The Hindu Business Line : Prize Petroleum mulls options to increase equity base

New Delhi, Oct. 23 Prize Petroleum, a joint venture of Hindustan Petroleum Corporation Ltd (HPCL) and ICICI, is considering various options, including rights issue route, for raising its equity base in order to fund its increased activities in oil exploration and production. The company hopes to have a firm plan in place by the first week of November.

Sources said the company expects the major shareholders, HPCL and ICICI, to reach a decision on the mechanism to be adopted to expand the company’s equity base shortly. Subsequently, it plans to seek board approval.

Currently, Prize Petroleum has a paid-up equity capital of Rs 20 crore with 50 per cent participation from HPCL, 45 per cent from ICICI and ICICI Ventures, and five per cent by HDFC. The company’s authorised capital is approximately Rs 720 crore. Sources told Business Line that an advisor has been appointed to do asset valuation of the company, which would enable it to approach the future investors.

The company has considered various options for enhancing its equity base including initial public offer, rights issue, and induction of an equity partner. “Some decision needs to be arrived at before the end of this year as the company’s offshore field development activities are at an advanced stage and funds are required,” sources said. The company needs funds to invest close to Rs 150 crore under commitments made in a contract with Oil and Natural Gas Corporation.

A consortium, where Prize Petroleum is the operator, is committed to develop ONGC’s offshore marginal fields in Cluster 7 near Mumbai High. Prize Petroleum is operating marginal fields of ONGC at Hirapur, West Bechraji, Khambel. It has also acquired 50 per cent share in Sanganpur oil field under the production sharing contract and one block in the sixth round of New Exploration Licensing Policy (NELP).

The market was abuzz with reports that Prize Petroleum was planning to come out with a rights issue for expanding its equity base, with HPCL expected to subscribe to its share of the issue while ICICI may give up its share in favour of a third party. Besides, Prize Petroleum also has offers from companies which want to come in as a partner. Some of the institutional investors who have expressed interest include IDFC Private Equity and Sabre Capital and Barings Inc.