Dragon Oil made its ambitions for north Africa clear yesterday when it made a tentative €627 million offer for fellow Dublin-listed explorer Petroceltic. The 230 pence a share bid is not firm, but the target's board has signalled that it would back it, subject to Dragon meeting a number of, as yet unspecified, conditions.

Dragon has been on the hunt for potential acquisitions for a while. Recently it landed exploration acreage in both Algeria and Egypt. Both are close to key markets in Europe but they are also home to some of Petroceltic's key assets.

One of the prizes that industry watchers say Dragon is eyeing is Petroceltic’s Ain Tsila gas field in Algeria. The company needs to finance its development. This year it raised $100 million from both new and existing shareholders and has plans to step up to the official lists of both the Irish and London markets, which would presumably give it access to more investors and their cash.

Dragon’s bid for the company reportedly has the backing of its 54 per cent owner, the Emirates National Oil Company, which means it is likely to have the wherewithal to go ahead and finance Ain Tsila itself, if it succeeds in annexing Petroceltic.

There is the the added bonus that Petroceltic has production assets in both Egypt and Bulgaria, which would add about 25,000 barrels of oil a day (bopd) to Dragon's 100,000 bopd output from its chief interests in the Turkmenistan section of the Caspian Sea.

The joker in the pack is Petroceltic’s exploration acreage in Iraq’s Kurdistan region, a flashpoint in the current conflict with Islamic State. The Irish company had to suspend exploration drilling there last month but is due to resume work shortly. The suggestions yesterday were that Dragon would offload this.

Not everyone agrees that Dragon is fairly valuing Petroceltic. Peel Hunt analyst Werner Riding suggested a rival could emerge if Dragon's offer were to become firm. Either way, the game is now afoot.