Evaluate Energy’s Oil & Gas Deals of the Week – 21st April 2011

Main action of the week involved Vedanta snapping up an 11% interest in Cairn India after Petronas offloaded their 14.9% interest in the company for US$2.1 billion. Click here for Evaluate Energy’s full analysis of the deal (clients only). Despite launching an offer for a 51% stake in the company in August 2010, this is the first time Vedanta has laid its hands on a Cairn India share due to that particular acquisition being stalled by the need for government approval.

The key asset that Vedanta wants is the 70% interest that Cairn India holds in the Rajasthan field. Originally discovered in 2004 by Cairn Energy with OOIP (original oil in place) of 1 billion barrels the field is now estimated to hold a potential 6.5 billion boe of OOIP.

The price per share paid in this deal represented a discount of 18% on the offer made to Cairn Energy, a price that ONGC were reported to have remarked as Vedanta “obviously over-paying”. It’s easy to see why ONGC may take that view when even after factoring in the value of the pipeline assets and upside from OOIP (assuming a 30% recovery factor) the price per 2P boe is still the wrong side of $30.

Meanwhile in Canada, heavily gas weighted Ember Resources were acquired by shareholders who already held a 42.2% stake in the company. The deal by Brookfield Special Situations Group and ARC Financial Corp valued the company at C$125 million. The price paid per proved & probable boe was in stark contrast to the Vedanta deal at just $5.76, which proved an example of how the composition of the reserves between oil and gas can drastically alter the view of a fair price to offer.

In Colombia Parex Resources increased its ownership from 50% to 100% in one development and three exploration blocks at a cost of $255 million. The company expects the acquisition will double its 2011 exit production and increase operating income by 50%.

Elsewhere, Norway revealed the results of the 21^st Norwegian Licensing Round which involved 29 companies taking stakes in blocks. The location of the successful bidders ranged from Europe to North America with ExxonMobil, Chevron and Suncor and Japan with Idemitsu.

Top Deals of the Week

EvaluateEnergy  tracks every global upstream deal on a daily basis, estimating normalised deal value, in-depth financial and operating detail behind each deal and an explanation and opinion on deal rationale . Normalised deal value reveals underlying reserve values.

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