Mergers, Acquisitions and Takeovers Case Study

ONGC’s acquisition of Imperial Energy – Can it be profitable?

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Abstract:
ONGC (Oil and Natural Gas Corporation) in India acquired Imperial Energy, the UK based firm operating in Russia for $1.9 billion in 2008. This acquisition was the second largest investment made by ONGC in Russia. Imperial Energy was an upstream oil and gas exploration and production company which had oil producing blocks in Western Siberia, which was considered to be the most productive oil producing part of Russia. The acquisition deal began in August 2008. 98% of the shareholders of Imperial Energy approved the deal in December 2008 so the deal became unconditional for ONGC. Raising finance for this deal was the biggest challenge for ONGC. The acquisition value in the oil and natural gas industry was normally decided by the prevailing crude oil prices at the time of the deal. When ONGC made the bid, crude oil prices were hovering between $115 to $120 per barrel. However, with the subsequent fall in oil prices due to the global financial crisis, there were concerns regarding profitability of the deal. With this acquisition ONGC added one more strong asset to its portfolio. This case examines the acquisition of Imperial Energy by ONGC. It also discusses the challenges faced by ONGC during the deal, and provides a brief overview of the oil and natural gas industry in India.

Pedagogical Objectives:

• To understand the Indian oil and natural gas industry and the challenges for this industry.
• To analyse the reasons behind ONGC's acquisition of Imperial Energy.
• To discuss the benefits of this deal for ONGC.

Keywords : ONGC (Oil and Natural Gas Corporation), Gas industry, Imperial energy, Russia, Oil reserves, Natural gas, India, Tomask, Production, Consumption

Contents : 
ONGC’s market share in oil production
India’s Crude Oil consumption
Oil and Natural Gas companies in India - Public sector
India’s oil production and consumption 1990-2006
ONGC’s acquisition of Imperial Energy
Overview of Oil and Natural Gas Sector of India
Regulatory actions declared by Government of India