Templeton-Backed Shiv-Vani Oil & Gas May Acquire U.S., European Companies

Shiv-Vani Oil & Gas Exploration Services Ltd., an Indian oil driller backed by Templeton Asset Management Ltd., plans to spend $50 million to acquire a U.S. or European company to get access to technology.

"We have the basic facilities when it comes to drilling," Vice President P.K. Gupta said in a phone interview from New Delhi today. "We are trying to develop capabilities in specialized services, which companies like Schlumberger Ltd. have."

Crude oil's 28 percent gain in the past year is encouraging explorers to drill for more oil and natural gas in unconventional areas as they bet prices will rise further. The number of rigs used by explorers in Asia rose to the highest in 18 years in June as demand for energy in the region boosted drilling, according to Baker Hughes Inc.

Shiv-Vani, which has gained 35 percent this year, rose 0.5 percent to 462.25 rupees at close of trading in Mumbai. The stock is the highest rated among members of the BSE500 index, with all 11 analysts tracking the company recommending a "buy," according to Bloomberg data.

"It's the only integrated player in the Indian market today," said Alok Deshpande, an analyst at Elara Capital Ltd. Customers "do prefer to hand over oil service contracts to a single project manager," such as Shiv-Vani, he said.

Shale, Coal Beds

Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and sandstone rock. Reliance Industries Ltd., India's largest company by market value, last month agreed to its second shale-gas acquisition in three months, committing $1.3 billion for a stake in a venture led by Pioneer Natural Resources Co.

BP Plc Chief Executive Officer Tony Hayward described shale gas as a "game changer" after it allowed the U.S. to overtake Russia in gas production last year.

Templeton, which owns a 5.3 percent stake in Shiv-Vani, according to Bloomberg data, invested $20.6 million in March. The funds will be used to meet the New Delhi-based company's equipment and technology needs, the fund manager said in a statement.

"We are looking at niche companies, either in the U.S. or Europe, with specialization in cementation or perforation," Gupta said. He didn't give a timeline for the purchase.

Shiv-Vani, which counts India's biggest explorer Oil & Natural Gas Corp., Oil India Ltd. and Petroleum Development Oman as its customers, plans to borrow $95 million selling convertible bonds, it said in a statement to the Bombay Stock Exchange last week.

The company's revenue increased to 12.5 billion rupees ($286 million) in the year ended March 31 from 8.7 billion rupees a year earlier. Net income rose to 2 billion rupees from 1.9 billion rupees.

Profit is expected to improve this fiscal as earnings before interest, tax, depreciation and amortization show the impact of projects started last year, Gupta said.

To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net

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