Cairn, consortium to drill in Ravva field

Cairn India and its joint venture partners ONGC, Videocon Petroleum & Marubeni-controlled Ravva Oil propose to undertake a USD 44 million drilling campaign in the eastern offshore Ravva field of the Krishna-Godavari Basin from April 2011. The consortia have completed a 4D seismic campaign in the acreage and data interpretation is underway to identify bypassed oil zones. However, the quantum of oil or gas that can be further recovered were not known. The consortium also plans to drill two new ''infill'' wells and ''workover'' two old Ravva wells by March, 2012. The infill drilling campaign is aimed at augmenting production. 

According Cairn, the average gross production from the 331.26-sq km Ravva field in Q3, FY2010-11, was 39,434 barrels of oil equivalent per day, comprising average oil production of 29,667 barrels per day and average gas production of 59 million standard cubic feet per day. Cairn India is the operator of the Ravva field with a 22.5 per cent stake, while Videocon holds 25 per cent, ONGC 40 per cent and Marubeni-owned Ravva Oil holds a 12.5 per cent participating interest. 

Cairn's Bhagyam oil field, the second biggest oil field in the Rajasthan block, is set to commence production in second half of 2011, taking the total output to 1,75,000 barrel per day.

Source: http://www.projectsmonitor.com/OILGAS/cairn-consortium-to-drill-in-ravva-field

Finance, Steel Ministries differ over SAIL FPO

The eagerly-awaited Rs 8,000-crore follow-on public offering (FPO) by Steel Authority of India (SAIL) appears to be in limbo. The steel ministry has taken a wait-and-watch stance, the finance ministry is growing jittery about meeting its disinvestment target of Rs 40,000 crore by the end of this financial year.

“The issue will come as market conditions improve. We are ready and we can go for it even this year, if the market is stable. Otherwise, we would not," Steel Secretary P K Mishra said on the sidelines of a steel summit here, organised by Ficci.

But newly-appointed Steel Minister Beni Prasad Verma has said since the financial year is drawing to a close, the FPO might hit the markets only next year. “We will wait. There is very little time left this financial year. We are looking at market conditions," the minister said.

The government, which holds slightly more than 85 per cent stake in SAIL, plans to off-load 5 per cent in the company to raise an estimated Rs 4,000 crore. SAIL will issue fresh equity to raise a similar amount. After this FPO, the government’s holding would come down to 69 per cent.

“We have to make an assessment of market conditions and only then will we take a final decision. One-and-a-half months are still available this fiscal… We might have to wait for the next financial year,” SAIL Chairman C S Verma said, adding that the company is ready with a prospectus, which is yet to be approved by the board.

SAIL’s FPO was supposed to hit the markets in February. The steel giant had appointed six merchant bankers in September. But in January, the process was delayed after the government issued notices to four of the short-listed banks — SBI Caps, Kotak Mahindra, Deutsche Bank and HSBC — for taking up the task of managing SAIL rival Tata Steel’s share sale that mopped up Rs 3,477 crore last month. JP Morgan and Enam Securities are not involved.SAIL is expected to utilise the proceeds from the issue of fresh equity towards funding its capital expenditure. The company has also chalked out an ambitious plan of increasing its installed hot metal production capacity from the existing 13.82 million tonnes per annum to 23.46 mtpa.

Meanwhile, the government is also planning to divest stake in state-run explorer Oil & Natural Gas Corp (ONGC). ONGC has said it will hit capital markets by the middle of March, for which it has appointed merchant bankers. The government had approved the sale of 5 per cent stake in ONGC on December 1 to raise Rs 12,000-12,500 crore.

The Indian Oil Corp divestment has also been delayed and is expected only next financial year, which might also see the sale of shares of by Hindustan Copper, Rashtriya Ispat Nigam, Minerals & Metals Trading Corporation and National Building Construction Corporation.

The department of disinvestment, under the finance ministry, is pressuring SAIL to bring out its FPO before March 31 to meet its disinvestment target. So far, the government has only been able to collect Rs 22,763 crore through Satluj Jal Vidyut Nigam (SJVN), Engineers India, Coal India, Power Grid Corporation of India, MOIL and Shipping Corporation of India.

SAIL shares fell 5.90 per cent on the BSE on Friday, sharper than the overall 1.60 per cent decline in the Sensex. Its closing price stood at Rs 160.15, near its 52-week low of Rs 151.80.

Source:-http://www.business-standard.com/india/news/finance-steel-ministries-differ-over-sail-fpo/425773/

Pick of the week: ONGC

Broking firm Edelweiss has picked up Oil &Natural Gas Corpn (ONGC) as Edelweiss Star. It has recommended `Buy` with the target price of Rs 1,360. Broking firm has given investment rationale and technical view for investing in the stock. The same are as below:

Investment rationale:

Global crude demand likely to increase on global recovery. Moreover energy consumption in India from natural gas(currently ~9% due to shortage of gas) is set to rise due to production increase from 132mmscmd in FY10 to around 230 mmscmd in FY12E. Based on the demand of gas for power and fertilizers, we believe that an increase in thegas supplies can be easily absorbed by the country. In fact, we believe that India may have an appetite for more gas supplies, as the country’s GDP grows above 8.0% CAGR in the next decade which offers serious opportunities in oil & gas sector.

ONGC`s (Q,N,C,F)* earnings will be positively correlated to the increase in crude prices, as an increasing proportion of its international revenues (through OVL in a deregulated environment) will lead to higher realisations on crude. Also, OVL will be the major driver for volumes in the future and is also currently scaling up its production assets aggressively.

Significant APM gas price hike at one go is definitely positive for ONGC. This is a significant positive for the company and will support the substantial capital investmentsby it. Further, ONGC`s current exploration acreage offers significant opportunities for increase in reserves. Further, we are enthused by ONGC`s asset, new projects, and potential exploration upsides. However, till clear subsidy sharing mechanism emerges, uncertainty may prevail.

Investment Risks

Lower-than-expected crude prices will impact the company`s crude realizations and earnings. Additionally, the company`s net realizations also depend on the upstream (ONGC) subsidy sharing.

Higher-than-expected decline rates in its existing matured assets could impact its production, going forward.

ONGC has assets in countries like Sudan and Syria, which face geo-political risks. Therefore, any unfavorable incident could impact production.

Outlook and Valuations

Our outlook on ONGC has improved due to increase in gross crude realisation and recent correction in stock price. On our FY11E and FY12E EPS estimate of Rs. 105 and 129, the stock is currently trading at a P/E of 11.3x and EV/EBITDA of 4.9x on FY11E basis and at a P/E of 9.2x, and EV/EBITDA of 4.3x on FY12E basis. Given these attractive valuations and its growth prospects, we believe the stock offers upside potential in the near term.

Source: Myiris news - Live News - Pick of the week: ONGC

ONGC finds shale gas in Bengal

Oil and Natural Gas Corporation (ONGC), the country’s biggest energy explorer, has struck shale gas reserves in its maiden well in West Bengal. This is the first time shale gas has been discovered in sedimentary shale gas rocks outside the US and Canada.

“ONGC created an exploration landmark when gas flowed out from the Barren Measure shale at a depth of around 1,700 metres, in its first R&D well, RNSG-1, near Durgapur at Icchapur, West Bengal,” the state-run company said in a statement.

Though the well is still under assessment, the breakthrough is significant, as India is the first Asian country where gas was discovered from shale outside the US and Canada. “The well was drilled down to a depth of 2,000 metres. The Barren Measure Shale, which is the main target, was encountered from 985 to 1,843 metres,” the statement said.

Exploration of shale gas, an unconventional energy source, has witnessed a surge in the US and Canada in recent times and is making substantial contribution to total gas production. In the US, shale gas contributes nearly 17 per cent of total gas produce.

The R&D project, which involved drilling of four wells in the Damodar Basin — two wells in the Raniganj sub-basin in West Bengal and two wells in the North Karanpura sub-basin in Jharkhand, was operationalised with the help of Schlumberger. “The estimated expenditure is about Rs 168 crore and the total project is expected to be completed within 520 days,” ONGC said.

Source: ONGC finds shale gas in Bengal

ONGC announces framework agreement with Sistema

ONGC Videsh Ltd, the overseas arm of ONGC Ltd, has signed a framework agreement with Sistema, the largest diversified public financial corporation in Russia and the CIS, for cooperation in the hydrocaron sector. 

The two companies have agreed to consider opportunities for a potential transaction involving (i) Sistema's majority stake in JSC Bashneft and 49 per cent stake in RussNeft, each of which owns and operates numerous fields and refining assets in Russia, (ii) ONGC Videsh's 100 per cent stake in Imperial Energy Corporation, which owns and operates fields in Russia, and (iii) Any other oil and gas assets which the above companies may acquire before definitive agreements are signed.

The parties further agree to consider joint investments in each other's existing and future exploratory assets in certain third countries. 

ONGC proposes to lead a consortium of Indian oil sector PSUs to consider acquiring the stake offered by Sistema under the agreement. The two companies have agreed upon the milestone date of June 30, 2011, by which to formulate the terms for potential transactions. 

ONGC Chairman R.S. Sharma said that Sistema had been scouting for a strategic partner with experience in oil and gas sector and given that ONGC had a proven track record of over 50 years in the oil and gas business worldwide, the partnership should establish synergistic value to the growth plan of the two groups in Russia's oil sector. 

Meanwhile, ANP, the regulatory authority of Brazil, has given approval for farming out in block BM-S-73 in which ONGC Campos Limitada, a wholly owned subsidiary of OVL, had acquired 100 per cent stake in 2007. Similar approval for block BM-S-74 is expected shortly.

The offshore concession is located in the Santos basin and covers an area of 160.04 sq. km. The concession is a part of Brazil's ninth licensing round and is currently in exploration phase. 

ONGC Campos Limitada, Petroleo Brasileiro S.A., Petrobras and Ecopetrol Oleo Gas do Brasil LTDA had entered into an agreement under the terms of which Petrobras will get 43.5 per cent share, Ecopetrol will get 13 per cent and 43.5 per cent will remain with ONGC Campos Limitada, the operator of the block. 

ONGC Campos Limitada also gets 43.5 per cent share from Petrobras (43.5 per cent) and Ecopetrol (13 per cent) in their block BM-S-74.

Source:-http://www.projectsmonitor.com/OILGAS/ongc-announces-framework-agreement-with-sistema