OVL to raise $3 bn for Kazakh acquisition

OVL in November last year agreed to buy ConocoPhillips' stake in Kazakhstan's oilfield for $5 billion

ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), plans to raise at least $3 billion in debt to part-fund acquisition of US energy giant ConocoPhillips' stake in a Kazazkhstan oilfield.

"We can take $1.5 billion loan from our parent company (ONGC)... May be even $2 billion. The rest $3 billion will be raised in overseas debt," OVL Managing Director Dinesh K Sarraf said here.

OVL in November last year agreed to buy ConocoPhillips' 8.4% stake in Kazakhstan's biggest oilfield, Kashagan, for $5 billion.

Sarraf, who has steered OVL out of slumber the company had gone into post the Imperial Energy acquisition debacle, said borrowings will not be an issue as was demonstrated when the company raised $800 million for an acquisition in Azerbaijan at lowest cost ever.

OVL raised $300 million through a 5-year tenor unsecured bond and $500 million through a 10-year Note. The 10-year bond bears fixed coupon of 3.756% per annum while the 5-year note will bear 2.574% per annum.

"We have tested the markets and we are confident of raising funds for Kazakh acquisition," he said.

OVL, which earlier this month got government approval for the Kashagan acquisition, is awaiting nod from Kazakhstan government to close the deal.

Kazakhstan has publicly stated that it will convey its decision by July.

OVL had gone into a shell after its January 2009 acquisition of Russia-focused Imperial Energy for $2.12 billion was severely criticised by many, including the Comptroller and Auditor General (CAG), as output and reserves lagged projections. Output at about 12,000 barrels per day was short of 35,000 bpd projected at the time of acquisition.

Sarraf after taking over as Managing Director in September 2011 turned around OVL into an aggressive acquirer, clinching a $1.001 billion deal to buy US energy major Hess Corp's stake in an Azerbaijan oilfield and $5 billion acquisition of ConocoPhillips' stake in a Kazakhstan oilfield.

Kashagan, a Caspian Sea field set to produce 370,000 barrels of oil a day, is to start output by September, eight years later than initially planned and with costs nearing $46 billion, double the early estimates.

While OVL got nod of the parters for acquisition of ConocoPhillips stake at end of January, Kazakh government has time till July to approve the transaction.

Exxon Mobil, Royal Dutch Shell, Italy's Eni, Total of France and KazMunaiGaz each hold 16.8% of Kashagan. Japan's Inpex Corp has 7.56%.