8 March, 2010
India’s ONGC May Borrow $10 Billion to Buy Assets (Update2)
(Closes shares in the seventh paragraph.)
By Gaurav Singh and Archana Chaudhary
March 8 (Bloomberg) -- Oil & Natural Gas Corp., India's biggest energy explorer, may borrow $10 billion over the next decade as it competes with rivals from China and South Korea to buy oil assets overseas to meet domestic fuel demand.
"We still have surplus funds in our treasury and I'm not happy to be a zero-debt company," Chairman R.S. Sharma said in a March 5 interview at his office in New Delhi. "We would like to borrow and leverage that for expanding our business."
The state-owned company completed India's biggest overseas energy acquisition last year and had cash and short-term investments of 127 billion rupees ($2.7 billion) as of March 31, according to Bloomberg data. Its debt-to-equity ratio was 0.01. ONGC would like a ratio of 2, amounting to more than $10 billion of debt over 10 years as its net worth grows, Sharma said.
ONGC, which is leading India's search for resources, bought Imperial Energy Plc for 1.4 billion pounds ($2.1 billion) and was part of a group that won a bid last month for a project in Venezuela. Chinese energy companies have announced plans to spend at least $18 billion since 2006 on oil and gas fields in Africa as the world's fastest-growing major economies seek to build energy security.
"It will be too early to say if the rivalry between Indian and Chinese companies will intensify again as the oil market is not at that place yet," Mahesh Patil, who helps manage about $2.5 billion in assets at Birla Sun Life Asset Management Co., said by telephone from Mumbai. "I don't think Indian companies will be as aggressive as the Chinese."
Devon Asset
New Delhi-based ONGC produces almost 25 percent of the crude used by India, Asia's third-largest energy consumer. Declining output at three-decade old domestic fields has forced the explorer to diversify its sources of supplies.
ONGC shares gained 0.6 percent to 1,100.50 rupees at the close in Mumbai trading. The stock has climbed 63 percent in the past year, trailing the benchmark Sensitive Index, which has doubled.
Sharma declined to comment on whether ONGC will bid for Devon Energy Corp.'s stake in an Azerbaijan oil field. Cnooc Ltd. and China Petroleum & Chemical Corp. are likely to bid for the stake, according to two people with knowledge of the matter.
Devon expects all bids by midyear for the 5.6 percent stake, which may be valued at $3 billion.
Venezuela, Iran Block
ONGC was part of a group that won a bid last month to develop the Carabobo 1 block in Venezuela's Orinoco Belt. Led by Spain's Repsol YPF SA, the partners include Malaysia's Petroliam Nasional Bhd., Indian Oil Corp. and Oil India Ltd. ONGC holds an 11 percent stake in the venture.
In December, ONGC and the Hinduja Group agreed to buy a 40 percent stake in the 12th project phase of Iran's South Pars natural-gas field, according to Seifollah Jashnsaz, managing director of National Iranian Oil Co.
India has trailed China in the quest for oil. Cnooc bought a stake in a Nigerian oil field for $2.7 billion in 2006 after India's government blocked ONGC's plan to buy the share.
Sharma defended ONGC's strategy of acquisitions, saying the company has commercial considerations and due diligence to do before getting government approval to buy assets.
ONGC's acquisition of Imperial Energy gave it access to seven blocks in the Tomsk region of Western Siberia, which may produce 25,000 barrels of oil a day by the end of 2010, according to the company's Web site. A plan to produce 35,000 barrels a day by the end of 2009 was scaled back after crude oil prices tumbled from a record $147.27 on July 11, 2008.
Overseas Stakes
ONGC got 15 percent of its revenue and 21 percent of its net income from overseas in the year ended March 31, 2009, according to data compiled by Bloomberg. ONGC is targeting annual production of 60 million metric tons of oil and gas overseas by 2025, about double India's current output of 34 million tons.
The Indian explorer has stakes in oil fields in Venezuela, Colombia, Brazil, Cuba, Congo, Egypt, Libya, Nigeria, Sudan, Iran, Syria, Myanmar, Vietnam, Russia and Turkmenistan, according to the Web site of ONGC Videsh Ltd., the overseas unit.
India's crude oil output may rise 11 percent to 36.7 million tons in the year ending March, the finance ministry said last month.
--With assistance from Rakteem Katakey in Delhi and John Duce in Hong Kong. Editors: John Chacko, Amit Prakash.
To contact the reporters on this story: Gaurav Singh in New Delhi at gsingh31@bloomberg.net; Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.
India’s ONGC May Borrow $10 Billion to Buy Assets (Update2) Added: (08.03.2010)
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