Cairn and ONGC Form Alliance on Strategic Assets

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."