Indian Oil Corporation digs up $10-m revenue from US biz

Written by Siddhartha P Saikia | New Delhi | Updated: Jul 7 2014, 13:18pm hrs
IOCThe IOC board had approved its share of acquisition of $27.5 million plus the firm's share of the project cost totalling around $75.5 million.
Indian Oil Corporations (IOC) foray into exploration has started yielding returns. The public-sector refiner, which acquired a 10% stake in the US-based Carrizo Oil and Gas Inc's liquid-rich shale assets in Colorado in 2012, has generated a cumulative revenue of $10.31 million by last fiscal end.

Participation in the Niobrara shale asset resulted in the first-ever revenue earnings for IOC from upstream business, said a company official. On October 4, 2012, IOC and Oil India had announced acquiring 10% and 20% stake, respectively, in Carrizo's Niobrara shale assets for $82.5 million for 60,000 net acre. The IOC board had approved its share of acquisition of $27.5 million plus the firm's share of the project cost totalling around $75.5 million.

At the time of acquisition, about 23 wells were on production. This increased to 114 wells as of April 30. The well head production hovers around 4.15 million barrels oil and around 5.56 billion cubic feet of gas (bcf). This is equivalent to about 5.08 million barrels of oil equivalent (mboe).

In addition, Carrizo in March had offered more acreage of around 2,400 net acres (area of mutual acquisition-3) to the Indian consortium for acquisition in the Niobrara asset.

The acreages offered are in fairly good regional productive settings and are offered by Carrizo at a price lesser than the intitial acquisition cost paid in October 2012, another official privy to the development told FE.

The acreage offered by Carrizo is at a price of around $2,775 per net acre, which is less than what was paid by the Indian companies of around $3,666 per net acre initially in October 2012, the official added. Legal consultant, Thompson & Knight LLP has carried out the legal due diligence review of the offer made by Carrizo. However, IOC and Oil India did not confirm if they are considering to acquire new acreage offered by the Houston-based firm.

Mukesh Ambani owned Reliance Industries (RIL) has taken most active step by spending $3.44 billion to buy stake in three shale gas assets in the US. For past several quarters, RIL's investments in the US shale assets have been more profitable than its exploration and production business at home. For the first time, in Q4 FY14, US revenues have beaten those of its Indian operations. The fourth quarter topline for US shale assets was R1,646 crore versus R1,417 crore from Indian E&P.

Another government-owned company, GAIL (India), in September 2011 acquired a 20% stake in Houston-based Carrizo Oil and Gas Inc's Eagle Shale Ford for $95 million. Of the total value, it made upfront cash payment of $63.7 million, while another $31.3 million was linked to Carrizo's further drilling and development cost. In FY13, GAIL garnered revenues of $21 million from the project and reported a PAT of $3.97 million.