2010-08-10-2010-08-05-2010-09-10

Acquired 20% interest in Carrizo's 52,200 net acres held in existing 50-50 joint-venture with Avista & 100% of Avista's 52,200 net acres.

India-based energy conglomerate Reliance Industries Ltd., (India: RIL) has closed its Marcellus shale joint venture in Pennsylvania with Carrizo Oil and Gas Inc., Houston, (Nasdaq: CRZO) and private-equity firm Avista Capital Partners for $392 million. This is Reliance's third foray onshore U.S., and its second in the Marcellus.

Reliance acquired a 20% interest of Carrizo's 52,200 net acres held in an existing 50-50 joint-venture with Avista for $65 million, with $13 million in cash and an additional $52 million in drilling carry for 75% of Carrizo's obligations for a two-year period.

Additionally, it acquired 100% of Avista's 52,200-net-acre Pennsylvania holdings in the Carrizo JV for $326.6 million in cash.

The resulting Pennsylvania-focused joint venture between Reliance and Carrizo now involves approximately 104,000 acres of undeveloped leasehold in central and northeastern Pennsylvania. Reliance holds 60% and 62,600 net acres. Carrizo holds 40% and is operator. The position is expected to support 1,000 wells during a 10-year development program, with a resource potential of 3.4 trillion cubic feet. Reliance will have the right to assume operations in certain parts of central Pennsylvania after a year.

Walter Van de Vijver, Reliance president of international E&P, says, "The proposed joint venture will supplement strengths achieved through our recent joint ventures and further expands our footprint in North American shale-gas operations."

Carrizo president and chief executive S.P. "Chip" Johnson says, "This transaction provides the capital to execute a more aggressive development drilling program in Pennsylvania than we would be able to pursue otherwise. Reliance brings regional Marcellus experience, technical expertise, and a strong balance sheet to the partnership."

Carrizo's joint venture with Avista, which was established in December 2008 with $150-million in capital commitment from Avista, will remain in place with some 140,000 total acres prospective for Marcellus shale in New York and West Virginia.

"We excluded our extensive acreage outside of Pennsylvania from this new joint venture to allow us to retain the benefit from current and future appraisal activities which will be conducted during the course of the year," adds Johnson.

Reliance first entered the U.S. in a $1.7-billion partnership with Pittsburgh-based Atlas Energy Inc. (Nasdaq: ATLS) in the Marcellus in April, and added a $1.3-billion claim on the Eagle Ford shale in South Texas, partnering with Dallas-based Pioneer Natural Resources Co. (NYSE: PXD) in June.

Ray Deacon, an analyst with Pritchard Capital Partners, says the deal values the acreage at $6,250 per acre. Jefferies & Co. Inc. analyst Subash Chandra, who similarly values the acreage at $6,225, notes the result is "considerably below recent transactions north of $10,000 in other shale plays."

Jefferies & Co. Inc. was financial advisor and Vinson & Elkins LLP was legal advisor to Reliance. BNP Paribas and Credit Agricole Corporate and Investment Bank were strategic advisors to Reliance. JPMorgan was financial advisor and Akin Gump Strauss Hauer & Feld LLP was legal advisor to Avista.