Oil India Plans to Invest $4B in Five Years to Raise Output

NEW DELHI (Dow Jones Newswires), Sep. 13, 2011

Oil India plans to raise its capital expenditure 73% to about INR190 billion ($4 billion) in the five years starting April 2012 as the state-run explorer seeks to sharply raise oil and gas production, its finance director said.

"We are stepping up exploration and development of our blocks in India and overseas," T.K. Ananth Kumar told Dow Jones Newswires late Monday. "We are also seeking producing assets, so we have raised our capital expenditure plans."

The company's capital expenditure in the five years ending March 2012 is likely to be about INR110 billion. It accounted for a 10th of India's total oil output of 754,000 barrels a day and 4.5% of total gas output of 52.22 billion cubic meters in the last financial year. Kumar didn't say how much the company is aiming to produce.

Oil India will mainly fund its investments through internal accruals, but may raise debt, he said.

The company, which was listed on local stock exchanges in September 2009, has cash reserves of INR130 billion, he added.

Oil India and its bigger state-run rival Oil & Natural Gas Corp. need to boost capital spending to bring new fields into production amid falling output at their aging fields. India, which imports about four-fifths of its crude oil requirements, is encouraging explorers to ramp up exploration and production to meet surging demand for energy in the world's second-fastest growing major economy.

"We have been witnessing an increase in capex by oil and gas explorers in India for the past several years as energy security is a focus. This sort of high capex is quite achievable by Oil India considering they have more than INR120 billion of cash and have been generating a cash flow of about INR40 billion per year," Alok Deshpande, analyst with Elara Securities Ltd., said.

Oil India is seeking to acquire producing oil and gas assets in Australia, Russia, Kazakhstan and Canada, Kumar said.

"We have shifted our focus to acquiring producing assets, rather than going for exploration blocks, as we already have our hands full with existing exploratory blocks. Also, we have enough cash in hand and that would be the best use of it," Kumar said.

Oil India is in talks with French explorer Etablissements Maurel et Prom to buy a stake in its Gabon assets and plans to close the deal by March, Mint newspaper reported Monday. Kumar declined to comment on the report.

Copyright (c) 2011 Dow Jones & Company, Inc.


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