BackReliance, Pioneer considering divestment of Eagle Ford midstream business
Reliance owns a 49.9% stake in the business, EFS Midstream, while Pioneer Natural Resources is the operator with a 50.1% stake
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Mumbai: US-based shale player Pioneer Natural Resources Co. (Pioneer) and Reliance Industries Ltd (RIL) said Wednesday they are planning to sell off their midstream—oil and gas transportation and distribution—company in the southern Texas region of the US.
The company, Eagle Ford Shale (EFS) Midstream, was formed in 2010 to evacuate and transport shale oil and gas from the Eagle Ford shale acreage in Texas, US, where both Pioneer and RIL are partners.
“... the company is pursuing the divestment of its 50.1% share of the Eagle Ford Shale Midstream business. Reliance Holding USA, Inc. owns the remaining 49.9% of the EFS Midstream business and also plans to pursue the divestment of its share in a joint process with Pioneer. Pioneer is the operator of the business," said Pioneer in a note on Wednesday.
It said the EFS Midstream business was formed to construct facilities to provide gathering and handling services for condensate and natural gas produced from wells in the Eagle Ford Shale.
These services are provided for an Eagle Ford Shale upstream joint venture operated by Pioneer (Pioneer 46%, Reliance 45% and Newpek LLC 9%) and for various third parties. The EFS Midstream system consists of 10 central gathering plants (CGPs) and approximately 740 km of pipelines. Its cash flow from the midstream venture is expected to cross $100 mn in 2015, said Pioneer.
In a separate statement RIL said, “Reliance has also agreed to consider a divestment of its shareholding in this joint venture. Reliance Industries Ltd (RIL), through its subsidiary Reliance Holding USA Inc. (RHUSA), had acquired a 49.9% stake in EFS Midstream LLC in June 2010. Current investments in EFS Midstream LLC is $208 million."
On 13 October, Alok Agarwal, chief financial officer, RIL said the Eagle Ford shale upstream venture has seen a substantial jump in valuations since 2010, and that RIL was looking for the right valuation to sell the assets.
According to a Bloomberg report in October, the venture has a total value of at least $4 billion.
RIL had invested $1.15 billion in 2010 to buy the stake in Eagle Ford upstream.
In October, RIL had said that the company is also seeking buyers for its upstream shale venture, which produced 704 million metric cubic feet of gas per day including close to 68,200 barrels of condensate (light oil) in the second quarter of the current fiscal.
Reliance also has investments in shale gas assets in the shale-rich Marcellus region in New York, with US-based firms Chevron Corp., and Carrizo Oil and Gas Inc.
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