Oil India - ANALYST MEET Thursday, January 03, 2008

ANALYST MEET

Oil India

Files DRHP with SEBI

We met with Mr. M. R Pasrija, CMD and Mr. T.K Ananth Kumar, CFO of Oil India and discussed about the proposed Initial Public Offer.

Highlights of the meet

• Oil India is India's second largest oil and gas company as measured by total proved plus probable oil and natural gas reserves and production. The Company is primarily engaged in the exploration, development, production and transportation of crude oil and natural gas onshore in India for nearly five decades. The company also processes the produced natural gas to extract LPG. Oil India is present internationally through the exploration of crude oil and natural gas in Gabon, Iran, Libya and Nigeria and was recently awarded exploration blocks in Yemen as part of a consortium. The company was ranked as the best public sector undertaking by the Department of Public Enterprises in its annual survey for fiscal 2006. It has been accorded "Mini Ratna Category I" status since 1997 by the Government of India ("GoI") for its operational efficiency and financial strength. In recognition of its performance and its consistent achievement of targets negotiated under the memoranda of understanding that it entered into with the GoI on an annual basis, the GoI has rated its performance as "Excellent" for fiscal 2004, 2005 and 2006.

• Oil India is coming out with an IPO to fund its requirements for fiscal 2009 and fiscal 2010 towards (a) exploration and appraisal activities; (b) development activities in producing fields; (c) purchase of capital equipments and contracts for facilities; and d) diversification of existing business in downstream activities. The estimated funding requirement for FY'09 is Rs 2239.05 crore and for FY' 2010 is Rs 2335.74 crore. The issue comprises a net issue to the public of upto 24,045,438 equity shares and a reservation of up to 2,404,544 equity shares for subscription by eligible employees. The issue shall constitute 11% of the fully diluted post issue paid up capital of the company.

• During half year ended September 2007, the company achieved a total turnover of Rs 2735.57 crore with OPM of 33.9% and net profit of Rs 881.13 crore. For the year ended March 2007 the company achieved a turnover of Rs 5285.08 crore with OPM of Rs 33.4% and net profit of Rs 1639.99 crore.

• For sixth month ended September 30, 2007 Oil India crude oil production stands at 10.78 million barrels and Natural Gas production stands at 1.042 billion cubic meters. Oil India crude oil production declined marginally 3.6% at 22.17 million barrels for the year ended March 2007 and natural gas production too declined by 2% at 2.264 billion cubic meters.

• The average crude oil realization for the half-year ended September 2007 for Oil India stands at US$ 33.49 per barrel. The average natural gas realization for the half-year ended September 2007 for Oil India stands at US$ 67.34 per thousand standard cubic meters.

• Oil India independent crude oil production facilities include 41 installations and approximately 1,169 kilometers of internal crude oil network pipelines, including approximately 963 kilometers of flow lines and an approximately 206 kilometer network for processed crude oil. They also own and operate crude oil storage facilities in Duliajan, Tengakhat, Digboi, Moran and Jorhat with a total storage capacity of 149,535 kiloliters of oil. Oil India independent natural gas production facilities include 29 installations and approximately 500 kilometers of internal gas network pipelines, including approximately 50 kilometers of flow lines and an approximately 450 kilometer network for processed natural gas.

• As of March 31,2007, Oil India independent proved plus probable crude oil reserves were approximately 539.66 million barrels and natural gas reserves from independent operations were approximately 46.04 billion cubic meters. In addition, as of March 31, 2007, Oil India has participating interest in the Kharsang fields of 8.52 million barrels of proved crude oil reserves. As of March 31, 2007, they also have contingent natural gas resources of 30.43 billion cubic meters based on best estimates.

• In relation to downstream integration Oil India has acquired a 26% equity stake in NRL (Numaligarh Refinery) and a 10% equity stake in BCPL (Brahmaputra Cracker and Polymer). BCPL was incorporated on January 8, 2007 with the objective of establishing a gas cracker project complex at Lepetkata, Dibrugarh, Assam, to, inter alia, process natural gas, naphtha or any petroleum product and to distribute and market petrochemical products in India and abroad. BCPL received its certificate of commencement of business on September 12, 2007. They have also entered into an MoU with two public sector undertakings, HPCL and GAIL, and two private companies, Total France S.A. and Mittal Energy Investments to establish a refinery and a petrochemical complex at Visakhapatnam, Andhra Pradesh.

• Oil India own and operate, as a common carrier for them, ONGC and BRPL, a 1,157-kilometer cross-country crude oil pipeline. The pipeline has the capacity to transport over 44 million barrels of crude oil annually. They also hold a 10% equity stake in a 741-kilometer pipeline construction project in Sudan that was completed in 2005. Apart they also have the ability to provide various exploration and production-related services to the oil and gas industry, both domestically and internationally, including pipeline construction, cathodic protection, pipeline consultancy services, drilling and well work-over services, research and development services and logging services.

• Oil India is currently conducting exploration activities in 16 blocks located in Assam, Arunachal Pradesh, Uttar Pradesh and Uttranchal under PELs (Petroleum Exploratory License) granted by the GoI, four pre-NELP (New Exploration Licensing Policy) blocks in Gujarat and Assam and 21 NELP blocks in the areas of Assam, Arunachal Pradesh, Mizoram, Rajasthan, Orissa, Andhra Pradesh and Pondicherry. Additionally, they are also involved in exploration activities in certain overseas blocks.

• Oil India has entered into a memorandum of understanding dated October 12, 2007 with British Gas Exploration and Production India to enter into a strategic relationship to evaluate joint participation in mutually identified exploration blocks proposed to be offered by the GoI in the forthcoming NELP VII licensing rounds.

• Oil India has entered into a memorandum of agreement dated November 6, 2007 with HPCL for jointly pursuing oil and gas opportunities in the upstream as well as the downstream sector in India and overseas. The parties have agreed to jointly participate in bidding for a few prospective blocks under NELP VII. HPCL has also agreed to explore the possibility of inducting Oil India in Bhagyanagar Gas, if feasible, for distribution of compressed natural gas and city gas distribution in Andhra Pradesh. Additionally, both parties have also agreed to evaluate options to jointly participate in construction and operation of a gas pipeline in Andhra Pradesh and any other areas of mutual interest.

courtesy: sanjib