For all who have such problems (as me :)) - turned out look_at works in different than local coordinate system - world coordinates
In godot its accessed by global_transform property ..
However you may run in issue when object facing just back to you - in this case you can still rotate it .
Code
Dragon.look_at(Player.global_transform.origin,Vector3.UP)
Dragon.rotate_object_local(Vector3(0,1,0), 3.14)