Will Genel Energy PLC, Ophir Energy Plc & Dragon Oil plc Be Sold?

Are Genel Energy PLC (LON:GENL), Ophir Energy Plc (LON:OPHR) and Dragon Oil plc (LON:DGO) a buy ahead of potential bid interest?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Royal Dutch Shell‘s £47bn offer for BG Group is the biggest deal yet to emerge from the current oil sector slump, but it won’t be the last.

Companies that will attract bids will have depressed share prices and high-quality assets, which the majors can use to replenish their reserves at a lower cost than through exploration.

In my view, three UK-listed companies that are definitely in play are Genel Energy (LSE: GENL), Ophir Energy (LSE:OPHR) and Dragon Oil (LSE: DGO) — which has already received a bid, but may resist — as I’ll explain below.

Genel Energy

Genel’s progress in Kurdistan has been impressive. Oil production rose by 58% to 69,000 barrels per day in 2014, and the company is about to begin exploiting its sizeable gas assets.

Unlike Gulf Keystone Petroleum, Genel has a strong balance sheet, with ample cash and access to cheap debt. This will protect it from an opportunistic low-ball bid.

In a Bloomberg interview last week, Genel boss Tony Hayward said that the firm would either continue to grow or receive an offer that was too good to refuse — in his view, both options are “equally likely”.

Genel shares have fallen by more than 30% over the last six months, and remain a buy, in my view.

Dragon Oil

Dragon is a special case: its majority shareholder is the Emirates National Oil Company (ENOC), which effectively blocks takeover bids from other firms.

ENOC recently approached Dragon with a possible takeover offer, which you might think would be a done deal. However, this will require the approval of the firm’s other shareholders, which may not be forthcoming.

A previous attempt by ENOC to take control of Dragon in 2009 failed, reportedly because Scottish investment group Baillie Gifford, which has a 7% stake in Dragon, opposed the deal.

Ophir Energy

Most of Ophir’s biggest gas discoveries were made in partnership with BG Group. The firm’s offshore Tanzania gas fields contain more than 17 trillion cubic feet (TCF) of gas, and it has other significant gas assets elsewhere.

Ophir’s recent acquisition of Asian oil and gas producer Salamander Energy means that the firm now has regular revenues and can afford to wait for the market to recover — or for a strong bid to emerge. Given the global scale of its gas assets, I believe this is a near-certainty.

Today’s best buy?

Although each of these companies has a good chance of receiving a bid in the next year, buying shares in the hope of a takeover bid is a risky strategy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has a long position in Genel Energy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

3 essential factors for investors to consider when aiming for passive income success

Mark Hartley outlines three of the most important considerations investors are faced with when attempting to secure a lucrative passive…

Read more »

Investing Articles

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »

Investing Articles

Here’s a plan to target £7,500 a month in passive income

This writer outlines a roadmap that someone could consider taking to try and aim for a substantial future passive income…

Read more »