Oil India completes acquisition of 50% stake in Russian oil block

Oil India Ltd (OIL) has acquired a 50-per cent stake in the License 61 Tomsk Oblast oil block in Russia held by Cyprus-based WorldAce Investments Ltd (WorldAce), for $85 million.

WorldAce is a wholly-owned subsidiary of PetroNeft Resources plc, an Ireland-registered, Russia-focused firm.

OIL, India's second largest explorer after ONGC, on Friday said the deal involves a three-stage payout, including $35 million in cash up-front, $45 million in exploration and development spending and a performance bonus of up to $5 million.

"The total commitment from OIL will be $85 million, including $45 million for development capex. The effective date of the acquisition is January 1, 2014," the company said in a statement.

The 4,991 sq km License 61, located on the eastern side of the Ob river in the oil-bearing region of the Tomsk Oblast, contains 7 oil fields and over 25 identified prospects and leads.

The block started production in 2010. Current production from the licence is around 2,100 barrels of oil per day.

According to independent expert Ryder Scott, the block holds 117.68 million barrels of oil reserves. These estimates do not include the new oil find of Sibkrayevskoye.

The acquisition will add significantly to the company's overseas E&P portfolio while also marking OIL's entry into Russia.

OIL had, last month, signed an MoU with Russia's Gazprom International BV for joint pursuit of exploration opportunities across the globe as well as collaborate on liquefied natural gas (LNG).

PetroNeft Resources Plc is listed at Dublin Stock Exchange and London Stock Exchange.

OIL said it had on 17 April signed definitive agreements with PTR to take 50 per cent non-operating interest in Licence 61 in Tomsk Oblast in Russia. The deal has now been completed.

"Subsequent to the signing of the definitive agreements, the major Conditions Precedents for successful closure of the deal, including the approval of shareholders of PetroNeft and Russian regulatory approvals were obtained," the statement said.

Rothschild and Thomson and Knight acted as financial and legal advisor, respectively, of OIL on this transaction.