Bharat Petroleum exercises RoFR to buy Videocon Oil's Brazil assets

Earlier, lenders had given conditional nod to sell 3 basins to Eneva, PetroRio

Government-owned Bharat Petroleum Corporation (BPCL) has exercised the Right of First Refusal (RoFR) in a bid to take control of bankrupt Videocon Oil Ventures’ (VOVL’s) Brazilian assets.

BPCL’s overseas arm BPRL Ventures BV and VOVL’s Videocon Energy Brazil had acquired oil blocks in the South American nation as joint venture partners but they could not develop them due to ongoing bankruptcy proceedings against Videocon Industries and its subsidiaries.

A source close to the development said lenders have received BPCL’s offer after they decided to sell three of the JV’s assets to Brazilian gas operators Eneva S A and PetroRio last month. BPCL, which has RoFR over these blocks, decided to make an offer, proceedings from which, if successful, would be used repay VOVL’s Rs. 30,000 crore bank dues. Banks had made claims against Videocon Industries for Rs. 63,000 crore, which includes VOVL’s dues.

While Anil Agarwal-owned Twin Star made an offer of Rs. 3,000 crore to take over VIL following the IBC proceedings, a separate process was initiated for Videocon's oil assets.

The lenders had given conditional clearance to sell the Potiguar Basin and the Sergipe Basin to Eneva for $250 million, and Campos Basin to PetroRio for $30 million. According to a source aware of the development, the original bidding was for the asset value, which is equity value minus corresponding liabilities. Hence, BPCL has submitted an offer to the consortium of lenders which is based on structured value, including liabilities. The exact figure of the offer is yet to be known.

“BPCL has shown interest in matching (Eneva’s and PetroRio’s offers), subject to various Government of India approvals. The consortium of banks will have to accept the offer by BPCL. The information we have got is that 100 per cent of lenders will have to accept the BPCL offer,” said a source aware of the development.

The process of clearance by lenders and then the Indian government is expected to take at least two to three months. “They cannot take only asset value and ignore liabilities. BPCL has calculated a structured value and made an offer to lenders,” he added.

Though BPCL’s overseas arm BPRL Ventures BV and Videocon Energy Brazil were initially equal partners in the basins, BPRL’s stake increased after VOVL failed to meet the share of a cash call for exploration. According to media reports, BPCL at present holds around 61 per cent participating interest in these assets, while VOVL holds the remaining 39 per cent.

A source in VIL said the entire process will depend on the judgment by the Supreme Court, which is hearing a petition by Twin Star. It appealed against the NCLAT's (National Company Law Appellate Tribunal’s) order to seek rebids for the company.

The Assets

IBV Brasil Petroleo Limitada (incorporated in Brazil), a joint venture company of BPRL Ventures BV (60.88 per cent) and Videocon Energy Brazil (39.12 per cent), currently hold participating interests in five deep-water blocks in three concessions in Brazil.

1. Campos

IBV has 35.7 per cent PI; PetroRio Jaguar Petroleo became the operator of the block in June 2021 with 64.286% PI after acquiring stakes from BP (erstwhile operator with 35.714 per cent PI) and the other partner, Total Energies (28.572 per cent PI). The operator has proceeded with an exclusive operation for development of the Wahoo discovery in the block, following which IBV has initiated arbitration proceedings against the operator at the International Chamber of Commerce (ICC), London.

2. Potiguar

The concession is operated by Petrobras with 30 per cent PI and other partners are IBV (20 per cent), Petrogal (20 per cent) and BP (30 per cent). The operator has approached ANP (Brazilian regulator) on behalf of the concessionaires for the relinquishment of the block. ANP’s approval is awaited.

3. Sergipe Alagoas

The concession currently consists of two blocks – SEAL-M-426 and SEAL-M-349 – and Petrobras is the operator with 60 per cent PI, while IBV holds the remaining 40 per cent. During the exploration periods, four discoveries of oil and gas, i.e., Barra, Farfan, Cumbe and Barra-1, have been made in this concession.