State-run GAIL (India) Ltd has built its first shale gas asset in the USA by acquiring 20 per cent stake in one of the blocks owned by Houston-based Carrizo Oil & Gas Inc., for $95 million (Rs 470 crore), the company has said.

Under the deal with NASDAQ-listed Carrizo, GAIL will acquire 20 per cent in Carrizo’s Eagle Ford Shale acreage position. The total investment in the asset is estimated to be around $300 million (a little less than Rs 1,500 crore) over the next five years, which also includes upfront cash payment of $63.7 million and a carry amount of $31.3 million, linked to Carrizo’s future drilling and development costs.

The joint venture will have 20,200 gross acres, out of which GAIL will have 4,040 net acres spread over four counties in Texas.

Shares of GAIL India were trading at Rs 420.90 per unit on the BSE at 1:29 pm, down 0.12 per cent from the previous close.

“We believe that this transaction with Carrizo comes at an opportune time,” GAIL’s chairman and managing director B.C. Tripathi commented on the acquisition.

The JV is expected to drill an additional 139 wells in the acreage. Also included in the transaction are eight wells currently producing about 2,350 net barrels of oil equivalent per day, of which GAIL’s share will be around 470 barrels per day.

Jefferies & Company, Inc. acted as exclusive financial advisor to GAIL on this transaction.

“Keeping in view the prospect of Indian shale gas bidding rounds, opening within a couple of years, this experience will hopefully help GAIL develop necessary skill sets for shale gas exploitation. Under the arrangement, GAIL will be sending secondees to Carrizo to work on the Eagle Ford assets, and GAIL and Carrizo will also work together in exploring shale gas opportunities in India and other countries outside the US,” Tripathi added.

Carrizo Oil & Gas is a Houston-based energy company actively engaged in the exploration, development, exploitation and production of oil and natural gas primarily in the Eagle Ford Shale in South Texas, the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, the Niobrara Formation in Colorado and in proven onshore trends along the Texas and Louisiana Gulf Coast regions.

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