Russian oil and gas exploration and production company PetroNeft Resources PLC has entered into a binding agreement with India’s second-largest oil explorer Oil India Limited for a 50 per cent stake in its Licence 61 at Tomsk Oblast, Russia.
Under the terms of the agreement, the Indian energy explorer will invest $85 million, including an upfront payment of $35 million and $45 million in exploration and development expenditure besides a $5 million performance bonus.
The agreement is subject to regulatory and shareholder approval at the company's extraordinary general meeting that is scheduled to be held on May 9. The deal is expected to be concluded by the end of May.
Upon completion of the farm-out agreement, PetroNeft Resources will use the fund to pare down its debt and also to invest in the oil block.
Oil India will be able to get 50 per cent of production and reserves at Licence 61 at Tomsk, but the Russian firm will remain as the operator of the Licence 61.
PetroNeft won the state auction for the Tungolsky Licence No. 61 in the Tomsk Region of Western Siberia and acquired the block in May 2005. Tungolsky Licence 61 is located on the east side of the Ob River in the least explored oil bearing region of the Tomsk Oblast. It encompasses seven oil fields and over 25 identified prospects and leads. Production commenced on in Q3 2010.
The Russian firm was in talks with a large number of parties for a potential farm-out of up to 50 per cent of Licence 61 and also held discussions with a number of Russian and international banks to refinance the existing debt facilities.
Earlier last year, Oil India and Oil and Natural Gas Corp Ltd picked 10 per cent equity stake in a Mozambique natural gas field for $2.5 billion.
(Edited by Joby Puthuparampil Johnson)