Mumbai-based private sector conglomerate Reliance Industries is looking to sell its 49.9 per cent stake in Eagle Ford Shale (EFS) midstream venture, as per a stock market disclosure on Wednesday.
It has decided to join its partner Pioneer Natural Resources Co, which is looking to divest its 50.1 per cent stake in EFS midstream venture, for a joint sale of the asset. The US-based firm is looking to focus on its shale gas explorations business, as per a stock market disclosure.
“The sale of EFS midstream would allow us to strategically redeploy capital to our core, oil-rich Spraberry/Wolfcamp assets in the Permian Basin of West Texas,” Pioneer chairman and chief executive officer (CEO) Scott Sheffield said. The company has, however, no plans to divest its EFS upstream assets.
The midstream system consists of 10 gathering plants and about 460 miles of pipelines. The system gathers and separates condensate from gas. It’s forecasted to generate $100 million in cash flow next year, the company said.
“The sale of EFS midstream is not expected to affect our ability to export processed Eagle Ford condensate,” Sheffield added.
The JV was formed in 2010 to construct facilities to provide gathering and handling services for condensate and natural gas produced from wells on dedicated acreage in the EFS.
Services are provided for the Eagle Ford Upstream joint venture operated by Pioneer with 46 per cent stake. Reliance holds 45 per cent stake in this JV with Newpek LLC holding the balance 9 per cent.
Reliance Industries had bought 45 per cent stake in EFS acreage position for $1.315 billion from Pioneer and Newpeck LLC. This involved a combined upfront cash payment of $263 million and deferred payments of $1.052 billion associated with a carry arrangement for 75 per cent of Pioneer’s and Newpek’s capital costs over an anticipated four years.
RIL formed a separate midstream joint venture with Pioneer through its subsidiary Reliance Eagle Ford Midstream LLC, where it acquired a 49.9 per cent stake for another $46 million.
This was the second successive deal for RIL to make its presence in the US shale business. In April 2010, it had agreed to pay $1.7 billion to Atlas Energy to form a joint venture and own a 40 per cent stake in Atlas’ Marcellus Shale operations in eastern US.
(Edited by Joby Puthuparampil Johnson)