Dragon Oil drops £492 million takeover bid for rival Petroceltic

Brent crude crashed to a new five-year low of $67.53, falling more than $10 a barrel in a week

The plunging oil price put paid to its first major deal today as explorer Dragon Oil abandoned its £492 million takeover bid for rival Petroceltic.

Dragon had offered 230p a share for Petroceltic in October, when the oil price was well above $90 a barrel. But today — as Brent crude crashed to a new five-year low of $67.53 — Dragon said that “in the light of prevailing market conditions, it no longer intends to make an offer”.

The news sent Petroceltic’s shares crashing by a third, down 59.5p to 114.5p. Sources said Dragon had abandoned the offer due to the dramatic fall as well as uncertainty over the future path of oil prices.

The deal would have given Dragon — which is focused on Turkmenistan — a firmer footing in Algeria, where Petroceltic owns a number of gas projects. Insiders said that while the deal still made strategic sense, it would be dependent on a recovery in the oil market.

Both firms are dual listed in London and Dublin and, under Irish takeover rules, Dragon must wait for a year before making another approach unless another bidder joins the fray.

Brent crude has now fallen for five months running — the longest losing streak since the 2008 financial crisis. The slide is down to several factors including mounting worries over global growth, a supply glut triggered by the US shale gas boom and last week oil cartel Opec’s decision not to cut production in response to the slump in prices.

Alongside Brent’s woes — likely to hit the UK’s tax take in Wednesday’s Autumn Statement — the latest signs of a slowdown in China also battered miners amid worries over flagging demand from the world’s biggest metal consumer.

Copper prices hit a four-year low and gold was down 2 per cent after the Swiss voted against boosting reserves of the precious metal in a weekend referendum. Tullow Oil was the FTSE 100’s biggest casualty, down 7 per cent or 30.1p to 395.9p, while miners Anglo American, BHP Billiton and oil and gas services firm Weir were also among the top ten blue-chip losers.

Mike van Dulken, head of research at Accendo Markets, called the latest rout a “Black Monday” for oil. Spreadex financial analyst Connor Campbell added: “Like oil, gold has no immediate saviour on the horizon, as things look bleak for both commodities. The yellow metal will be hoping that Chinese and American economies can weaken further in order to make gold a viable investment once more.”