A consortium of oil refiner Bharat Petroleum (BPCL) and Videocon Industries have jointly entered into agreement to buy 100-per cent of Brazil's EnCana Brasil Petroleo Limitada (EBPL) for $283 million (about Rs1,310 crore). The consortium will initially pay $165 million towards acquiring the 100 pr cent equity of the Braxillian firm and a $118 million reimbursement of all the expenses incurred by EBPl since 1 January 2007.
The acquisition agreement was signed between VB (Brasil) Petroleo Private Ltd, equally held joint venture between Videocon Industries Ltd and BPCL's wholly-owned subsidiary Bharat PetroResources Ltd and Canadian natural gas producer EnCana Corp and 749793 Alberta Ltd on 18 September 2008 for the purchase of EnCana's Brazillian subsidiary EnCana Brasil Petróleo Limitada, Brazil, on a 50:50 basis.
The transaction is for interests in EBPL's assets of 10 deep water offshore petroleum exploration blocks including Espírito Santo, Sergipe-Alagoas, Potiguar and Campos Basin concessions- the four concessions in Brazil.
EnCana is a leading North American unconventional natural gas and integrated oil sands company with an enterprise value of approximately $50 billion, trade on the Toronto and New York stock exchanges.
EnCana Brasil is a consortium of EnCana Corp and Brazilian oil majors Petrobras and Anadarco. It has non-operating interests in 10 deep and ultra-deep water exploration blocks offshore Brazil, nine of which are operated by Petrobras, the Brazilian national oil company whereas Anadarko Corporation, USA through its Brazilian subsidiary is the operator in one remaining Concession.
A further payment of $118 million will be made as reimbursement of all the expenses of EBPL since 1 January 2007 Videocon said in a statement.
The sale, which will be effective retrospectively from 1 January 2007, is subject to regulatory approval and is expected to close in the first quarter of 2008.
''This sale reflects the continuation of our focus on North American unconventional natural gas and integrated oil sands resources. When added to our previous 2007 sales of exploration interests in Chad and Canada's Mackenzie Delta, this Brazil asset sale is expected to take this year's divestiture proceeds to more than $500 million, our 2007 target,'' said Randy Eresman, EnCana's president and CEO.
He further added that with this sale, expected to generate an estimated after-tax gain to net earnings of about $75 million, EnCana is exiting Brazil.
In keeping with its previous sale of its interest in the Chinook oil discovery in 2006, total Brazil divestiture proceeds are estimated to be about $530 million, resulting in an estimated after-tax gain to net earnings of about $330 million.
EnCana generates second quarter cash flow increased 16 per cent of $2.9 billion, or $3.85 per share, as a result of solid performance from the company's North American portfolio of resource plays and substantial increases in commodity prices.
BPCL set up Bharat PetroResources, for its exploration drive in October 2006 with an authorised share capital of Rs1,000 crore and joined hands with key players to sign memorandums of understanding (MoUs) with Brazil's national oil company, Petrobras, Norwest Energy of Australia and Videocon Industries Limited for cooperation in the upstream sector.
Besides bidding for exploration blocks, BPCL has been looking at opportunities for farming into existing blocks.
In the last couple of years BPCL has participating interest in 14 blocks. Of this, 9 blocks are situated within India and the others are located in the North Sea, in the United Kingdom, Oman, Australia and Timor.
BPCL has recently received the centre's approval for the acquisition of a 2.5-per cent stake in Oil India Limited.
BPCL plans to raise its investment in overseas exploration and production ventures this fiscal year to $200 million for the year 2007-08.
Last year BPCL stated that it was scouting for assets in West Africa, Brazil, South America and Australia.
Ashok Sinha, chairman and managing director, BPCL had said earlier that Brazil is a large oil-producing nation and this acquisition gives us a foothold there. We will continue to look at more opportunities.
BPCL has moved up in the 'Fortune Global 500' list with a ranking of 325 and currently ranks No.3 amongst the six Indian companies who have made it to the list.
Further, the BPCL brand continues to occupy its pre-eminent position in the market and the London based brand valuation firm, Brand Finance has placed it in the 7th position amongst India's 50 Most Valuable Brands. BPCL continues to be amongst the companies featured in the latest rankings of Platts Top 250 Global Energy Companies.
The Videocon group is a $2.5-billion global conglomerate dealing in consumer electronics, colour picture tube glass, home appliances & compressor manufacturing in India.
Videocon made amendments to the main object clause of the Memorandum of Association of the Company to incorporate different lines of activities such as Thermal Power, Oil & Gas, Mining of Natural Resources including Coal and Renewable Energy including Solar Energy.
Today, its Ravva oil field with one of the lowest operating costs in the world produces 50,000 barrels of oil per day.
Last month Videocon Industries and Bharat Petroleum took 10 per cent stake each in an offshore oil exploration block in Mozambique. (See: Videocon, Bharat Petroleum buy 10 per cent each in Mozambique oil block)