In its 'Daily Oil & Gas Filter', broker Westhouse called Dana Petroleum (LON:DNX) an “attractive target” with further upside potential after the midcap oil and gas producer confirmed a takeover approach that caused its share price to balloon 15% this morning on top of yesterday’s 5% gain.
Dana Petroleum said yesterday that it was in talks after receiving preliminary approach, yet there was no certainty whether this would lead to an offer being made for the company. Today’s reports have suggested that the takeover bid came from South Korea’s KNOC (Korea’s National Oil Company) and was worth as much as £1.7 billion, compared to the company’s current market cap of just below £1.3 billion.
This is not the first time that the company is subject of takeover speculation, with Westhouse noting that its stable production base in the North Sea and international exploration acreage made it a sought after asset. The broker commented that the approach from KNOC could be met with a rival bid from another company, which would drive Dana’s share price even higher, however, it noted that it does not seem likely that it would reach 1,800 pence as some suggested. This would mark a 30% premium to the stock’s closing price yesterday of 1,176 pence.
Dana Petroleum itself has recently made an acquisition, having agreed to acquire Petro Canada Netherlands BV a from a Suncor Energy subsidiary (TSX, NYSE: SU) for €328 million earlier this month. The company has also secured a US$900 million term loan and revolving credit facility, which will be fully underwritten by Royal Bank of Scotland (LON:RBS).
The acquisition will increase Dana's previous 2010 production guidance by some 10-12% on an annualised basis, subject to timing of deal completion. Dana estimates that its production will increase by 8,000-9,000 boepd (barrels of oil per day) in 2011, equivalent to a 20-25% increase in previous guidance for the Dana Group, with a production increase of 10,000-14,000 boepd in 2012 as new projects are brought onstream in The Netherlands.
Dana's total number of producing fields will increase to 54 from the current 36, this includes 15 new offshore fields and 3 new onshore fields.