KNOC confirms Dana approach

By Cho Mee-young and Sarah Young

SEOUL/LONDON (Reuters) - Korea National Oil Corp (KNOC) confirmed it was in "very preliminary" talks over a cash offer for Dana Petroleum DNX.L, as it looks to use a $6.5 billion (4.3 billion pound) warchest to help double the country's oil reserves.

The KNOC confirmation on Friday followed a Dana statement after the market close on Thursday detailing a very preliminary approach, all of which helped push Dana stock up 23 percent to 1,452 pence, its highest level since last October.

"We had approached Dana but no concrete progress has been made," a KNOC source told Reuters earlier on Friday, declining to be identified due to the sensitivity of the issue.

UK media reports on Thursday put the price offered by state-run KNOC at as much as 1,800 pence per share, which would value the company up to 1.7 billion pounds.

London-based analysts were sceptical on a deal, however, given the preliminary nature of the approach and the rumoured price.

"If the shares reach 1,500 pence today we would recommend selling on the grounds that it's far from certain the deal will go through," Evolution Securities analyst Richard Griffith said.

Oriel Securities analyst Nick Copeman said KNOC would be unlikely to pay for Dana's exploration upside and, based on its existing reserves, his valuation would not support a significantly higher offer than 1,450 pence.

Dana currently trades on 9.6 times estimated earnings, while an offer at 1,800 pence would value it at 16.7 times forecast EPS, according to data from Thomson Reuters StarMine.