RIL, Pioneer sell US pipeline network JV to Enterprise Products for $2.15 bn
02 June 2015
Reliance Industries Ltd (RIL) and Pioneer Natural Resources have sold their entire stake in a US shale oil and gas transportation pipeline network joint venture to Enterprise Products Partners for $2.15 billion.
Pioneer, which owns 50.1 per cent in the EFS Midstream JV will get about $1.08 billion, while RIL will get around 1.07 billion for its 49.9-per cent stake.
''The purchase price will be paid in two installments with the first installment of $1.15 billion paid at closing and the final installment of $1 billion paid one year after closing,'' Houston-based Enterprise said in a statement.
Under the terms of the deal, Pioneer and RIL will dedicate their Eagle Ford Shale acreage to Enterprise under a 20-year, fixed-fee gathering agreement for natural gas processing, natural gas liquids transportation and fractionation, and for natural gas, processed condensate and crude oil transportation services.
EFS Midstream provides gas gathering, treating, compression and condensate processing services in the Eagle Ford Shale. The system includes 460 miles of natural gas gathering pipelines, 10 central gathering plants, 780 million cubic feet per day of natural gas treating capacity and 119 thousand barrels per day of condensate stabilisation capacity.
RIL is also planning to exit the Eagle Ford Basin oil and natural gas joint venture with Pioneer, for which it has hired Citigroup to find buyers for its 45-per cent stake which it acquired for $1.15 billion in 2010.
The Eagle Ford shale asset is a three-way joint venture between RIL, Texas-based Pioneer and a division of Mexico's Alpha SAB de CV, where the three hold stakes of 45 per cent, 46 per cent and 9 per cent, respectively.
Alfa SAB's Newpek LLC unit is also exploring a sale of its share and being advised by Tudor Pickering Holt & Co, according to earlier media reports.
RIL currently has a share of 115,000 barrels of oil equivalent per day, with 60 per cent of the production in liquid form rather than gas, according to a presentation made by RIL in July last year.
The proposed joint transaction is subject to regulatory approvals and other formalities, it added.
Reliance said its agreement to sell its interest in EFS is part of a joint transaction, wherein both Reliance and Pioneer have agreed to sell their entire respective holdings in EFS, for an aggregate consideration of $2,150 million.
''EFS has succeeded in its objective of building the gathering and midstream infrastructure in a timely manner to support ramp-up of the Reliance-Pioneer Eagle Ford upstream joint development operations. EFS has now transitioned from a 'development' mode to 'stable operations' mode, generating free cash flows since 2013,'' Walter Van de Vijver, president and CEO of Reliance Holding USA, Inc, said.
The Eagle Ford shale assets have become more attractive after the US commerce department, in June last year, gave Pioneer permission to export a type of ultralight oil known as condensate produced from the region.
Spread over 230,000 acres, EFS Midstream provides gas gathering, treating, compression and condensate processing services in the Eagle Ford Shale. The EFS Midstream system includes approximately 460 miles of natural gas gathering pipelines, 10 central gathering plants, 780 million cubic feet per day of natural gas treating capacity and 119 thousand barrels per day of condensate stabilization capacity.
Under the terms of the agreements, the Pioneer and Reliance joint development will dedicate its Eagle Ford Shale acreage to Enterprise under a 20-year, fixed-fee gathering agreement that includes a minimum volume requirement for the first seven years. Pioneer and Reliance will also dedicate their Eagle Ford Shale acreage under related 20-year fee-based agreements with Enterprise for natural gas processing, natural gas liquids transportation and fractionation, and for natural gas, processed condensate and crude oil transportation services.
Besides Eagle Ford, RIL has two more shale ventures in the US - a 40 per cent stake in Chevron's Marcellus shale acreage and a 60 per cent interest in Carrizo Oil and Gas Inc's Marcellus shale acreage in Central and Northeast Pennsylvania.
Pioneer is incidentally the first Eagle Ford operator to get permission from the US commerce department to export the ultralight oil condensate from South Texas. It's also the largest operator in the Permian Basin in West Texas.