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Reliance Industries Ltd (RIL) is planning to sell its 45 per cent stake in the US' Eagle Ford shale acreage for around $4.5 billion; it has mandated Citigroup and Bank of America Merrill Lynch to find a buyer.
In June 2010, RIL had bought a 45 per cent interest in Pioneer Natural Resources Co's Eagle Ford shale formation in South Texas for $1.31 billion. According to its June quarter result, RIL has invested a total of $3.91 billion in the Pioneer JV.
When contacted, a spokesperson for Reliance Industries said in an email: "Reliance constantly strives to identify means by which to create additional value for its shareholders. It is the company's policy not to comment on market speculation. If there are any required disclosures, Reliance will make those at an appropriate time."
Pioneer Natural Resources, the field operator, holds a 46 per cent stake in the Eagle Ford venture, while nine per cent is held by Alpha SAB's Newpeck LLC.
At $4.5 billion for RIL's share, the field is valued at $10 billion. Newpek was exploring opportunities to sell its share and was being advised by Tudor Pickering Holt & Co, agencies reported.
In addition to Eagle Ford, RIL holds stakes in two more shale ventures in the US - a 40 per cent interest in Chevron's Marcellus shale acreage and a 60 per cent one in Carrizo Oil and Gas Inc's Marcellus shale acreage in Central and Northeast Pennsylvania.
RIL's total investment in the US till July 2014 has been $7.36 billion. The company had invested a total of $2.04 billion in acquiring stakes in three companies, gaining access to 12 trillion cubic feet of reserves.
According to the company's June quarter result, its revenue from shale gas operations rose 26 per cent from last year to $270 million (Rs 1,620 crore), while its operating profit from the business increased 22 per cent to $201 million (Rs 1,206 crore).
During the quarter, RIL's oil & gas revenue growth was largely led by volume growth in the US shale business. In the previous quarter, its production of 15 million standard cubic metres per day (mscmd) of gas from shale business was higher than the eight mscmd of gas produced from the D1 and D3 fields of the KG-D6 block in India. RIL is to declare its September quarter earnings on Monday.
"RIL was more interested in learning the ropes of shale gas development and business. India has good shale gas potential and private companies like Reliance will gain with their experience when the field is opened up in India," said P Phani Sekhar, fund manager (PMS) at Angel Broking.
According to analysts, falling crude oil prices could be a concern for RIL and its partners in shale gas business, going forward. High oil prices would keep the cash flow in check and allow further investments in the field. A further drop in crude oil prices might make the assets less attractive.
On Friday, Brent crude oil dropped below $90 a barrel — the lowest since 2010 — on the back of rising oil production and tepid economic growth.
