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India's Reliance expands US shale gas presence with new deal

https://www.chemnet.com   Aug 06,2010
India's Reliance Industries Ltd. Thursday said that its subsidiary,Reliance Marcellus II, has signed an agreement to enter into a Marcellus Shale joint venture with US-based Carrizo Oil & Gas.


Under the proposed transaction, RIL will acquire a 60% interest in Marcellus Shale acreage in central and northeast Pennsylvania that is currently held in a 50:50 joint venture between Carrizo and ACP II Marcellus,an affiliate of Avista Capital Partners.


Under the transaction, RIL will acquire 100% of Avista's interest and 20% of Carrizo's interests in the joint venture. Upon completion of the transaction, RIL and Carrizo will own 60% and 40% interest, respectively, in a newly formed joint venture between the companies.


RIL will pay a total $392 million, comprising $340 million of cash and $52 million of drilling carry obligations, Reliance said. The drilling carry obligations will provide for 75% of Carrizo's share of development costs over
an anticipated two-year development program, it said.


The joint venture will have approximately 104,400 net acres of undeveloped leasehold in the core area of the Marcellus Shale in central and northeast Pennsylvania, of which RIL's 60% interest will represent approximately 62,600 net acres.


This acreage is expected to support the drilling of approximately 1,000 wells over the next 10 years, with a net resource potential of about 3.4 Tcf of gas equivalent of which 2 Tcfe will be net to RIL, the company said.


The transaction allows for additional growth in the development acreage,at pre-agreed terms.


Carrizo will serve as the development operator for the joint venture and RIL has the option to act as a development operator in certain regions in the coming years as part of the joint venture, the company said.


The transaction is expected to close by mid-September.


RIL has been making inroads into the US shale gas sector since early 2010.


In April, RIL acquired a 40% interest in Pittsburgh-based Atlas Energy for $1.7 billion. RIL and Atlas have agreed to acquire, in a series of transactions, 42,344 acres of Marcellus Shale acreage in southwestern
Pennsylvania for an average price of $4,532/acre. The JV will control some
343,000 Marcellus share acres, of which about 137,000 acres are net to RIL.


In June, RIL bought a 45% stake in Pioneer Resources' Eagle Ford shale for $1.15 billion.
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