ONGC Videsh Declares FY’17 Financial Results

ONGC Videsh Declares FY’17 Financial Results
New Delhi: May 24, 2017

Financial results of ONGC Videsh Ltd, the wholly-owned subsidiary of Oil and Natural Gas Corporation Limited (ONGC), for the year ended March 31, 2017 were considered and approved by the Board in its meeting held on May 22, 2017. The performance highlights are as under:

Financial Table

Consolidated production of Crude Oil and Oil Equivalent Gas during FY’17 was higher by 44% as compared to previous year. The incremental production is mainly due to acquisition of 26% stake in Vankorneft project in Russia during the year.

The Company recorded its standalone profit of Rs. 1,749 crore during the FY’17 against loss of Rs. 3,894 crore in the previous financial year and consolidated profit of Rs. 701 Crore during FY’17 as against consolidated loss of Rs. 3,633 Crore during FY’16. The financial statements of FY’16 have been restated in accordance with Indian Accounting Standards (Ind AS).

The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) and Guidance Note on Accounting for Oil and Gas Producing Activities (Ind AS) issued by the Institute of Chartered Accountants of India. These are the Company’s first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015. The mandatory exceptions and optional exemptions availed by the Company on first-time adoption have been detailed in the notes to the financial statements. The Company has determined its functional currency to be United States Dollar (USD) and accordingly prepared the financial results in USD and has translated the same in Rs. for submission to NSE & publication as per the reporting requirements.

The Board of Directors has proposed a final dividend of Rs. 1.40 per share (previous year: Nil) to be paid on fully paid equity share of par value of Rs. 100 each. This equity dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting.

A. New Acquisitions and Agreements

• ONGC Videsh completed acquisition of 15% interest in Vankor Field located in East Siberia of the Russian Federation on May 31, 2016 from Rosneft Oil Company and subsequently acquired additional 11% interest on October 28, 2016. Vankor is Russia’s second largest field by production and accounts for 4% of Russian production. The daily production from the field is around 400,000 barrels per day of crude oil (bopd) on an average and ONGC Videsh’s share of daily oil production from Vankor (considering both the acquisitions) is about 104,000 bopd.

• ONGC Videsh and Petroleos De Venezuela S.A. (PDVSA) through their relevant subsidiaries signed two definitive agreements for facilitating redevelopment of the San Cristobal joint venture project in Venezuela on November 4, 2016. The remediation plan aims to increase the current level of production by about 40%. The agreement also provides for mechanism to liquidate ONGC Videsh’s outstanding dividends from the project and ONGC Videsh to obtain long term finance for the capital investment for implementing the redevelopment plan. As per provisions of the agreement, ONGC Videsh has already received USD 88.4 Million and extended a loan of USD 17.1 Million for remediation plan of the project.

B. Financing

• ONGC Videsh Vankorneft Pte. Ltd., a step down wholly owned subsidiary of ONGC Videsh, July 2016, raised USD 1 billion comprising of USD 400 million Senior Unsecured Notes due 2022 and USD 600 million Senior Unsecured Notes due 2026 in the international capital markets for refinancing the bridge loan for acquisition of 15 shares in JSC Vankorneft. The bond issuance was made at competitive rates and well received by the investors. The deal has been awarded the “Best Corporate Bond” deal from India at The Asset Triple A Country Awards 2016.

• ONGC Videsh Vankorneft Pte. Ltd also raised finances by way of bridge loan to acquire 11% shares in JSC Vankorneft in October 2016. The bridge loans have been replaced in April 2017 for which the company tied up USD 500 million and JPY 38 billion syndicated longer tenor facilities at competitive prices from International commercial banks.

C. Operations

• Sakhalin-1 Project, Russia

New Built Drilling Rig “Krechet” for Sakhalin-1 Project
The stage 2 development of the Odoptu field will be carried out with a new high technology Rig, for drilling nearly 32 wells and will capture nearly 400 Million Barrels of Oil during the rest of the project life.

 World’s longest ERD well (O5-RD) was spud in Chayvo Field with measured length of 15,000 m on February 6, 2017. Drilling of this well will break its own earlier record of 13,500 m in the same field.

• Satpayev project, Kazakhstan

Govt. of Republic of Kazakhstan granted extension of exploration period for two years w.e.f June 6, 2017 and the Company plans to drill the second commitment well in July 2017.

D. ONGC Videsh’s current portfolio

ONGC Videsh has participation in 38 projects in 17 countries including Azerbaijan, Bangladesh, Brazil, Colombia, Kazakhstan, Iran, Mozambique, Myanmar, Russia, South Sudan, Sudan, Venezuela, Vietnam and New Zealand. ONGC Videsh maintains a balanced portfolio of 38 projects, 14 producing, 4 discovered/under development, 16 exploratory and 4 pipeline projects. The Company currently operates/ jointly operates 20 projects.

A lasting partnership – ONGC Videsh and PDVSA

PdVSA executives from Venezuela, who have now successfully completed their M.Tech Program at Indian Institute of Technology (Indian School of Mines) Dhanbad were recently felicitated by Mr PK Rao, Director (Operations) in the presence of Venezuelan Ambassador, His Excellency Sr. Augosto Montiel, Regional President of Venezuela Business Unit, Mr Sukant Tiwari, Head of the Petroleum Engineering Department of IIT(ISM), Dhanbad, Prof. V.P. Sharma and visiting PdVSA officials amongst others recently. The students were awarded provisional certificates by Mr PK Rao, Director(O) during the ceremony.

ONGC Videsh has two Joint Ventures in Venezuela with the National Oil Company PdVSA. As a goodwill gesture, ONGC Videsh had sponsored PdVSA executives to undergo two years Masters programs at Indian School of Mines, Dhanbad in 2015, in order to upgrade their technical skills and add value to its Venezuelan operations.

Of the nine students, seven of them have done M.Tech in Petroleum Engineering and two in Petroleum Exploration. They also have varied work experience of 3 to 10 years in different fields of PdVSA. Speaking on the occasion, Mr PK Rao appreciated the IIT(ISM) faculty and lauded the executive-students for completing the dissertations/projects in the premier institute of India which could be useful in their respective areas of work. As per the agreement with PDVSA, these students will be serving the Indian Joint Ventures in Venezuela for some period of time after returning from India.

Apart from the regular classroom learning and practical exposure, they also underwent extensive field trainings in Mehsana and Ahmedabad Assets of ONGC during their summer vacation in addition to training in Institute of Reservoir Studies of ONGC at Ahmedabad, which is one of the premier institutes in Reservoir Studies.

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Director (Operations) infuses fresh energy in San Cristobal Project, Venezuela

Project San Cristobal, El –Tigre, Venezuela got a fresh infusion of energy when Mr. P. K. Rao, Director (Operations), recently visited the San Cristobal Project. There has been continuous decline in the production from the project due to decline in the reservoir pressure. Detailed reservoir studies had been carried out by the joint venture with active support of subsurface professionals of ONGC Videsh and Corporate Exploration Center of ONGC and a scheme of water injection named remediation plan was finalized for the field.

Review meeting at El- Tigre

Director (Operations), ONGC Videsh Chairing review meeting at El-Tigre

However, the scheme was facing delays on account of resource crunch besides difficult social environment in the country challenging the remediation efforts. Continuous engagement by the ONGC Videsh management has led to signing of Agreements on Nov 04, 2016 for receipt of past dividends and financing for remediation plan. Since then about USD 88 million of past dividend has been received and about USD 17 million has been disbursed to the joint venture as loan for implementation of remediation plan.

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Director (Operations) with Mr. Ruben Figuera, Director-PdVSA and other officials of PIVSA

The remediation plan envisages enhancing reservoir pressure by water injection, drilling of 17 water injector wells, 36 additional producer wells and creation of surface facilities for injecting 140 KBPD of water into the reservoir, processing of 80 KBPD of produced liquid  and compression facilities for 15 MMSCFD of  gas. Success of this scheme would enhance visibility of ONGC´s technical capability in overseas operations. The scheme has been also vetted by ONGC Institutes – IRS and IOGPT. Consequently, the first phase of water injection has been accelerated by constant engagement with the JV and long pending jobs towards creation of injection facilities have commenced to inject about 45 KBPD of water. These facilities comprise of three water supply wells, gas separator system, storage tank, water injection pumps, water injection lines and 5 injector wells.

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Director (Operations) with employees of PIVSA supervising field operations

The culmination was achieved with the inauguration of the phase-1 water injection by Mr. P.K. Rao, Director (Operations), on April 29, 2017 at San Cristobal Field. During the ceremony PDVSA was represented by Mr. Ruben Figuera, Executive Director (New Developments) and Mr. Jose Aredondo, Manager Indian operations, Mr. Nelson Ramirez, President PIVSA, Mr. SK Thamilselvan, Country Manager and other ONGC Secondees in Venezuela. Employees of the Joint Venture were also present at the occasion in large number.

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Director (Operations) inaugurating the water injection & addressing the employees of PIVSA

During his address, Mr. P.K.Rao, Director (Operations), expressed his gratitude towards the Board of ONGC/ONGC Videsh and CVP-PDVSA for their support for the project which was very vital for its success. He emphasised to work collectively to improve the production performance by improving the operational efficiency, thereby reducing the lifting cost. The ceremony took place just ahead of Labor Day, which is a big event in Venezuela. On the occasion, Mr. P.K. Rao greeted all the workers present and complimented them for the hard efforts made by them. He expressed hope that they will continue to work with same zeal and dedication to take the project to greater heights and thus strengthen the friendship between India and Venezuela.

PRESS RELEASE

ONGC Videsh has encountered exciting result in its well Mariposa-1 which is under drilling in CPO-5 block of Colombia. ONGC Videsh is the operator of the block and holds 70% P.I and Amerisur Resources holds the remaining 30%.
The well Mariposa-1 commenced drilling on March 24, 2017 and was directionally drilled to a total depth of 11556 feet (MD). Electric Log analysis indicates the presence of approximately 120ft of oil saturated net pay in the Lower Sands Unit 3 of the Une Formation. Good hydrocarbon shows of oil and gas were also encountered while drilling this section. The well is currently under conditioning to run and cement a 7” production liner in order to initiate the testing programme.

Highlights of Director Exploration’s visit to Beijing, China to attend 37th MECL Board Meeting

Mr. Sudhir Sharma, Director Exploration – ONGC Videsh Limited, visited Beijing, China to attend 37th MECL Board Meeting as Director and Vice Chairman of MECL Board, held on 27th and 28th April 2017.

The board meeting was attended by  Mr. DuanZhibin (SINOPEC) as  Chairman, Mr. Gong Jiuhe (SINOPEC) and Mr. Amit Bharti (ONGC Videsh) as other Directors of MECL Board and by officers of MECL.

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From Left to Right: Mr. Navneet Singh (Assistant Secretary), Mr. J.P Waghray (CTO), Mr. Zhao Xuan (COO), Mr. Amit Bharti (Director), Mr. Duan Zhibin (Director-Chairman), Mr. Sudhir Sharma (Director- Vice Chairman), Mr. Gong Jiuhe (Director),  Mr. Carlos Alberto Benavides Bonilla (EVP CA&B), Mr. Zhang Hui (CFO),  Mr. Leonel Fernando Vargas Zapata (EVP Operations)

MECL has emerged as one of the key players of heavy crude oil in Colombia, and a pioneer of technology in the country. MECL is owned 50:50 by ONGC Amazon Alaknanda Limited (OAAL) and SINOPEC Overseas Oil and Gas Limited (SOOGL), respective Bermudian Subsidiaries of ONGC Videsh Limited and SINOPEC.

MECL owns 100% interest in Velasquez field (discovered in 1940s and is producing for nearly 60 years) and the Velasquez-Galan pipeline, which runs 189 km from the Velasquez property to Ecopetrol’s Barrancabermeja refinery. MECL operates in the fields within the Nare Association Contract with Ecopetrol, Colombia’s National Oil Company, where crude was found in the 1980’s. The Association contract covers the commercial fields Moriche, Girasol, Jazmin, Abarco, Nare Sur and Under River as well as non-commercial areas of Chicala.

The officers of MECL presented the agenda’s pertaining to Company’s performance, Annual Accounts of 2016, OPEX Budget of 2017, strategy for extension of one of the producing blocks, New Business development Strategy, strategic initiatives including Crude upgradation and Scope of Renewable Energy in Colombia as well as status of exploratory block operated by Mansarovar to the Board of Directors.

Mr Sharma appreciated the efforts of MECL team for conducting the meeting in efficient manner. He highlighted that the most burning issue is decline in production and MECL should make all efforts to arrest the decline and bring it back to the level it reached in 2014. He added that the ONGC Videsh technical team has studied the Velasquez field in detail and has also shared its technical recommendations with MECL team for arresting the production decline and further boosting the production level. He ensured all the help from ONGC Videsh for implementing those recommendations. He showed concern over the dismal performance of HSE KPI in 2016. He opined that the action plan to improve the HSE KPI by outsourcing the manpower also needs close supervision by MECL. The reasons for delay and cancellation of contract leading to low CAPEX and Physical execution must also be monitored very closely by MECL. He also supported the opinion of other Board member, Mr Amit Bharti of further optimizing and reducing the OPEX to add more value to the Shareholders. On NARE association renegotiation, he advised MECL to gauge the expectations of Ecopetrol and subsequently make strategy for negotiation on the basis Win-Win situation for both Ecopetrol and MECL. He assured ONGC Videsh help in diplomatic push/ intervention needed for success of Nare renegotiation. He appreciated the Renewable energy initiatives taken by MECL and advised MECL to look for opportunities, get aligned with the international trend and utilize the appropriate moment to enter this sector after proper due diligence.

Along with Mr. Duan Zhibin, Chairman of the Board, he thanked MECL team for all the arrangements, presentations, and for conducting the meeting in an efficient manner.