Emirates National Oil Company: Swoops for Dragon Oil at 735p Per Share

Following the announcement by Emirates National Oil Company, ENOC on 17 March 2015 confirming that it had made an approach regarding a possible offer for Dragon Oil, ENOC confirms that it has been in discussions with the independent committee of the board of Dragon Oil (the “Independent Committee”) regarding the terms of a possible cash offer for Dragon Oil.

As a result of those discussions, and having considered initial shareholder feedback and market commentary around the possible offer price, ENOC is proposing a possible cash offer of 735 pence per Dragon Oil share (the “Proposal”). ENOC informed the Independent Committee of the Proposal on 14 May 2015. The Proposal marks a substantial increase since the opening proposal put forward to the Independent Committee on 15 March 2015.

Proposal

The Proposal of 735 pence per Dragon Oil share values the entire issued share capital of Dragon Oil at approximately £3.6 billion^[1] and represents:

• a premium of 44.3 per cent to the closing price of 509.5 pence per Dragon Oil share as at close on 13 March 2015, the business day immediately before the date of the first approach by ENOC
• a premium of 38.0 per cent to the volume weighted average Dragon Oil share price of 532.5 pence over the 90 day period ended 13 March 2015
• a premium of 14.0 per cent to the closing price of 645.0 pence per Dragon Oil share as at 20 May 2015, the business day immediately before the date of this announcement

As at close on 13 March 2015, the business day immediately before the date of the first approach by ENOC, the Dragon Oil closing price was 509.5 pence per Dragon Oil share. As at 31 March 2015, Dragon Oil holds £1,243m of net cash^[2] on its balance sheet, which represents 251.8p of cash per Dragon Oil share. Adjusting the Proposal for this cash per Dragon Oil share implies a cash adjusted price of 483.2 pence per Dragon Oil share. Adjusting Dragon Oil’s closing share price of 509.5 pence as of 13 March 2015 implies a cash adjusted price of 257.7 pence per Dragon Oil share. Accordingly, on a cash adjusted basis, the implied premium is 87.5 per cent.

ENOC believes that the Proposal represents full and fair value to Dragon Oil’s shareholders and is capable of being recommended to Dragon Oil’s shareholders. The Proposal will be fully funded from ENOC’s existing cash resources and there is no diligence pre-condition given ENOC’s position as a 53.9% shareholder in Dragon Oil.

Strategic Rationale

ENOC has taken the strategic decision to become a fully integrated global oil & gas company and is looking to further diversify its sources of cash flow by operationally consolidating its upstream footprint. The combination of ENOC’s existing downstream position and skillset with Dragon Oil’s upstream operating experience represents a key step towards creating an international integrated oil & gas company.

To date, ENOC has maintained an arm’s length approach with regards to its dealings with Dragon Oil. Going forward ENOC will look to undertake a more active role, in line with a typical majority shareholder, in the management and future strategic direction of Dragon Oil, subject to the terms of the relationship agreement between ENOC and Dragon Oil, together with any applicable law, regulation or stock exchange rule.

Commenting on the Proposal on behalf of ENOC, Saif Al Falasi, Group Chief Executive said:

“We have great respect for the board and management of Dragon Oil. Separately, we have worked constructively with the Independent Committee over the past two months to put forth a proposal to shareholders that is capable of being recommended.

We believe the Proposal is full and fair and provides an excellent opportunity for Dragon Oil’s shareholders to realise significant value today. There is great uncertainty in the sector and we believe, as a long term and supportive shareholder, that Dragon Oil has achieved as much as is possible through its existing upstream strategy. Moreover, Dragon Oil stands to benefit significantly from being part of the integrated platform that ENOC offers. To that end, we want to ensure that all of Dragon Oil’s shareholders have the opportunity to evaluate the Proposal on its merits.

Our strategic vision is to become a leading oil and gas company by expanding our presence in international markets and establishing an exploration and production portfolio. Together, ENOC’s board and I are highly enthusiastic at the prospect of this potential combination and I hope this attractive Proposal will be supported by Dragon Oil’s shareholders.”