State-owned Oil and Natural Gas Corp. Ltd’s overseas arm had announced this acquisition in August, since when oil prices have fallen at least 60%.

In other words, if the deal were struck now, it would have cost ONGC Videsh far less than the £1.4 billion it agreed to pay in August.

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A statement made by Imperial in November suggests its registered oil reserves have risen by 40% since July. Still, this would far from offset the negative impact of lower crude prices.

In August, the assumption was that long-term crude prices would be around $100 per barrel. At the current price of around $40 a barrel, it now looks far-fetched. On the other hand, the estimate of Imperial’s reserves hasn’t changed as dramatically. It was already known that the company had achieved drilling success at the Kiev Eganskoye field on the east side of the Ob river after the previous year’s audit, and that the discovery would increase its reserves.

In August, the acquisition price seemed to have accounted for the high tax structure in Russia and the high development costs that ONGC would have to incur once it acquired the company. Now, the acquisition price is exorbitant.

Thanks to Russia’s high tax structure, Citigroup analysts have estimated Imperial’s net realisations would be merely $47 a barrel on the assumption that the long-term crude price will be $100 a barrel.

While the company boasts of reasonably high reserves, the proven part of them is rather low as a proportion, which increases the risk of achieving production targets. Besides, details of other liabilities of Imperial are not known, making the acquisition rather risky.

ONGC shares have fallen only 22% since the news of the Imperial buy first hit the markets. Considering that crude prices have fallen sharply since then, there is room for further correction in ONGC’s share price.