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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area

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From: drlink	6/7/2005 11:04:53 AM
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From ATON Dragon Oil. Shares soar as buyer circles; Alekperov discusses projects in Turkmenistan Shares in Dragon Oil yesterday recorded their biggest gain for the year - up 13% at one point in intra-day trading - after the company said it had been approached for a minority stake. Dragon said the offer for up to 48% of its stock was only preliminary in nature. If an offer is made, Dragon will appoint independent directors - excluding ENOC - to consider whether to recommend it to its 85,000-odd shareholders. Emirates National Oil Company (ENOC) owns 52% of Dragon and according to a statement put out by the company it will not be selling its holding. ENOC is restricted from selling its stake by a number of technical factors, including the need to receive approval from the Turkmen government. A loan from the EBRD to Dragon also stipulates that ENOC must remain the majority shareholder. The identity of the potential buyer was not disclosed, but we note that last month, Lukoil and ENOC both denied a media report that the Russian major had agreed to buy ENOC's Dragon stake. Additionally, in an interesting coincidence, Lukoil CEO Vagit Alekperov was in talks in Ashkabad yesterday on developing new projects on Turkmenistan's Caspian shelf and modernizing refineries, the first time Lukoil has expressed an interest in the country at such a senior level. Alekperov said that Lukoil is now ready to realize large-scale investment projects in Turkmenistan, without going into specifics. In our view, whether it is Lukoil or someone else, the potential desire by a strategic investor to establish a foothold in the company (even without majority control) confirms once again the fundamental attraction of Dragon's main asset, the Cheleken block, with gross 2P reserves of 661mn bbls of oil and a potential 3.5tcf in gas reserves. Our recommendation on Dragon Oil is Buy; our target price of $2.44 suggests 24% upside potential. If the unknown suitor proceeds with the tender offer, we would expect it to happen at a slight premium to current levels.

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