US energy company ConocoPhillips (COP) agreed Monday to sell its 8.4 percent interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to India's ONGC Videsh Ltd. for expected proceeds of about $5 billion. The total consideration includes purchase price plus expected working capital and customary adjustments at closing. The deal is expected to close in the first half of 2013.
ONGC Videsh is the international investment arm of India Government-owned explorer Oil and Natural Gas Corp. Ltd. According to reports, another two Indian firms, Oil India Ltd., and refiner Indian Oil Corp. Ltd., were also in the fray to buy the stake, and had submitted their bids along with ONGC in late July.
"The sale of this quality asset is an important component of our ongoing strategic asset disposition program. We are pleased that ONGC Videsh recognizes the value of this asset," said Don Wallette, executive vice president, Commercial, Business Development, and Corporate Planning.
ConocoPhillips has notified the Kazakhstan government authorities as well as the co-venturers of its intention to sell the stake in the asset. ConocoPhillips' interest in Kashagan is located in the Kazakh sector of the Caspian Sea.
ConocoPhillips noted that it expects to record an after-tax impairment charge of about $400 million in the fourth quarter of fiscal 2012 to reduce the asset carrying value of $5.5 billion to fair value.
In late September, ONGC Videsh also agreed to acquire New York-based Hess Corp.'s (HES) 2.7 percent stake in the Azeri, Chirag and the deep water portion of Guneshli Fields in Azerbaijan sector of the Caspian Sea and 2.36 percent interest in Baku-Tbilisi-Ceyhan Pipeline for $1 billion.
The company said in late October that it has generated $2.1 billion in proceeds from asset dispositions in the first nine months of 2012, and remains on track to complete $8 billion to $10 billion in disposition by the end of 2013.
The proposed sale of ConocoPhillips' interest in the oil asset is part of the company's planned asset divestiture program to increase value for shareholders. Following the closure of the current proposed deal, ConocoPhillips would have disposed off assets totaling about $7 billion.
As a move to unlock value for shareholders, ConocoPhillips had also earlier in the year spun-off its refining business into a separately traded public company named Phillips 66 (PSX).
COP closed Friday's regular trading session at $56.67, up $0.36 on a volume of 2.06 million shares. In the past 52-week period, the stock has been trading in a range of $50.62 to $78.29.
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