The Hindu Business Line : Essar may not pitch for stake in Prize Petroleum

New Delhi, March 11 Essar Oil may not pitch for acquiring stake in Prize Petroleum, a joint venture between Hindustan Petroleum Corporation and financial institutions.

Essar Oil was among the companies which had undertaken due diligence for acquiring stake in Prize Petroleum. The other companies who have either undertaken or are in the process of undertaking due diligence include Larsen & Toubro, Jaiprakash Associates and the L.N. Mittal Group.

HPCL holds 50 per cent stake in Prize Petroleum, while ICICI Bank and ICICI Ventures hold 45 per cent, and Housing Development Finance Corporation holds 5 per cent. While the new strategic partner will acquire stake from the two financial institutions, HPCL will retain its entire holding in the joint venture.

Industry sources told Business Line that after completing the due diligence, Essar is contemplating not to go ahead with its plans to acquire stake in Prize. Sources said one of the reasons could be that Essar has not found a synergy in business focus.

Essar currently has a total of 11 oil and gas blocks (both domestic and overseas). Prize Petroleum hopes to get a partner by the end of this month or early next month. It plans to come out with a rights issue for expanding its equity base.

ICICI Bank has appointed global consultant Deloitte Touche Tohmatsu on behalf of the financial institutions to manage the data room for due diligence. The final call on roping in the partners would be taken by ICICI.

Prize has a paid-up equity of only Rs 20 crore and its authorised capital is about Rs 720 crore. Prize wants to increase its equity base in order to fund its increased activities in oil exploration and production.

The company operates ONGC’s marginal fields in Cluster-7 near Mumbai High. It also operates marginal fields of ONGC at Hirapur, West Bechraji and Khambel. Prize has 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).

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