* Majority stake will allow ENOC to vote against dividend
* ENOC to lower Dragon Oil (LSE: DGO.L – news) ‘s near-term production target
* Dragon Oil reiterated its production target on Tuesday (Adds Setanta’s comments, link to Dragon Oil’s Tuesday statement)
By Mamidipudi Soumithri
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July 16 (Reuters) – Dragon Oil Plc’s largest shareholder, Emirates National Oil Co Ltd (ENOC), said the oil producer no longer needed to pay a dividend to shareholders, stepping up pressure in its bid to take over the company.
ENOC, which owns 54 percent of Dragon Oil, offered 750 pence per share to buy out minority shareholders in June. Baillie Gifford and Setanta Asset Management, Dragon Oil’s second and third largest shareholders, see that offer as inadequate.
ENOC’s majority stake in Dragon Oil would allow it to vote against any proposal to pay dividends at the company’s annual general meeting.
First Energy analyst Stephane Foucaud said ENOC’s statement could be part of a strategy to convince hesitant shareholders to accept its offer.
The takeover would help downstream-focused ENOC become a fully-integrated global oil and gas company.
Dubai-based ENOC also said Dragon Oil’s capital expenditure budget of $ 700 million would not be enough to deal with the operational challenges that it expects Dragon Oil to face.
Dragon Oil, which produces oil from the Cheleken field in Turkmenistan, reiterated on Tuesday its production target of 100,000 barrels of oil per day over the next five years. ENOC said it would lower that target in the near-term to about 90,000 barrels.
Setanta, which has a 3.1 percent stake in the company, said ENOC’s target was not reflective of Cheleken’s potential, adding that Dragon Oil’s production update supported its view.
“It certainly does not seem consistent with the type of scenario to which ENOC refers,” Setanta’s Richard Doyle said, referring to Dragon Oil’s statement.
Dragon Oil declined to comment, while Baillie Gifford, which holds about 7.2 percent of the company, said its stance remained unchanged.
The company’s shares were trading marginally higher at 726 pence at midday on Thursday. (Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by Anupama Dwivedi)
