Live news , top stories, corporate news, company news, sector news, economy news, results analysis news, ceo interviews, fund manager interview, advisor interview, market news, bazaar talk, hot stocks news, ipo news, commodities news, mutual fund news, insurance news, news wire
29 November, 2014 07:45 IST
Value accretion potential of OVL-Kashagan deal hinges upon cost recovery, fiscal terms: PL
Source: IRIS Exclusive | 27 Nov, 2012, 06.44PM
Comments  |  Post Comment

ONGC Videsh (OVL) is set to acquire Conoco Phillips’ 8.4% stake in the Kashagan oil field project for USD 5bn. Kashagan oil field is located in the Kazakh sector of the Caspian Sea. The deal is subject to various government approvals, Kazakhstan's as well as co-ventures' pre-emption rights. The transaction is expected to close in the first half of 2013.

Oil in place stands at 38bn barrels. Owing to the reservoir's complexity, the recovery factor is relatively low, about 15-25%. ENI's website states the recoverable reserves at 7-9 billion bbls. The first oil is expected from the field in H1FY13 and initial estimates peg production at 370-450 kbpd. Peak output is expected at 1.5mbpd towards the end of 2020.

''According to our estimates, OVL has paid USD 7.8 a barrel, which looks reasonable, broadly in line with carrying value of COP in Conoco's books. However, the value accretion potential of the deal hinges upon the cost recovery aspect and fiscal terms, given the significant cost overruns,'' said Prabhudas Lilladher.

''Moreover, the Phase-II development of the field is also stalled due to conflict on cost issues with the Kazakh government. The acquisition is a part of OVL' strategy to increase its production to 20MMTPA by 2020 from FY12 levels of 8.8MMTPA. ONGC, (Q,N,C,F)* with cash of USD 4 billion in its book at the end of September 2012, would be able to fund the deal but will now become a net debt company,'' it added.

It has recommended 'Accumulate' on the ONGC, with a price target of Rs 283 as compared to current market price (CMP) Rs 250 in its report dated Nov. 27, 2012.

Click here to view full report

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.


Related Articles
Ind-Ra rates Prism Cement's Rs 1,000 mn NCDs at 'A-' - 28-Nov-2014 17:36
IDBI Bank opens Zonal Office in Chandigarh - 28-Nov-2014 16:22
CRISIL reaffirms `AA+/Stable/A1+` on Bharti Airtel - 28-Nov-2014 15:02
State Bank of India shares climb on partnership with Nissan - 28-Nov-2014 14:51
Nissan, SBI enter strategic tie-up to offer vehicle finance options in India - 28-Nov-2014 14:48
ICICI Bank allots 227,650 shares under ESOS - 28-Nov-2014 14:27
Coal India gives nod for MCL project worth Rs 113.63 bn - 28-Nov-2014 14:15
GEPL Capital maintains 'Buy' on VIP Industries; target Rs 123 - 28-Nov-2014 11:34
Ind-Ra affirms Coromandel International at 'AA+' - 28-Nov-2014 10:12
'Accumulate' Tata Steel; target of Rs 530: Prabhudas Lilladher - 27-Nov-2014 18:22
Essar Steel commissions 6 mtpa pellet complex in Odisha - 27-Nov-2014 18:08
more...
* Q - Quote , N - News , C - Chart , F - Financials
Comments Post comment 
 Post Comment
Name Email
Comment
Security Code type    into this box
Home  |   Shares  |   F&O  |   Mutual Funds  |   Loans  |   Insurance  |   News Centre
Wealth Tracker  |   Newsletters  |   Tax Corner  |   NRI Centre  |   Advertise
© All rights reserved. IRIS Business Services Limited
A Disclaimer