Talks on Korea National Oil Corporation’s plans to (KNOC) buy Dana Petroleum have ground to a halt.
South Korea’s national oil company KNOC went public with an £18-a-share bid for Dana Petroleum in July, valuing it at £1.7billion, but the Aberdeen-based oil and gas operator says the offer, which the Koreans have refused to increase, is not high enough.
Dana said yesterday the current bid failed to recognise developments at the firm which could “materially increase” its oil production and reserves.
KNOC – pursuing Dana to boost its own overseas reserves – has so far said it will not lift its offer regardless of any new information and refused to sign a confidentiality agreement without a recommendation of the bid.
It has also failed to respond to an offer by Dana chairman Colin Goodall and chief executive Tom Cross to fly to Korea to argue the firm’s case to the KNOC board.
More than three-quarters of Dana’s production portfolio is in the North Sea. The firm has made recent finds in the Blackbird field in the North Sea and in Egypt since KNOC’s interest emerged, while it also has a drilling programme continuing off the Faroe Islands.
The company said it had made every effort to encourage and assist KNOC but added: “The board does not consider it is prudent or warranted to provide a recommendation to any conditional, unsolicited proposal at this level.”
KNOC said yesterday it was very disappointed that the Dana board did not agree that £18 a share represented a full and fair value for the company. It said it believed its proposal reflected all of the company’s recently announced and ongoing developments, together with its exploration potential.
KNOC said it had received an offer from Dana to review due-diligence information, although this was on the basis of a confidentiality agreement with restrictive provisions and on the understanding that the board of the Aberdeen company would not be prepared to recommend the offer price.
It added: “KNOC believes that entry into such an agreement and a due-diligence exercise would only be appropriate in the context of an agreed offer price between the parties. KNOC is currently considering its options in relation to Dana and a further announcement will be made in due course.”
Analysts at Evolution Securities said the announcement by Dana did not bode well for the success of KNOC’s all-cash offer.
They said: “Our core-plus-risked net asset value is £15.54 but any failure to conclude a deal would, in our view, send the share price considerably lower than this, perhaps even below the £11.00 mark. If that were the case there would be no place for the Dana board to hide.”
Dana’s shares fell by as much as 10% at one stage yesterday but settled down 3.7% at £16.30.