India's Reliance inks shale gas JV with Carrizo

India’s largest private sector company Reliance Industries continues on its US acquisition spree by spending $392 million on a shale gas joint venture with Carrizo.

Mukesh Ambani’s flagship company Reliance Industries has further consolidated its presence in the shale gas industry in the US by paying $392 million for a 60% stake in a joint venture with Carrizo Oil & Gas. The announcement marks the third gas deal by Reliance since April.

Reliance will buy a 20% interest in 52,200 Carrizo net acres in Pennsylvania for $65 million, which will be paid $13 million in cash to Carrizo and $52 million by way of carry for future drilling, completion and seismic costs. Simultaneously Reliance will buy the entire interest of private equity firm Avista Capital Partners, which is a Carrizo affiliate, in the same properties for $327 million.

Carrizo is a Houston-based energy company engaged in the exploration, development, exploitation and production of oil and natural gas in a number of US states.

The joint venture agreement between Reliance and Carrizo covers approximately 104,400 gross acres in northern and central Pennsylvania. Carrizo will retain a 40% working interest in the acreage and Reliance will own the balance. As part of the agreement Reliance will not only fund its own share of future development obligations but will also fund 75% of Carrizo's portion of these costs over the next two years or until the $52 million development carry is spent. Carrizo will continue as operator but Reliance has negotiated the right to take over operations in certain parts of Central Pennsylvania after one year.

This is Ambani’s third deal in less than six months. In April, Reliance shelled out $1.7 billion to buy a 40% interest in a 300,000 acre natural gas field owned by Pennsylvania-based Atlas Energy Resources. Then, in June, Reliance acquired a 45% interest in around 212,000 net acres in a property called Eagle Ford Shale from Pioneer Natural Resources.

The ongoing M&A activity by Reliance is good news for investment banks.

On the Atlas deal Reliance was advised by Barclays Capital with legal advice from Vinson & Elkins. Additionally, Bank of America Merrill Lynch provided strategic and financial advice to Reliance. Atlas was advised by Jefferies & Company as lead financial adviser and J.P. Morgan Securities as financial adviser.

On the Pioneer deal Reliance continued to work with Barclays Capital, this time adding UBS as joint M&A adviser. BoA Merrill was on the sell-side advising Pioneer.

And on the latest Carrizo deal Jefferies & Company, which would have got to know Reliance well on the Atlas deal, flipped to the buy-side as lead financial adviser. Meanwhile, BNP Paribas and Credit Agricole corporate and investment bank provided strategic advice.

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