owned oil refiner is buying oil explorer Dragon Oil for $1.9bn (£1.2bn) as the emirate seeks a safe haven from the recession-hit property market.
The Emirates National Oil Company (Enoc) agreed to pay 455p a share for the 48 per cent of Dragon it did not already own, valuing the Turkmenistan-focused oil firm at $2.36bn.
Enoc’s investment in Dragon signals a change in the emirate’s investment strategy after suffering a real estate crash in the financial crisis.
In January, Dubai-based Dragon pledged to boost production in 2009 and said it was confident about weathering falling global oil prices.
One of Dragon’s 10 largest minority shareholders said, however, that yesterday’s offer was fair, given “limited upside” in Turkmenistan, where uncertainty over energy reserves has cooled foreign interest in oil and gas infrastructure.
Analysts and investors said the stock was probably worth more than Enoc offered, but it was the best shareholders would get.
Merrill Lynch analyst Taleh Musayev said “given that another bidder is not likely to emerge, the offer is likely to go through”.
Peter Hutton at stockbroker NCB advised investors to seek more.
Shares in Dragon Oil closed yesterday up 36.5p, or nearly nine per cent, at 446.5p.
Dragon’s main assets are oil and gas fields in Turkmenistan, which has attracted oil firms after new leadership led to a more open approach to foreign investment.
Enoc, owned by the emirate’s sovereign wealth fund Investment Corporation Dubai, runs service stations, fuel terminals and oil tankers in the Gulf.
Mustafa Alani at Dubai-based Gulf Research Centre said: “The property sector has been hit hard. Oil will always remain profitable.”
The Dragon Oil purchase comes as the emirate seeks to restructure about $80bn of debt.