Dragon Oil makes tentative approach for Petroceltic

International oil and gas exploration, development and production companyDragon Oil confirmed this morning that it is in discussions regarding a "possible offer" of Irish listed company Petroceltic. The deal would give Dragon Oil exploration and production operations in North Africa and Kurdistan.

Dragon Oil, which is backed by Dubai’s state oil company and produces in Turkmenistan, said that the offer is of the order of 230 pence sterling per share in cash, or £492 million (€627m) in total, and follows an extensive confirmatory due diligence exercise.

The offer is subject to the approval of Dragon Oil shareholders, and the company said it is in discussions with its majority shareholder (who owns approximately 54%) to vote in favour of a transaction.

The board of Petroceltic said that it is willing to recommend a firm offer to its shareholders.

Buying Petroceltic would widen the scope of Dragon Oil's operations to Algeria, Egypt and northern Iraq. Dragon chief executive officer Abdul Jaleel Al Khalifa said in August that he saw Egypt, where the company has an exploration license, as a prime area for expansion. The company expects to produce 100,000 barrels a day by the end of next year in Turkmenistan, giving it the cash flow to make acquisitions.

The completion of any offer by Dragon Oil would be subject to customary conditions for an offer for an Irish public company, as well as appropriate approvals from the Algerian Government in relation to the Algerian assets of Petroceltic.

(Additional reporting Bloomberg)