The Marcellus Shale is a giant rock formation underlying Pennsylvania, New York and other states.
Mukesh Ambani-led Reliance Industries today said it will buy its third shale gas asset in the United States for $392 million.
Reliance will pay $340 million in cash to acquire a 60% stake in the Marcellus shale-gas acreages held by Carrizo Oil and Gas Inc and its partner, the company said in a press statement.
The remainder $52 million would in Carrizo's drilling cost in the Marcellus shale-gas areas of central and northeast Pennsylvania.
The Mumbai-based firm in April had bought a 40% stake in Atlas Energy Inc's Marcellus Shale acreage for $1.7 billion. In June, it had agreed to buy a 45% stake in Pioneer Natural Resources Co's Eagle Ford shale natural gas asset in Texas for about $1.36 billion.
Reliance would have a net share of 62,600 acres of Carrizo's shale acreage, smaller than the 137,000 acres in the Atlas venture and 118,000 acres in Pioneer's assets.
The resource potential in the Carrizo areas is a gross 3.4 trillion cubic feet of gas compared with 10 trillion cubic feet in the Pioneer areas.
Reliance said its "subsidiary, Reliance Marcellus II, Llc, has signed definitive transaction agreements to enter into a Marcellus Shale joint venture with US-based Carrizo."
Under the proposed transaction, Reliance will acquire a 60% interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in a 50:50 joint venture between Carrizo and ACP II Marcellus LLC, an affiliate of Avista Capital Partners.
"Pursuant to the transaction, Reliance will acquire 100% of Avista's interest and 20% of Carrizo's interests in the joint venture," it said. "Upon completion of the transaction, Reliance and Carrizo will own 60% and 40% interests respectively."
Shale gas is one of the hottest investment plays in the energy sector, with a string of multibillion dollar deals having been done over the past year prompted by technical advances which have unlocked huge and previously inaccessible natural gas reserves.
The Marcellus Shale is a giant rock formation underlying Pennsylvania, New York and other states. Shale has long been known to contain natural gas, but this was not worth extracting with conventional technology.
"Carrizo will serve as the development operator for the joint venture and RIL has the option to act as a development operator in certain regions in the coming years as part of the joint venture," the statement said.
The transaction is anticipated to close by mid-September 2010.
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