Cairn reports that approval has now been received from the Government of India through the Cabinet Committee on Economic Affairs for the farm-out of certain assets to ONGC and the farm-in to two exploration blocks from ONGC.
Completion of the transaction is subject to execution of mutually acceptable sale and purchase agreements between the parties.
The transaction comprises the following:
The farm-out by Cairn to ONGC of a 90% operated interest in deep water exploration Block KG-DWN-98/2 with an effective economic date of 30 September 2003. Cairn will retain operatorship of Block KG-DWN-98/2 until the closing date, following which ONGC will assume operatorship under the terms of transfer of operatorship agreements to be agreed between Cairn and ONGC.
The farm-out by Cairn to ONGC of a 15% exploration interest in Block CB/OS-2 and a 10% interest in the Lakshmi and Gauri Development Areas with an effective economic date of January 1, 2003.
(together "the Farm-out Interests")
The farm-in by Cairn from ONGC of a 30% working interest in each of Blocks GV-ONN-97/1 onshore northern India, adjacent to the border with Nepal, and CB-ONN-2001/1 onshore Gujarat, western India with an effective economic date of 30 September 2003 ("the Farm-in Interests"). Cairn will pay to ONGC a cash consideration equivalent to the economic monetary value of the blocks as assessed by ONGC at the time of bidding for the Farm-in Interests (evaluated by Cairn).
ONGC will pay to Cairn a cash consideration of US$135 million for the Farm-out Interests. The cash consideration will be adjusted to reflect net working capital movements between the respective effective economic dates and the closing date.
Subir Raha, Chairman of ONGC, commented:
"I am confident that there is a great future ahead for ONGC and Cairn working together in alliance."
Bill Gammell, Chief Executive of Cairn, commented:
"I am delighted to broaden our strategic alliance with our partner ONGC and I am confident that our combined skills will lead to further success."