OIL, IOC acquire 30% stake in US firm Carrizo for $82.5 mn
New Delhi: State-owned Oil India Ltd (OIL) and Indian Oil Corp (IOC) Thursday jointly bought 30 percent stake in Houston-based Carrizo Oil & Gas's Niobrara shale oil and gas assets in Colorado for USD 82.5 million (about Rs 428 crore).
In their first shale asset overseas, the OIL-IOC combine will make an upfront payment of USD 41.25 million to Carrizo and pay a similar amount for future drilling costs on behalf of the US firm, OIL Director (Finance) T K Ananth Kumar told reporters here.
OIL will acquire 20 percent and IOC will get 10 percent in the Denver-Julesburg basin in Colorado, which produces both natural gas and liquids.
Carrizo, which holds 61,500 gross acres in the Niobrara basin, currently produces 1,850 barrels of oil-equivalent per day, of which 30 percent would now accrue to OIL-IOC combine.
"Our share of peak production, which is estimated to be reached in 3-4 years, will be 3,700 barrels of oil-equivalent a day," said Nripendra Kumar Bharali, Director (Human Resources and Business Development) of OIL.
The joint venture would spend USD 230 million over the next 3-4 years on the shale property.
OIL-IOC paid about USD 3,000 per acre for the 18,450 acre spread over three counties in Texas.
"This compares very favourably with other acquisitions in the basin," Kumar said.
Output from the field consists of about 69 percent of oil, 14 percent of natural gas liquids and 17 percent dry gas, Bharali said.
OIL-IOC join Reliance Industries and GAIL India Ltd in race for shale assets in US to shore up energy security.
RIL holds stake in three shale gas joint ventures in the US, including one with Carrizo in the Marcellus shale acreage in Pennsylvania. Gas utility GAIL India last year acquired a 20 percent stake in Carrizo's Eagle Ford shale acreage.
Kumar said OIL, which has earmarked Rs 7,000 crore for overseas acquisitions this year, is in talks for acquisition of conventional oil and gas as well as unconventional shale assets in US, Canada and some African nations.
"We are going to close few more deals in the coming months," he said. "We are taking this investment as a stepping stone. We want to take more and more opportunities."
OIL plans to raise close to USD 100 million in foreign loans by year end to part-fund the Carrizo stake buy. "Thursday US dollar loans can be raised at less than 5 percent (interest rate) as compared to about 11 percent rate for domestic loans," he said.
US is witnessing a shale revolution after a combination of horizontal drilling and hydraulic fracturing unlocked oil and gas reserves trapped in shale formations.