Indian oil firms to buy stake in Carrizo's Niobrara shale assets

Oil India Ltd. (OIL) and Indian Oil Corp. (IOC) jointly agreed to acquire 30% of Carrizo Oil & Gas Inc.’s liquid-rich shale assets in the Niobrara basin in Colorado through their wholly owned US subsidiaries for $82.5 million total, marking the India parent companies’ first US upstream acquisition.

OIL will acquire 20% interest and IOC will acquire 10% interest in Carrizo’s Niobrara holdings, which are in Weld and Adams counties in Colorado. Terms call for an upfront payment of $41.25 million and a subsequent $41.25 million carry of Carrizo’s future drilling and development costs.

Carrizo of Houston last year sold 20% interest of its South Texas Eagle Ford shale to GAIL India Ltd. and in 2010 sold a 20% interest of its Marcellus shale assets in the Appalachia region to Reliance Industries Ltd.

The Niobrara joint venture involves 18,100 net mineral acres and 555 boe/d (75% oil) of production from 24 Carrizo-operated wells. Carrizo will operate the assets in which OIL and IOC will be partners.

OIL and IOC are looking for additional acquisitions abroad as well as experience with unconventional oil and gas operations, the companies said.

S.K. Srivastava, OIL chairman and managing director, said the Carrizo acquisition fits OIL’s corporate strategy of diversification.

“We have earmarked part of our financial reserves for acquisitions and new opportunities to bolster our overseas portfolio and were keen on joint ventures in countries with geopolitical stability such as the US, UK, Canada, and Australia.”

R.S.Butola, IOC chairman, called the Carizzo joint venture “another step in our journey to emerge as an integrated energy company.” IOC is primarily a refiner although it is moving toward more exploration and production.

“While our E&P plans have been relatively low key so far, with the shale asset in the Niobrara basin we should gain momentum in this space,” Butola said. “The learning and technology exposure that will accrue in this field would stand us in good stead in the future.”

S.P. Johnson, Carrizo's president and chief executive officer, said upfront proceeds from the joint venture would help pay for 2012 capital expenditures and the drilling carry will allow the addition of a second drilling rig in the Niobrara in early 2013.

OIL is a state-run oil and gas company in India involved with E&P and crude oil transportation. Most of its producing fields are in northeastern India.

The company has more than 100,000 sq km of petroleum exploration license and mining lease areas for its exploration and production activities. OIL estimates its proved and probable reserves at more than 940 million boe.

IOC, a state-run company, is involved with refining, petrochemicals, pipeline transportation, and product marketing as well as E&P. IOC and its subsidiaries own and operate 10 of India's 20 refineries.

Carrizo has assets in the Eagle Ford shale in South Texas, the Barnett shale in North Texas, the Marcellus shale in Appalachia, and the Niobrara formation.

In addition, Carrizo also is developing Huntington oil field in the UK North Sea.

Contact Paula Dittrick at paulad@ogjonline.com.

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