Reliance Industries (RIL) will invest $1.36 billion to acquire 45% interest in a joint venture for Eagle Ford shale acreage of Texas in the US, its second investment in a shale gas asset in three months.
RIL will pay upfront $263 million in cash and the remaining in the form of subsidies for Pioneer and Newpek LLC’s future drilling expenses.
Pioneer will own 46%, Reliance will hold 45% and the others, the remaining 9% of the JV.
RIL will pay $1.315 billion for its implied share of 118,000 net acres in the Eagle Ford fields.
Some analysts are worried that RIL is paying too high a price. “Our big concern is that Reliance is coming in fairly late in the game,” Neil Beveridge, an analyst at Sanford C Bernstein in Hong Kong, told Bloomberg. “Prices are higher now and Reliance is paying a premium.”
RIL is paying $11,100 for each acre in the Eagle Ford area compared with $4,000 paid by BP in March, according to calculations by Beveridge.
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