Reliance Industries (RIL) on Thursday said its subsidiary, Reliance Eagleford Upstream LP, has entered into a joint venture agreement with US-based Pioneer Natural Resources Company to acquire a 45% interest in Pioneer?s core Eagle Ford Shale acreage position in two separate transactions. Reliance will invest $1.3 billion (around Rs 6,900 crore) in the joint venture.
Pioneer and Newpek LLC, Pioneer?s current partner in Eagle Ford, will simultaneously convey 45% of their respective interests in Eagle Ford to Reliance. Newpek, a wholly-owned subsidiary of ALFA, S.A.B. de CV, currently owns approximate 16% non-operated interest in Pioneer?s core Eagle Ford Shale acreage.
Following the transactions, Pioneer, Reliance and Newpek will own 46%, 45% and 9% of the joint venture interests, respectively. The JV will have an approximate networking interest of 91% in 289,000 gross acres implying 263,000 net acres, RIL said in a press release. Reliance will pay $1.3 billion for its implied share of 118,000 net acres. Sources said this implied a cost of $11,150/acre, around 12% lower than implied value for Eagle Ford shale acres using LT gas price deck at $6.8/mmbtu. ?This upstream transaction consideration will include combined upfront cash payment of $263 million and deferred payment of $1.052 billion associated with a carry arrangement for 75% of Pioneer?s and Newpek?s capital costs over an anticipated four-year period,? RIL said.
The deal is structured in a manner similar to that of the JV with Atlas Energy in the Marcellus shale.
The joint venture?s leasehold, which is largely undeveloped, is located in the core area of the Eagle Ford Shale in south Texas. Low operating costs, significant liquid content (70% of the acreage lies within the condensate window) and access to services in the region combine to make the Eagle Ford one of the most economically attractive unconventional resource plays in North America, it added.
Pioneer believes the acreage will support drilling of over 1,750 wells with a net resource potential of approximately 10 tcfe (4.5 tcfe net to RIL). Also included in the transaction is the current production of 28 mmcfe/d (11 mmcfe/d net to Reliance) from five currently active horizontal wells.
While Pioneer will serve as the development operator for the upstream joint venture, Reliance is expected to begin acting as development operator in certain areas.
Additionally, Reliance and Pioneer have executed definitive agreements to form a midstream joint venture that will service the gathering needs of the upstream joint venture. Reliance Eagleford Midstream LLC will pay $46 million to acquire a 49.9% membership interest in the JV. Reliance will have equal governing rights in the joint venture and Pioneer will serve as operator.