Reliance sells entire stake in Marcellus shale venture for $126 million
Mumbai: Reliance Marcellus II LLC, a subsidiary of Reliance Holding USA Inc. and Reliance Industries Ltd (RIL), said on Friday that it had signed agreements to sell all of its interest in upstream Marcellus shale assets in north-eastern and central Pennsylvania for $126 million.
The assets are currently operated by Carrizo Oil and Gas, Inc. and are being sold to BKV Chelsea LLC, an affiliate of Kalnin Ventures LLC.
“Additionally, Reliance could receive contingent payments of up to $11.25 million in aggregate based on natural gas prices exceeding certain thresholds over the next three years,” the company said.
The Carrizo-operated acreage was one of the three upstream assets in the US in which Reliance had a stake. The assets produce mainly gas and are located in Susquehanna, Wyoming and Clearfield counties of Pennsylvania.
In 2010, RIL had bought a 60% stake in the assets for $392 million.
Walter Van de Vijver, president and CEO of Reliance Holding USA said: “This transaction represents an opportunistic sale of developed upstream Marcellus assets and ends a successful partnership of 7 years with Carrizo in a joint sale. We will continue to actively manage the remainder of our US shale resources.”
A drop in crude oil prices has hit the valuations of oil and gas assets. Shale gas blocks have suffered far more than traditional oil and gas blocks as they are economically viable only when prices are above a certain threshold.
Citigroup Global Markets Inc. acted as the financial advisor to Reliance and Haynes and Boone LLP served as its legal counsel.
Reliance had in June 2015 sold its Eagle Ford (EFS) Midstream joint venture with Pioneer Natural Resources in the US. RIL had spent $46 million in acquiring the 49.9% stake in EFS and invested another $208 million over the years. RIL realized $1 billion from the sale of EFS Midstream.
In June 2010, RIL had invested in the US shale gas business, where it bought a 45% stake in the Eagle Ford shale gas fields, owned by Pioneer, for $1.3 billion. As part of the deal, RIL received a 49.9% stake in the venture.
On Friday, RIL shares closed at Rs836.85, up 1.53%, on BSE, while the benchmark Sensex ended almost flat at 31,814.22 points.
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