India's Reliance Industries pays $1.15B to enter US Eagle Ford Shale via JV with Pioneer Natural Resources

By Phaedra Friend Troy

Pioneer Natural Resources (NYSE:PXD) signed a joint venture agreement with the US subsidiary of the Indian major Reliance Industries in a $1.15 billion Eagle Ford Shale deal.

Under the JV agreement, Pioneer will sell 45 percent of its interest in its Eagle Ford Shale acreage located in South Texas. The land spans some 212,000 acres.

This is the second major US shale deal that Reliance has entered in the last few months. Just in April, Reliance agreed to pay $1.7 billion to form a JV with Atlas Energy for 120,000 acres in the Marcellus Shale.

Eagle Ford Shale JV Agreement

The cost includes a $266 million cash payout to Pioneer at closing and $879 million to carry Pioneer’s share in future drilling costs on the acreage.

Additionally, Reliance will participate in the development of midstream assets as a 49.9% partner. The midstream assets will include gathering and treatment facilities to separate condensate production from the produced gas.

Additionally Reliance has entered into a joint venture agreement with the other partner on the acreage, Newpek, for $210 million.

Pioneer retains operatorship and 46 percent interest in the Eagle Ford Shale acreage. Reliance will hold 45 percent interest, and Newpek will hold 9 percent interest.

Eagle Ford Shale Drilling Campaign

Until now, Pioneer has successfully drilled six wells on the Eagle Ford Shale acreage, with five currently producing at a daily rate of 28 million cubic feet of equivalent. The sixth well is expected to come on-stream soon.

The upcoming joint venture drilling campaign will begin with one rig and ramp up to as many as 14 over the coarse of the next three years. There are 26 horizontal wells planned for the rest of 2010 and 70 wells planned in 2011. In 2012, there are 120 wells planned; and in 2013, there are 140 wells scheduled to be drilled on the Eagle Ford Shale acreage.

Furthermore, the JV intends to acquire approximately 9,500 more Eagle Ford acreage, focusing on Atascosa, Bee, DeWitt, Karnes, Live Oak and McMullen Counties in Texas.

Pioneer estimates that its net production from the Eagle Ford Shale will increase from its current average of 2,000 barrels of oil equivalent per day (boepd) up to 41,000 boepd in 2013.



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