Under the agreement, Reliance will acquire a 60% interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in a 50-50 JV between Carrizo and ACP II Marcellus, an affiliate of Avista Capital Partners.
Reliance will acquire 100% of ACP’s interest and 20% of Carrizo’s stake in the JV. Upon completion of the transaction, Reliance and Carrizo will own 60% and 40% interests, respectively, in a newly formed JV between the companies.
Reliance will pay a total consideration of $392m, comprising of $340m of cash and $52m of drilling carry obligations, which will provide for 75% of Carrizo’s share of development costs over an anticipated two year development program.
Carrizo will serve as the development operator for the JV and Reliance has the option to act as a development operator in certain regions in the coming years as part of the JV. The transaction is anticipated to close by mid-September 2010.
The JV will have approximately 104,400 net acres of undeveloped leasehold in the core area of the Marcellus Shale in Central and Northeast Pennsylvania, of which Reliance’s 60% interest will represent approximately 62,600 net acres.
This acreage is expected to support the drilling of approximately 1,000 wells over the next 10 years, with a net resource potential of about 3.4tcfe (2tcfe net to Reliance). The transaction allows for additional growth in the development acreage, at pre-agreed terms.
