GeoGlobal wants $250m for Deen Dayal stake

Vol 14, PW 17 (24 Feb 11) Exploration & Production

Canadian explorer GeoGlobal Resources and its former chief executive Jean Paul Roy want to sell their combined 10% stake in shallow water block KG-OSN-2001/3, home to GSPC’s Deen Dayal gas discovery.

PETROWATCH learns GeoGlobal appointed merchant bankers in January to find a buyer for the 5% stake held by Jean Paul Roy and the 5% stake held by GeoGlobal. What is the asking price GeoGlobal wants $250m for its 10% stake.

This is dirt cheap, if you consider block operator GSPC’s claims that Deen Dayal holds 7-tcf of gas, based on a study by Gaffney, Cline and Associates. Yet keep in mind the DGH has certified only 1.02-tcf of proven, probable and possible gas reserves at Deen Dayal.

Still, merchant banker sources tell us GeoGlobal is undervaluing its stake and should ask for at least $400m. “GSPC’s (80%) stake is valued at $4bn,” says one banker.

“If GeoGlobal waits another year it could easily get $500m for its 10% stake.” But GeoGlobal might not have time, say some, as it desperately needs to raise $150m to pay GSPC to end a long, acrimonious row about its share of exploration costs at Deen Dayal.

“If GeoGlobal gets $250m for its stake, it could pay $150m to GSPC and keep the remaining $100m,” we hear. Ironically, GeoGlobal can sell its stake only after resolving its ‘carried interest’ dispute with GSPC.

Over 12 companies are said to have shown interest in GeoGlobal’s 10% stake so far, but names are unavailable. “Most of these companies have seen the IM (Information Memorandum) circulated over the past two months,” we are told.

“Who wouldn’t want a stake in a ‘gas asset’” GeoGlobal has not yet opened a dataroom but is ready to meet potential buyers.

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