Oil India Ltd (OIL) and Indian Oil Corporation (IOC) have jointly acquired stakes in Carrizo Oil & Gas Inc’s (Carrizo) liquid rich shale assets in the Denver – Julesburg Basin in Colorado for $82.5 million.
Indian energy players have been actively buying shale gas assets in the American continent and Australian sub-continent.
Through their wholly-owned U.S. subsidiaries, OIL and IOCL executed definitive agreements with Carrizo, by which they have acquired 30 per cent of Carrizo’s interest in approximately 60,000 net acres and the partners will target development of the Niobrara shale. As part of the transaction, OIL and IOCL will also receive a 30 per cent interest in Carrizo's existing production, of approximately 1850 BOE/ day from 24 gross wells.
The total consideration of $82.5 million consists of an upfront payment of $ 41.25 million and the assumption of $ 41.25 million of Carrizo’s future drilling and development costs.
OIL and IOCL will look to raise money through bonds to part-finance the acquisition.
This investment provides an early entry into a prolific unconventional oil play. The D-J Basin is a well known producing basin where many U.S. E&P companies are successfully developing the Niobrara formation. The transaction also provides a platform to the companies for additional acquisitions in North America.
OIL and IOCL have formed wholly owned subsidiaries in Texas, Oil India (USA) Inc., and IOCL (USA) Inc., respectively.
OIL’s Chairman & Managing Director, Mr SK Srivastava said the acquisition is in line with the company’s growth strategy along the energy value chain.
“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. This acquisition will also give us first hand exposure to operations of shale/tight oil and gas fields and technologies deployed for the same,” Srivastava said.
BMO Capital Markets acted as the exclusive financial advisor to Oil India ltd. Thompson & Knight LLP acted as legal counsel, while Ernst & Young and Halliburton acted as tax and accounting and technical due diligence consultants, respectively.
In recent times, shale gas prices are trading below $2.90 per million BTU in the New York trading desk.
In 2011, state-owned gas distributor-Gail India had also acquired 20 percent stake in Eagle Ford region Texas from Carrizo for $95 million.
(Edited by Prem Udayabhanu)