Oil India Ltd (OIL), the state explorer that bid for Gulfsands Petroleum Plc, said it has more than $2.5 billion cash available for acquisitions as it seeks producing assets overseas to help boost the country’s energy security.
“We have earmarked around $500 million toward overseas acquisitions in” the year that started April 1, Chairman and Managing Director N M Borah said in an e-mailed reply to questions on April 1. “If the opportunity or need arises, we would be in a position to spend higher outlays.”
India plans to set up a sovereign wealth fund to help state-run explorers compete with Chinese rivals for overseas energy assets. The government has asked Oil & Natural Gas Corp and Oil India to make at least one acquisition each this year to meet demand in the world’s second-fastest growing major economy. Gulfsands in March rejected a $580 million bid led by OIL.
“OIL can leverage their balance sheet and use much of their cash to buy fields,” Vinay Nair, a Mumbai-based analyst with Khandwala Securities Ltd said. “Raising money is not a problem for them.”
Oil India shares have declined 7 per cent this year compared with a 3 per cent gain in the benchmark Sensitive Index. The stock gained 0.4 per cent to Rs 1,155.05 in Mumbai trading today.
“As a strategy, our focus is on acquiring producing properties as these will add to our reserve base, enhance oil production and also add to the bottom line,” Borah said in an interview in his office at Noida, near New Delhi. “Where overseas assets are concerned, we are looking at various options including some in Africa,” Australia and Southeast Asia.
Gulfsands bid
Oil India and Indian Oil Corp, the nation’s biggest state refiner, said on March 23 they had bid for Gulfsands. The companies offered 315 pence a share, which was “wholly inadequate,” Gulfsands said that day. The bid valued the UK explorer at about £380 million ($580 million).
“We bid based on information that was available in public,” Borah said. “We now wish to do due diligence on them.”
OIL has submitted a due diligence proposal to Gulfsands and has not yet officially heard from the company, Borah said. The explorer and Indian Oil Corp haven’t decided whether to increase their bid for the UK-listed company, he said.
Higher Offer
London-based Schroders Plc, Gulfsands’s largest shareholder, would be willing to consider a higher offer, Andy Brough, who manages Schroders funds that hold the stock, said March 22. Schroders owns 22 per cent of Gulfsands.
Gulfsands owns a 50 per cent stake in a block in Syria that produces about 11,000 barrels a day of crude oil, according to the company’s Web site. It also owns interests in 44 blocks, including 30 producing blocks, off the coast of Texas and Louisiana.
Oil India had cash and near cash of Rs 60.7 billion rupees ($1.4 billion) in the year ended March 2009, according to data compiled by Bloomberg. The explorer raised Rs 27.8 billion selling shares in an initial public offer in September.
The company plans to spend about $1 billion on operating its oilfields in India and exploring newer areas this financial year, up 50 percent from the year ended March 31, Borah said.
Oil India targets production of 3.65 million metric tonnes of crude oil in the year that started April 1 compared with 3.57 million tonnes a year earlier, Borah said. Natural gas output may rise to 2,621 million cubic meters this year from 2,400 million cubic meters last year, he said.
