Dragon Oil (LON:DGO) has kicked off its share buy-back programme and it has in the past two days bought 500,000 shares for cancellation.
Paying between 505.5 and 533p a share it has so far spent at least £2.5 million.
On Wednesday the growing oil producer unveiled its proposal to buy back US$200 million worth of shares through on market transactions.
The company says it has a strong financial position and significant cash generating abilities. And it believes a share buy-back programme offers an efficient route to return surplus cash to shareholders.
At the end of March Dragon Oil had US$1.65 billion in cash.
Dublin based broker Davy says the share buyback programme does not come at the expense of Dragon’s investment in organic growth or diversification. Dragon has the firepower to execute its plans using its cash from operations, the broker said.
Dragon continues to grow its production profile in the Caspian Sea, where it is working to increase production to 100,000 barrels a day by 2015.
It is primarily a one asset company. However it took a step towards diversification last week as it landed a stake in a new exploration venture in southern Iraq.
Alongside partners Kuwait Energy and Turkish Petroleum it has been awarded a contract to explore for oil near Basra. The consortium will have five years to assess whether or not Block 9 can be developed into a commercialoil field. If successful the consortium can then apply for a 20-year development licence.
Through the terms of the contract the consortium will receive US$6.25 per barrel of oil equivalent. This relates to subsequently produced oil, should a commercial discovery be made and developed, and it kicks in once a prescribed level of production has been reached.