Reliance Inds to sell stake in Eagle Ford midstream shale asset for $1.07B

Mumbai-based conglomerate Reliance Industries Ltd and its partner Pioneer Natural Resources Co have entered into an agreement with North America-based Enterprise Products Partners Ltd to offload their entire holding in Eagle Ford Shale (EFS) midstream venture for $2.15 billion.

RIL currently owns 49.9 per cent stake in the joint venture, while the remaining is held by Pioneer Natural Resources, which initiated the sale of EFS Midstream LLC last November.

“Under the terms of the definitive agreement, Enterprise will pay Reliance approximately $574 million in cash at closing and make the final payment of $499 million in cash on or before the first anniversary of the closing date,” RIL said in a statement. Pioneer will also realise a similar amount.

Enterprise has agreed to spend $270 million more over 10 years on new facilities, connections and expansion projects.

Reliance continues to own 45 per cent stake in EFS upstream project. It did not say if it intends to sell this asset too.

Under the agreement, RIL and Pioneer will use EFS Midstream’s pipeline infrastructure and system for 20 years, including a minimum volume requirement for the first seven years, the statement said.

The completion of this deal, which is expected to be closed in the third quarter of 2015, is however subject to regulatory approvals and closing conditions.

“Upon closing of the transaction, Pioneer will no longer receive its share of the cash flow generated by the EFS Midstream business, which was forecasted to be more than $100 million in 2015,” Pioneer said in a separate statement.

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 EFS. It provides gas gathering, treating, compression and condensate processing services in the Eagle Ford shale formation, the most prolific oil field in the US.

Reliance Industries had bought 45 per cent stake in EFS acreage position for $1.315 billion from Pioneer and Newpek 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 had 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 the eastern region of the US. Atlas was later acquired by Chevron.

RIL’s shale gas business in the US comprises three upstream joint ventures with Chevron, Pioneer Natural Resource and Carrizo Oil and Gas besides the midstream joint venture with Pioneer. Aggregate investments since the inception of these ventures aggregate $8.1 billion.

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