RIL completes deal for 60% stake in Marcellus Shale asset

Mukesh Ambani-led Reliance Industries has announced the completion of its deal to acquire a 60 per cent stake in the Marcellus Shale gas asset in the United States for $392 million.

On August 5, Reliance had announced that it will buy its third shale gas asset in the United States. Its subsidiary, Reliance Marcellus II Llc, had signed a definitive transaction agreement to enter into a Marcellus Shale joint venture with U.S.-based Carrizo.

In a statement issued on Saturday, Carrizo Oil and Gas said that it has “closed its previously announced joint venture transaction in the Marcellus Shale with a subsidiary of Reliance Industries.”

The joint venture agreement is effective immediately, the statement added.

“The new Carrizo-Reliance joint venture agreement covers approximately 1,04,400 gross acres in Northern and Central Pennsylvania. Under the terms of the agreement, Carrizo retains a 40 per cent working interest in the acreage and Reliance owns 60 per cent,” the statement said.

Carrizo will continue as operator of the acreage, with Reliance having the right to assume operations in certain parts of Central Pennsylvania after a year, it added.

Under the agreement, Reliance paid $340 million in cash to acquire a 60 per cent stake in the Marcellus shale gas acreage held by Carrizo Oil and Gas Inc and its partner.

The remaining $52million would be incurred on bearing Carrizo’s future seismic survey and drilling costs in the Marcellus shale gas area.

The Marcellus shale acreage was earlier held by a 50:50 joint venture between Carrizo and ACP II Marcellus LLC, an affiliate of Avista Capital Partners.

Reliance has acquired 100 per cent of Avista’s interest in the JV for approximately $327 million and 20 per cent of Carrizo’s interests for a purchase price of $65 million.

In April, the Mumbai-based firm had bought a 40 per cent stake in Atlas Energy Inc’s Marcellus Shale acreage for $1.7 billion. In June, it had agreed to buy a 45 per cent stake in Pioneer Natural Resources Co’s Eagle Ford shale gas asset in Texas for about $1.36 billion.

Reliance would have a net share of 62,600 acres in Carrizo’s shale acreage, less than its 137,000 acre holding in the Atlas venture and 118,000 acres in Pioneer’s assets.

The gross resource potential in Carrizo’s Marcellus Shale area is 3.4 trillion cubic feet of gas, compared to 10 trillion cubic feet in Pioneer’s Eagle Ford asset.

Keywords: RIL, Mukesh Ambani, Marcellus Shale