OIL completes acquisition of 50% stake in oil block in Russia

Total commitment from the company will be $85 million including $45 million for development capex

Oil India Ltd, the nation's second largest explorer, today said it has completed acquisition of 50% stake in an oil block in Russia for $85 million.

OIL bought the stake from Ireland-registered, Russia- focused firm PetroNeft Resources plc in License 61 in Tomsk Oblast in Russia.

The deal includes a three-stage payout including $35 million in cash up-front, $45 million in exploration and development spending and a performance bonus of up to $5 million.

"The total commitment from OIL will be $85 million including $45 million for development capex. The effective date of the acquisition is January 1, 2014," the company said in a statement here.

The acquisition marks OIL's entry into Russia and is a significant addition to the company's overseas E&P portfolio. Last month, it had signed an MoU with Russia's Gazprom International BV for joint pursuit of exploration opportunities across the globe as well as collaborate on liquefied natural gas (LNG).

License 61 is located on the eastern side of the Ob river in the oil-bearing region of the Tomsk Oblast. The 4,991 sq km licence contains 7 oil fields and over 25 identified prospects and leads.

The block started production in 2010. Current production from the licence is around 2,100 barrels of oil per day.

According to independent expert Ryder Scott, the block holds 117.68 million barrels of oil reserves. These estimates do not include the new oil find of Sibkrayevskoye.

OIL said it has "completed the acquisition of 50% shareholding in WorldAce Investments Ltd (WorldAce), a Cyprus based wholly owned subsidiary of PetroNeft Resources Ltd (PTR), which owns License 61 in Tomsk Oblast region in Western Siberia, Russia".

PetroNeft Resources Plc is listed at Dublin Stock Exchange and London Stock Exchange.

OIL said it had on April 17 signed definitive agreements with PTR to take 50% non-operating interest in Licence 61 in Tomsk Oblast in Russia. The deal has now been completed.

"Subsequent to the signing of the definitive agreements, the major Conditions Precedents for successful closure of the deal, including the approval of shareholders of PetroNeft and Russian regulatory approvals were obtained," the statement said.

Rothschild and Thomson and Knight were financial and legal advisor respectively to OIL on this transaction.