London-listed oil producer Dragon Oil has dropped an £510m takeover offer for rival Petroceltic, blaming weak oil prices that have fallen around 35pc since the deal was first announced in October.
“Dragon Oil now confirms that, in the light of prevailing market conditions, it no longer intends to make an offer for Petroceltic,” the company said in a statement on Monday.
The news sent Petroceltic shares 32pc to 118p by 0836 GMT, while Dragon Oil shares edged 1.7pc lower.
The dropped bid is the latest casualty of a steep drop in global oil prices as companies reprioritise investments against a backdrop of lower returns from oil production.
Dragon Oil offered 230p a share for Petroceltic in early October.
The deal would have given Turkmenistan-focused Dragon Oil a firmer footing in Algeria, where Petroceltic owns a number of gas projects.
Analysts at First Energy said that they took a positive view on the deal collapsing for Dragon Oil. “We had previously seen this possible transaction as dilutive to our valuation for Dragon Oil that was revised down by 20p per share at the time” they said.
“The offered price was set at a time of a much higher oil price, the recent oil equity melt down could offer Dragon better opportunities than the potential Petroceltic deal” First Energy analysts added.
Last week the UK’s biggest oil companies saw almost £23bn wiped off their valuation after Opec decided to keep production levels constant despite week demand and falling prices.
Brent Crude was trading 2pc lower on Monday morning to £68.74, adding to a 30pc decline since June.
By Ashley Armstrong