COP To Sell Caspian Sea PSA

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Purchase of 8.4% stake in Kazakhistan production sharing agreement.

ConocoPhillips Co. (NYSE: COP) plans to sell its 8.4% interest in the the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Ltd. for about $5 billion.

Under the terms of the agreement, ONGC Videsh Ltd., the international arm of India’s Oil and Natural Gas Corporation Ltd. would acquire ConocoPhillips’ interest in Kashagan, which is located in the Kazakh sector of the Caspian Sea.

The transaction is expected to close in the first half of 2013.

“The sale of this quality asset is an important component of our ongoing strategic asset disposition program,” said Don Wallette, executive vice president, commercial, business development, and corporate planning. “We are pleased that ONGC Videsh recognizes the value of this asset.”

At Sept. 30, the carrying value of the net assets related to ConocoPhillips’ interest in Kashagan was approximately $5.5 billion. ConocoPhillips expects to record an after-tax impairment of approximately $400 million in the fourth quarter of 2012 to reduce the carrying value to fair value.

Through Sept. 30, the company’s 2012-13 disposition program has yielded proceeds of $2.1 billion. Once closed, this transaction would increase that total to approximately $7 billion, and help it to accomplish its target of selling off $8 billion to $10 billion in assets by the end of 2013.

The proposed sale of its Kashagan interest is part of ConocoPhillips’ plan to increase value for shareholders through focused capital investments and a commitment to deliver growth in production and cash margins, improved returns on capital, and sector-leading shareholder distributions.

ONGC Videsh Ltd, the overseas arm of the state explorer, will pay a base price of USD 4.25 billion plus a share of working capital and other cash calls together with interest for the 8.4 percent stake in the field that produces 370,000 barrels per day (18.5 million tons a year) of crude oil.

Goldman Sachs was OVL's financial advisor; Allen & Overy, legal advisor; E&Y, tax and accounting advisor and bayphase, technical advisor.