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OVL raises $1 billion debt to fund Vankor acquisition

ONGC Videsh Ltd has raised $1 billion through a US dollar bonds issue to finance its acquisition of 15% stake in Russia's 2nd biggest oil field Vankor, its Managing Director Narendra K Verma said.




ONGC Videsh Ltd has raised $1 billion through a US dollar bonds issue to finance its acquisition of 15% stake in Russia's 2nd biggest oil field Vankor, its Managing Director Narendra K Verma said December 18, 2016.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), raised $600 million through a 10-year bond at a coupon rate of US treasury rate plus 2.20% and another $400 million through a 5.5-year maturity bond at an interest rate of US treasury rate plus 1.75%, he said. «It is one of the lowest cost funding rates in the current scenario,» Narendra K Verma said.

The effective rate comes to 3.75% for $600 million bond and 2.875% for $400 million papers.
The proceeds of the issue would go to refinance a $1.2 billion bridge loan the company had taken from a group of foreign banks to make payments for the $1.268 billion acquisition.
The bridge loan was taken in May this year at a highly competitive rate of about 1.3%.
The interest rate is lower than 4.625%t OVL had paid on a $2.23 billion 10-year bond issue in July 2014 to finance its Mozambique gas field acquisition.

OVL had in September last year struck a deal to buy 15% in the Russia's 2nd biggest oil field of Vankor from Rosneft for $1.268 billion.
In March this year, it signed an initial agreement to buy an additional 11% for $930 million.
Verma said that acquisition has been funded through a bridge loan and it too would be replaced by a long-term funding in due course.

Vankor, the largest field to have been discovered and brought into production in Russia in the last 25 years, is located in the northern part of Eastern Siberia.
As of January 1, 2015, the initial recoverable reserves in the Vankor field are estimated at 476 million tonnes of oil and condensate, and 173 billion cubic meters of gas.
Vankor is Russia's 2nd largest field by production and accounts for 4% of Russian output. The average daily production from the field is around 415,500 barrels per day of crude oil since acquisition and OVL's share of daily oil production from Vankor (considering both the acquisitions) will be about 108,030 barrels a day.

Prior to the deal, Rosneft, Russia's national oil company, held 100% stake in Vankorneft. This is the fourth biggest acquisition by OVL.
It had in 2013 paid $4.125 billion for a 16% stake in Mozambique's offshore Rovuma Area 1, which holds as much as 75 trillion cubic feet of gas reserves.
In 2009, it had bought Russia-focused Imperial Energy for $2.1 billion. Prior to that in 2001, it had paid $1.7 billion for a 20% interest in the Sakhalin-1 oil and gas field off Russia's far eastern coast.

Source : Neftegaz.RU