RIL and Pioneer Natural Resources Company Plan to Divest the Eagle Ford JV

Reliance Industries Limited (RIL) along with its partner Pioneer Natural Resources Company plans to divest their joint venture in the Eagle Ford Shale and midstream business. This will not include any of Pioneer’s upstream drilling assets for which RIL is also a joint partner.

This decision arrives at amidst speculations that the recent oil price drops may result in a rise in the volumes of mergers and acquisitions in the already thriving oil and gas sector. A number of other industry players are already looking at restructuring their portfolio of assets.

According Price Waterhouse Coopers, between the months of July and September 2014 alone, a total of 78 oil and gas deals have been signed. With deal values totaling up to $123 billion, an 81% rise has been marked in deal volume and there has been a 640% rise in deal value as compared to the same period last year.

Shifting Focus on Shale Gas Explorations

The US-based Pioneer Natural Resources Company holds 50.1% stake in the joint venture and is also the operator of the project. In a statement, a spokesperson from this company said that the divestment is with an aim to focus more on the shale gas explorations business. RIL that holds 49.9% stake in this venture through its arm Reliance Holding USA is also in the pursuit to sell of its stake.

A spokesperson from RIL in a separate statement to India bourse said, “”Reliance has also agreed to consider a divestment of its shareholding in this joint venture. The current investment in EFS Midstream LLC is $208 million.”

The midstream business of Eagle Ford currently owns and runs 10 gathering plants and about 460 miles of pipelines. This 4 year old joint venture is expected to generate a cash flow of about $100 million in the coming year.

Scott D Sheffield, Chairman and CEO of Pioneer Natural Resources said, “The sale of EFS Midstream would allow us to strategically redeploy capital to our core, oil-rich Spraberry/Wolfcamp assets in the Permian Basin of West Texas, where we are successfully transforming the substantial resource potential we delineated in 2013 into strong production growth,”

He further added, “We currently have no plans to divest our Eagle Ford Shale upstream assets. The sale of EFS Midstream is not expected to impact our ability to export processed Eagle Ford condensate.”

Successful Join Ventures for RIL

On media reports last month regarding RIL’s plans to sell its stake in the Eagle Ford joint venture, the company’s Chief Financial Officer, Alok Agarwalhad said, “Eagle Ford is the most successful joint venture and it has gained a very decent amount of valuation in the last 12 months. Our partners and we are looking at what’s best for the JV going forward.” Media reports valued RIL’s stake in this joint venture at $4.5 billion.

In addition to the Eagle Ford joint venture, RIL also owns stakes in 2 other shale ventures within the US. The company owns 40% stake in Chevron’s Marcellus shale asset and 60% stake in the assets of Carrizo Oil and Gas Inc based in central and northeast Pennsylvania.

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