Turkmen President Niyazov dies; political uncertainty could mean risks for Dragon Oil and Burren Energy
Turkmen President-for-life Saparmurat Niyazov has died of sudden cardiac arrest, Reuters reported this morning, quoting state TV. The 66-year-old leader has ruled the reclusive Central Asian state and the FSU's second biggest gas producer since 1985 (since 1991 as a president).
The current political situation in the country is far from being certain at the moment. It remains unclear who will be Niyazov's successor and what changes it might bring to the country's political system and economy. Due to the extremely high level of centralization of power in Niyazov's hands, we see potential risks from the political uncertainty and potential successor issues for the two companies from our universe with business in Turkmenistan - namely Dragon Oil and Burren Energy - and thus would expect high volatility in their shares. The situation could also influence Gazprom, the largest buyer of Turkmen gas, which has signed a contract to purchase annually 50bn cm of Turkmen gas in 2007-2009 at $100/mcm.
We rate Dragon Oil as a Buy based on its fundamental characteristics, with an end-2007 fair value of $4.29. We no longer provide a formal recommendation on Burren Energy, given its strong territorial expansion into African and Asian markets.
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