By OGJ editors
HOUSTON, Aug. 5 – Reliance Industries Ltd., Mumbai, has taken another step into US unconventional resource plays by entering a venture that envisions the drilling of 1,000 wells in the Marcellus shale fairway.
A subsidary, Reliance Marcellus II LLC, entered a joint venture with Carrizo Oil & Gas Inc., Houston, through which it will acquire a 60% interest in Marcellus shale acreage now held in a 50-50 joint venture of Carrizo and ACP II Marcellus LLC, an affiliate of Avista Capital Partners.
Paying a total of $392 million, Reliance will acquire 100% of Avista’s interest and 20% of Carrizo’s interest in the joint venture. New interests thus will be Reliance 60% and Carrizo 40%.
Of the total consideration, $340 million will be cash, and $52 million will be drilling carry obligations. The latter obligations will provide for 75% of Carrizo’s share of development costs over an expected 2-year development program.
The joint venture holds 104,400 net acres of undeveloped leases in the core area of the Marcellus shale in central and northeastern Pennsylvania.
Reliance said the acreage will support the drilling of about 1,000 wells during the next 10 years. It estimates resource potential net to the joint venture at 3.4 tcf of gas equivalent.
Carrizo will be development operator for the joint venture. Reliance has the option to become development operator in certain regions.
Carrizo and Avista remain in a joint venture holding Marcellus shale acreage in New York and West Virginia.
Earlier, Reliance entered a joint venture with Pioneer Natural Resources Co. and Newpek LLC in a $1.35 billion deal through which it gained a large position in the Eagle Ford shale play of South Texas (OGJ, July 5, 2010, p. 43).