Armed with $2 billion, Oil India on the Prowl
Mumbai   07-Jul-2010

Armed with cash ammunition of $2 billion, Oil India Ltd., the country's second largest state-owned hydrocarbons explorer, is on the prowl with partner IndianOil (IOC) to acquire small and medium-sized producing assets or even companies that can be value accretive.

Oil India has also plans to diversify into more downstream businesses to improve its profitability by investing higher margin product value chain, the recently companies said in an investor presentation posted on its websites.

The company told analysts it is looking at producing assets which would give at least 20% return in tandem with organic growth of the company.

"Inorganic growth in JV with IOC-supported by $2 billion cash. To acquire small-medium sized producing properties equivalent to organic growth" Oil India said.

IOC had cash of over Rs 1,300 crore as on March 31, with debt- to-equity ratio of 0.9. Oil India said it has lined up investments of $1.9 billion, or nearly Rs 8,900 crore, to be spread over 2010-11 and 2011-12.

For the current year ending March, the company has outlined investment of Rs 4,800 Crore, of which 46%, or over Rs 2,200 crore, has been earmarked for inorganic growth indicating that the company is close to striking some deals.

For the over Rs 3,600 crore investment plan for 2011-12, Oil India has earmarked only 1% for mergers and acquisition and over 50% for exploration and appraisal. In 2010-11, 32% of the planned capital expenditure will be spent on exploration and appraisal and remaining 22% on oversees projects, domestic assets acreage development. Earlier this year, Oil India and IOC's plan to acquire UK listed Gulfsands Petroleum PIc was put on hold following differences over due diligence.

OIL-IOC had in early-May pulled out of the race to acquire Gulfsands after the latter refused their request for valuation and diligence before making a firm offer.

Later in May, Oil India Chairman  N M Borah said Gulfsands , which has oil assets primarily in Syria , is still on the radar but OIL-IOC have so far not made any further move.

In the current year, Oil India will focus on development of blocks in Assam and Andhra and plans to drill 44 wells as against 30 drilled in 2009-10. It also plans to drill 2 new development wells in Rajasthan. It wants to drill 17 exploration wells in Assam and Andhra Blocks and 14 in blocks in Rajasthan and KG Basin.

On downstream, Oil India said it wants to participate in refining and petrochemicals venture on a "Selective Basis" as well as foray into the latest hydrocarbons Fad - shale gas - in its nominated acreages in the north-east.