Carrizo Oil & Gas, Inc. has closed its previously announced joint venture transaction in the Marcellus Shale with a subsidiary of Reliance Industries Limited.
In connection with the joint venture, Reliance acquired a 20% interest in approximately 52,200 net Carrizo acres in Pennsylvania considered highly prospective for Marcellus Shale natural gas at a purchase price of $65 million. Reliance paid $11.4 million in cash to Carrizo at closing with $1.7 million more expected later this year. In addition, Reliance will pay an expected $52 million of Carrizo’s share of future drilling, completion, and seismic costs (development carry). The joint venture agreement is effective immediately.
The new Carrizo/Reliance joint venture agreement covers approximately 104,400 gross acres in northern and central Pennsylvania. Under the terms of the agreement, Carrizo retains a 40% working interest in the acreage and Reliance owns 60%. In addition to funding its own share of future development obligations, Reliance will fund 75% of Carrizo’s portion of these costs over the next two years or until the earlier full utilization of the $52 million development carry, subject to certain conditions and extensions. Carrizo will continue as operator with Reliance having the right to assume operations in certain parts of Central Pennsylvania after one year.