OVL to buy ConocoPhillips' 8.4% in Kazakh field for $5 bn

In its biggest acquisition ever, ONGC Videsh Ltd (OVL) has agreed to invest around $5 billion to acquire ConocoPhillips’ 8.4 per cent stake in the Kashagan field off North Caspian Sea. The deal is expected to be closed during the first half of next calendar year.

Among OVL’s other large deals, it had acquired Imperial Energy in 2009 for $2.1 billion. The latest acquisition will help it offset the drop in production from Sudan and Syria which pulled its output down by more than seven per cent in 2011-12.

In a statement, the company said: “ONGC Videsh has finalised definitive agreements for acquisition of the 8.4 per cent participating interest (PI) of ConocoPhillips in the North Caspian Sea production-sharing agreement that includes Kashagan Field in Kazakhstan. The acquisition is subject to relevant government, regulatory approvals, priority rights and consortium pre-emption rights.”

GLOBAL SHOPPERS
Top outbound M&A transactions by Indian companies since 2006

$12,983 mn - TATA STEEL
takes over UK’s Corus Group in Oct ‘06

$10,700 mn - BHARTI AIRTEL
acquires Kenya’s Zain Africa BV in Feb ‘10

$5,731 mn - HINDALCO
aquires Canada’s Novelis in Feb ‘07

$2,624 mn - ONGC VIDESH LTD
buys UK’s Imperial Energy in Aug ‘08

$2,300 mn - TATA MOTORS
aquires UK’s Jaguar, Land Rover in Mar ‘08

$2,000 mn - TANTI-ARCAPITA JV
acquires China’s Honiton Energy in Jul ‘08

$1,972 mn - ADANI ENTERPRISES
buys Australia’s Abbot Point in May ‘11

$1,794 mn - ESSAR GLOBAL
aquires Canada’s Algoma Steel in Apr ‘07

$1,700 mn - RELIANCE INDUSTRIES
buys 60% stake in the US’ Marcellus Shale gas asset in Apr 10

Source: Dealogic

NYSE-listed ConocoPhillips is the third-largest energy company in the US and the fifth-largest refiner in the world. In a statement on its website, it said “expected proceeds are approximately $5 billion, representing the purchase price plus expected working capital and customary adjustments at closing”.

“The proposed sale of its Kashagan interest is part of ConocoPhillips’ plan to increase value for shareholders through focused capital investments and a commitment to deliver growth in production and cash margins, improved returns on capital, and sector-leading shareholder distributions,” it added.

“The sale of this quality asset is an important component of our ongoing strategic asset disposition programme,” said Don Wallette, executive vice-president (commercial, business development and corporate planning), ConocoPhillips.

The acquisition would mark OVL’s entry into the largest oil-proven North Caspian Sea of Kazakhstan. The Kashagan field, located in the shallow waters of the Kazakh North Caspian Sea, is the world’s largest current development project. Kashagan’s consortium partners are Eni, Total, Shell, ExxonMobil and KazMunaiGaz — each with 16.81 per cent PI, while ConocoPhillips has 8.40 per cent and Inpex 7.56 per cent PI.