Dragon Says Dividend Growth Will Slow Down on Acquisitions

Dragon Oil Plc, an explorer focused on Turkmenistan, will slow future increases in dividends as it considers acquisitions.

The company today raised its first-half payout to shareholders by 67 percent to 15 cents a share. Dragon Oil plans to spend $200 million on buying back 5 percent of its shares, the Dubai-based explorer said in a statement.

For dividends “I don’t see the same growth pattern continuing in the future with the same pace,” Chief Executive Officer Abdul Jaleel Al Khalifa said in a phone interview.

Dragon has been expanding in Iraq and Tunisia to diversify from its main production base in Turkmenistan. It plans to bid for exploration licenses in Afghanistan and is looking for possible acquisitions with output expected to rise by as much as 15 percent a year through 2015. Dragon held $1.7 billion in cash as of June 30.

“We still want to keep that money to grow the company and always put it in the right place,” al Khalifa said. “It’s only two or three acquisitions and all money is gone.”

Dragon had considered expanding in West Africa. In February, it gave up plans to bid for BowLeven Plc, a driller working in Cameroon.

If Dragon meets its production forecast with the oil price averaging at $95 a barrel, it “will end up with a $4 billion cash pile, representing 85 percent of current market” value, Tao Ly, a London-based analyst at Nomura International Plc, wrote in an e-mailed report.

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