Indian Oil Giants Set to Invest Billions Globally This Year (and in Canada too)

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Indian oil companies are on the hunt for acqusitions. This and China's hunger for acquisitions of oil reserves bode well for the valuations of both large and small oil producers, and may make equity financing easier to come by in the exploration and development industry in the long term.

In particular, Oil India has a war chest of $2.5-billion to use for acquisitions, and according to Bloomberg, the Indian government has asked Oil India and ONGC to make at least one acquisition each during the course of this year, as of April 1, to meet the country's demands.

“Oil India 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 by telephone today. “Raising money is not a problem for them.”

Oil India shares have declined 7 percent this year compared with a 3 percent gain in the benchmark Sensitive Index. The stock gained 0.4 percent to 1,155.05 rupees 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.

ONGC, Oil and Natural Gas Corp. of India, estimated to have $2.8-billion in cash reserves, has been reportedly trying to make an acquisition in the Canadian oil sands arena, according to Bloomberg.

ONGC had 127.4 billion rupees ($2.8 billion) of cash and short-term investments and net debt of 127.10 billion rupees as of March 2009, according to data compiled by Bloomberg. The company will have the capability to raise about $25 billion in 10 years, Chairman and Managing Director R.S. Sharma said March 15.

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India, planning a sovereign wealth fund to help companies bid for overseas energy assets, has asked state-run ONGC and Oil India Ltd. to make at least one acquisition each in the year starting April to meet demand in the world’s second-fastest growing major economy. Indian companies are competing for overseas energy resources with China, which spent a record $32 billion last year buying oil, coal and metals projects abroad.

“This fits into ONGC’s go-global strategy,” said Neil Beveridge, an energy analyst at Sanford C. Bernstein Ltd. in Hong Kong. “There are enormous reserves in Canada’s oil sands and volumes are large and this fits into the strategy to get oil to India.”

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New Delhi-based ONGC bought Imperial Energy Plc for 1.4 billion pounds ($2.1 billion) last year in its biggest acquisition. The explorer won the rights to develop the Carabobo 1 heavy oil field in Venezuela in partnership with Oil India Ltd. and Indian Oil Corp. India’s cabinet approved $2.18 billion in spending by the Indian companies in the project last week.

Source: Bloomberg.com

Oil India Has $2.5-billion Cash for Acquisitions - April 5, 2010
ONGC Said to Seek Acquisition in Canadian Oil Sands - March 25, 2010

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