Billionaire Mukesh Ambani-led Reliance Industries Ltd has agreed to sell its entire 60% stake in a US shale energy joint venture for $126 million (Rs 823 crore), taking a deep haircut on the price it had paid to acquire the asset seven years ago.
Reliance said in a statement on Friday that it has signed a pact to sell Marcellus shale assets in northeastern and central Pennsylvania in the US to BKV Chelsea LLC, an affiliate of Kalnin Ventures LLC, subject to customary closing terms and conditions.
The assets are operated by Carrizo Oil & Gas Inc, which has also agreed to sell its stake to BKV Chelsea. The total deal value for the asset is $210 million, according to a separate statement by Kalnin Ventures.
Kalnin may separately make contingent payments of up to $18.75 million based on natural gas prices exceeding certain thresholds over the next three years. Reliance’s share of this contingent payment would be up to $11.25 million.
The assets produce mainly gas and are located in Susquehanna, Wyoming and Clearfield counties of Pennsylvania.
The diversified Indian conglomerate had acquired the assets in August 2010 for $392 million, or almost Rs 1,800 crore. This means it is selling its stake at a third of the price in dollar terms and less than half in rupee terms.
Walter Van de Vijver, president and CEO of Reliance Holding USA Inc, said this transaction is “an opportunistic sale” of developed upstream Marcellus assets and ends the seven-year partnership with Carrizo. “We will continue to actively manage the remainder of our US shale resources,” he said.
The Carrizo-operated acreage was one of three upstream assets in the US that Reliance had acquired.
Reliance said it remains invested in the Marcellus shale play via its non-operated position with Chevron in southwestern Pennsylvania and in the Eagle Ford property via its non-operated position with Pioneer in Texas.
The transaction is anticipated to close by the end of December.
Citigroup Global Markets, Inc. acted as the financial adviser to Reliance while Haynes and Boone served as its legal counsel.