DRAGON Oil shareholders have approved a £65 million rights issue to fund the drilling and development of its oil fields in the Caspian Sea.

At a specially convened extraordinary general meeting in Dublin yesterday, shareholders were told the company was also planning to consolidate its shares, proposing a 25 to one consolidation to reduce the total number of shares in issue to 300 million.

Shareholders will be asked to approve this at another e.g.m. planned for late July, around the time of its annual general meeting, the company said yesterday.

This move is designed to holster Dragon's share price, with the company indicating that at that stage, the shares could be worth between 70p and 80p.

Dragon Oil is currently trading at around 4p.

The rights issue will allow Dragon Oil to appraise a gas discovery in Thailand and to look for new licences.

It has already received irrevocable commitments and underwriting arrangements for the three for five rights issue at 2p sterling per share.

Mr Arifin Panigor, who owns 46 per cent of Dragon, has undertaken to subscribe for his £30 million rights entitlement in full.

While its second largest shareholder, Philippine's listed investment company, Sinophil, which has an 18.6 per cent stake is taking up its £12 million entitlement.

Dragon plans to increase its output in the Caspian Sea from current levels of 6,200 barrels a day to 75,000 a day over the next five years.

It may also borrow funds to invest in its production prospects, the company has said.