Vankorneft stake buy: OVL may tap foreign currency debt market

By: |
Updated: December 25, 2015 10:06:06 AM

ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), is likely to tap the foreign currency credit market to fund the 15% stake it proposes to buy in Russia’s CSJC Vankorneft, a senior company executive told FE.

ONGC-main-660

ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), is likely to tap the foreign currency credit market to fund the 15% stake it proposes to buy in Russia’s CSJC Vankorneft, a senior company executive told FE.

A formal agreement is expected to be signed soon between Russia and India for the share purchase valued at close to $1.26 billion.

“We may look at the foreign currency bond or loan market whichever offers better pricing. It may even be a mix of both,” the executive said. Regulatory approvals for the transaction are awaited and it is likely to be closed early next year.

ongc-gr

The payout to the Russian company will be in dollars, the person said, and OVL may issue foreign currency bonds like it did in 2014, or may tap the foreign currency loan market, which is highly competitive and dominated by Japanese and Australian banks known to offer tighter spreads.

OVL could consider issuing a non-dollar foreign currency bond if there is a cost advantage. “Sometimes there are benefits from raising funds in another currency on a fully-hedged basis. If the all-in cost is lower in other currencies, we may opt for that,” the executive explained.

In the past, OVL’s decision of going for a euro bond had paid off. The company had raised $2.2 billion in 2014 via dollar- and euro-denominated bonds for its Mozambique acquisition. Of the total amount, 525 million euro was raised through euro-denominated bonds. It was reported this year that the exchange rate changes had led to a gain of R700 crore in terms of interest outgo.

In September, the company had signed definitive agreements to acquire up to 15% shares in CSJC Vankorneft, a company organised under the law of Russian Federation, which is the owner of Vankor Field and NorthVankor licence. Rosneft Oil Company, the national oil company of Russia, holds 100% stake in Vankorneft.

Vankor is Rosneft’s (and Russia’s) second-largest field by production and accounts for 4% of Russian production. Daily production from the field is around 442,000 bpd of crude oil on an average, with ONGC Videsh’s share of daily oil production being about 66,000 bpd.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
121 firms enter Dalal Street in 2015, raise Rs 13,600 crore
2Dr Lal, Alkem shares extend gains for second day after blockbuster listing
3SSWL surges over 10% on order worth $13.5 mn from Siam Kubota Corp