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Oil India Ltd (OIL) is going slow on acquisitions as the company’s debt is hitting the upper circuit.
Chairman and Managing Director Utpal Bora said, “For the time being, we don’t have any other plans to acquire more assets. We have invested a lot of money overseas. Our debt-equity ratio has reached almost 69 per cent, which is quite high. However, if some very attractive producing asset comes up, then we may think again.”
Funding plans In April, the company raised $500 million through an offshore issue of fixed rate notes through its Singapore-registered subsidiary Oil India International Pvt Ltd (OIIPL).
The funds raised will be used for partial repayment of bridge loans raised by OIIPL for financing the recent acquisition of stakes in Russian Companies, namely LLC Taas Yuryakh and JSC Vankorneft.
Commenting on the bond issue Bora told BusinessLine that “We raised the bonds to fund the acquisition of our producing Russian assets.
“The total payout is almost $1 billion. Out of this amount, we borrowed $800 million as a short-term loan, remaining was financed by internal resources.”
Since this payment (of short-term borrowing) comes up in October, OIL needs to repay it. “This is why we have raised this debt of $500 million. We have got a very competitive interest rate of 4.05 per cent for the 10-year bond issuance. The remaining $300 million will be paid through internal resources. So the full payment of the short-term loan will be done by October,” he said.
Bora expects a robust performance from OIL in the coming quarters as crude oil prices stabilise near the $55 a barrel range.
He said: “In the first quarter of 2016, oil prices went as low at $27 a barrel so if it goes that low, then upstream companies will face a lot of trouble. Oil India’s cost of production is around $33-34 a barrel. Now at around $50 a barrel to $55 a barrel range, we are quite comfortable. There is no subsidy burden on OIL at this range and we are getting an average of $15 a barrel.”
But, the feather in OIL’s cap is natural gas production. During financial year 2016-2017, OIL’s gas production was 3.47 per cent higher than production in fiscal 2015-2016.
Bora said: “We have produced almost 2.9 billion cubic metres of gas, which is the highest gas production in the history of the company.” For the fiscal 2017-2018, Bora is eyeing a gas production of 3 billion cubic metres for OIL.
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