Deal conclusion likely by June
Rosneft, Russia’s top oil producer, has reached a preliminary agreement to buy 49 per cent stake in Essar Oil. The deal is likely to be concluded by June.
Rosneft has concluded due diligence of Essar Oil, which operates the country’s second biggest private sector oil refinery at Vadinar in Gujarat. “We had constructive discussions with the management of Essar. We achieved preliminary agreement on the terms and procedure,” Rosneft CEO Igor Sechin said after meeting Essar Directors Prashant Ruia and Ravi Ruia in New Delhi on March 16.
“We have to go to obtain all the permits (for the acquisition). The transaction will be completed by June 2016,” Sachin added.
Essar Oil owns India’s second largest single site refinery, having a capacity of 20 million tons per annum and also has a network of petrol pumps as well as coal-bed methane (CBM) blocks.
Prashant Ruia said Rosneft confirmed its intention to acquire 49 per cent equity interest in Essar Oil Ltd. “Rosneft has completed satisfactory due diligence of Essar Oil. The parties intend to close the transaction by June 2016 following the execution of mutually agreed binding documents and after receipt of necessary approvals,” he added.
The Russian firm, in a statement, said: “Preliminary mutual understanding has been reached on the timing and structure of a deal to buy into the equity of Essar Oil Ltd. The parties intend to sign and close the transaction by the end of June 2016 upon obtaining all necessary permits.”
The Russian firm will also supply 10 million tons a year of crude to Essar Oil’s 20 million tons per annum Vadinar refinery for 10 years. “In addition an agreement on crude oil deliveries to commence this year has also been achieved,” Rosneft disclosed.
Rosneft, the world’s top listed oil producer, and Essar Oil & Gas Ltd. / Essar Energy Holdings Ltd., companies incorporated and managed under the laws of Mauritius, had in July last year signed a non-binding Term Sheet.
Promoter Ruia family in July last year held 90.5 per cent of Essar Oil, of which 65.6 per cent is in the form of overseas depository shares. The company has since been delisted through a share buy-back.
Rosneft is majority owned by the Russian Government with BP Plc holding under 20 per cent stake and public shareholding at around 10 per cent.
Essar Oil Ltd. comprises a Vadinar refinery with an annual capacity of about 20 million tonnes and about 1,600 stations located in India. The partners plan to substantially increase the refinery’s capacity to 25 million tonnes and increase the number of stations to 5,000 within the next two years, which will require substantial capital expenditure.
Rosneft’s proved oil and gas reserves as of September 30, 2015, amounted to 43 billion barrels of oil equivalent (boe), in accordance with the Petroleum Resources Management System.
Daily production for the 12 months ended September 30, 2015, stood at 5.2 million boe. The company’s refining capacity covers approximately half of the group’s consolidated crude oil production.
For the nine months ended September 30, 2015, Rosneft reported consolidated revenue net of export duties and EBITDA of $66.8 billion and $15 billion respectively.
Moody’s has said that, together with the deal on Essar Oil, Rosneft had on March 16 also announced a number of deals at different stages with ONGC Videsh Ltd. and a consortium of Indian Oil Corporation Ltd., Oil India Ltd. and Bharat PetroResources Ltd., about farming out of some of its assets in Siberia.
– PTI Economic Service