Oil India makes an exit from US shale venture, selling 20 percent stake

Oil India Ltd, a state-owned oil company has made an exit from a United States shale venture marking the second exit of an Indian firm from a US shale venture in the past two months. Oil India Ltd also sold its 20 percent stake for an exponential price of $25 million to its venture partner.

Let’s take a look at the statement of the company given in the regulatory filing,

“Oil India(USA)Inc (wholly owned subsidiary of OIL), divested its entire stake in Niobrara shale asset, USA.” 

The What and Why

In the year 2012, both OIL and Indian Oil Corporation (IOC) bought a 30 percent stake in Carrizo Oil based in Houston and Gas’s Niobrara shale asset in Colorado. The deal was closed for $82.5 million. With their respective subsidiaries both acquired stakes in the company’s assets. While OIL’s stakes amounted to 20 percent, the IOC stake was 10 percent in Carrizo’s Niobrara basin acreage assets.

The breakdown of the total investment worth $82.5 million is as follows. It comprised an upfront cash payment worth $41.25 million and a carry amount worth $41.25 million, both linked to the future drilling and development cost of Carrizo. The sale of the stake was made to Verdad resources LLC, the operator of the asset. Originally, a 20 percent interest was acquired by OIL in the shale asset in the Denver-Julesburg basin from Carrizo Oil &Gas, Inc. Following this, the entire stake of Carrizo in the Niobrara asset was sold to Verdad Resources LLC in the year 2018, thereby making Verdad a new operator of the asset. The remaining 10 percent stake in the project is held by Haimo Oil and Gas.

Back in November, Reliance had announced its plans of divesting its interest in the Eagleford shale play of Texas. To this end, Reliance Eagleford Upstream Holding L.P, Reliance’s wholly-owned subsidiary signed an agreement with Ensign Operating III, LLC. With this all the shale gas assets of Reliance stands cancelled, marking the departure of the company from the North American shale gas business. In addition to this, not so long ago the firm had also divested its stakes in the Marcellus shale blocks.

OIL’s exit from the shale venture comes at the tail end of Relaince Industries’ departure from another US shale owing to the lack lustre revenue generation. Following the exit, the shares of OIL saw a substantial rise upto 5 percent. The OIL filing pointed towards a net profit worth $279,000 on a $4.27 million revenue. This was for the fiscal year ending March 31, 2021.