Reliance Industries today said it has sold its entire 49.9 per cent interest in a US shale oil and gas pipeline joint venture to New York-listed Enterprise Products Partners for USD 1.073 billion.
Reliance and its partner Pioneer Natural Resources Co sold off Eagle Ford (EFS) Midstream venture, that owns a 460 miles pipeline network, to Enterprise Products Partners for USD 2.15 billion. Pioneers held 50.1 per cent interest.
“Under the terms of the definitive agreements, Enterprise will pay Reliance approximately USD 574 million in cash at closing and make the final payment of USD 499 million in cash on or before the first anniversary of the closing date,” RIL said in a statement.
The transaction, under which Reliance Holding USA Inc, a subsidiary of RIL, signed definitive agreements for the sale of its entire holding of 49.9 per cent interest in EFS Midstream LLC to an affiliate of Enterprise Products Partners LP, is to close by the third quarter of 2015.
“Reliance’s agreement to sell its interest in EFS is part of a joint transaction, wherein both Reliance and Pioneer have agreed to sell their entire respective holdings in EFS, for an aggregate consideration of USD 2.15 billion,” it said.
EFS had debt of USD 170 million as on March 31, 2015, and hence RIL share of the first tranche proceeds will be reduced by around USD 85 million.
RIL has since inception made an investment of USD 208 million in EFS and received distributions of USD 75 million since 2013.
The firm plans to use the proceeds from the sale of EFS for further development of its shale gas portfolio as well as repayment of some of its existing debt.
“In addition to the aggregate acquisition consideration being paid to Reliance and Pioneer proportionate to their respective ownership interests in EFS, Enterprise has agreed to spend USD 270 million over the next ten years on new facilities, connections and expansion projects,” the statement said.
Enterprise in a statement said, “The purchase price will be paid in two installments with the first installment of USD 1.15 billion paid at closing and the final installment of USD 1 billion paid no later than the first anniversary of the closing date.”
EFS Midstream venture was formed in 2010 to construct, own and operate facilities providing gas gathering, treating, and transportation services in the Eagle Ford Shale in South Texas.
The Midstream system consists of 10 gathering plants and about 460 miles of pipelines. The system gathers and separates produced condensate from produced gas.
It also stabilises the condensate, where necessary, and treats the gas produced from the Eagle Ford upstream joint venture operated by Pioneer with stake of 46 per cent.
RIL holds 45 per cent interest in the Eagle Ford upstream joint venture and the rest 9 per cent is with Newpek LLC.
It is being speculated that RIL may be looking at selling this stake as well. RIL bought 45 per cent interest in Pioneer Natural Resources Co’s Eagle Ford shale formation of south Texas for USD 1.3 billion. The company statement however did not say anything on the upstream venture.
The Eagle Ford assets, spread over 230,000 acres, have become more attractive after the US Commerce Department, in June last year, gave Pioneer permission to export a type of ultralight oil known as condensate produced from the region.
Besides Eagle Ford, RIL has two more shale ventures in the US — 40 per cent stake in Chevron’s Marcellus shale acreage and a 60 per cent interest in Carrizo Oil and Gas Inc’s Marcellus shale acreage in Central and Northeast Pennsylvania.
Under the terms of the agreements, the Pioneer and Reliance can use the EFS Midstream for moving condensate and gas for 20 year on fee-based arrangement.
Commenting on the transaction, Walter Van de Vijver, President and CEO of Reliance Holding USA said, “EFS has succeeded in its objective of building the gathering and midstream infrastructure in a timely manner to support ramp-up of the Reliance-Pioneer Eagle Ford Upstream Joint Development operations.
“EFS has now transitioned from a ‘development’ mode to ‘stable operations’ mode, generating free cash flows since 2013. EFS monetisation thus provides a significant opportunity for unlocking value for our shareholders.”
Citi and BofA Merrill Lynch acted as financial advisors to RIL for the transaction.
EFS Midstream provides gas gathering, treating, compression and condensate processing services in the Eagle Ford Shale.
The EFS Midstream system includes approximately 460 miles of natural gas gathering pipelines, 10 central gathering plants, 780 million cubic feet per day of natural gas treating capacity and 119 thousand barrels per day of condensate stabilization capacity, Enterprise Products said.
“We are pleased to announce the acquisition of EFS Midstream,” said Michael A Creel, chief executive officer of Enterprise’s general partner. “This purchase and the associated long-term, fee-based agreements expand our relationship with Pioneer and Reliance and broaden the midstream services that we provide to them.”
The transaction is subject to customary regulatory approvals and closing conditions, is expected to close in the third quarter of 2015.
Enterprise Products Partners LP is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids, crude oil, refined products and petrochemicals.
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