Alliance Oil Company Ltd and Repsol Exploracion, S.A. have reached an agreement to form and govern a joint venture for exploration and production growth in Russia.
Further to the agreement, Alliance and Repsol envisage establishing a joint venture with a total asset base of approximately $840 million following asset and cash contributions by the shareholders, with Alliance and Repsol holding a 51% and a 49% stake respectively.
The collaboration implies that Alliance will transfer upstream assets in the Volga-Urals region valued at approximately $570 million on a debt-free, cash-free basis to the joint venture. Repsol will carry out a capital increase and also pay cash to Alliance to reach a 49% participation in the joint venture.
The purpose of the joint venture will be to develop assets contributed by the shareholders to enhance production, and serve as a vehicle to facilitate reserve growth through acquisition opportunities in oil and gas exploration and production in Russia, the world's largest producer of hydrocarbons.
Repsol Chairman Antonio Brufau and Alliance Group Chairman Musa Bazhaev have
today signed an agreement in Moscow to form a joint venture that serves as a
growth platform for both companies in the Russian Federation, the world's
largest oil and gas producer.
This agreement seeks to combine Alliance's knowledge and access to exploration
and production business opportunities in Russia with Repsol's know-how and
technological and financing capabilities to create a long-term exploration and
production partnership in Russia.
The joint venture is envisioned to have a total asset base of approximately
$840 million following asset and cash contributions by the shareholders.
Alliance and Repsol will hold a 51% and a 49% stake respectively in the joint
Under this collaboration, Alliance will transfer its upstream subsidiaries
Saneco and Tatnefteodatcha, which comprise exploration and production licenses
at 14 fields with proven and probable oil reserves of 171.5 million barrels as
of 31st December 2010 and current production of around 20,500 barrels of oil
per day. Alliance's asset contribution is valued at $570 million. Repsol will
carry out a capital increase in the joint venture and also pay cash to Alliance
to obtain a 49% participation.
In addition to the exploitation of the assets contributed by Alliance, the
agreement envisages the pursuance of growth opportunities through the joint
acquisition of oil and gas assets in Russia. The joint venture will have
preferential rights regarding new upstream business opportunities identified by
either Alliance or Repsol in Russia. The formation of the joint venture is
pending regulatory approval. Alliance has been advised by Bank of America
Merrill Lynch and Baker & McKenzie and Repsol by Barclays Capital and DLA
"The creation of the joint venture will allow us to further expand our upstream
operations in Russia through joint exploitation of the Volga-Urals assets and
realisation of new business opportunities. Repsol is an international leader in
oil and gas management, technology and financing and we now have the
opportunity to share these resources with common objectives," said Eric Forss,
Chairman of Alliance Oil Company.
"This alliance will grant Repsol immediate access to producing assets in
Russia, one of the world's largest hydrocarbon resource holders. We are certain
that Alliance Oil's local expertise and Repsol's technological capabilities and
know-how will provide a solid foundation for future growth in Russia," said
Repsol's Executive Chairman, Antonio Brufau.
Repsol already owns a 3.5% stake in Alliance as a result of the merger between
Alliance and West Siberian Resources, in which Repsol initially held 10%, in
2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which owns two
exploration and production licenses, known as Karabashsky-1 and -2, and five
licenses for geological study in the prolific West-Siberan basin.