Oil India Ltd (OIL) has quit a US shale oil partnership, selling a 20% share to its venture partner for USD 25 million. This is the second withdrawal of an Indian corporation from the US shale market in two months.
"Oil India (USA) Inc (wholly owned subsidiary of OIL), disposed its whole ownership in Niobrara shale asset, USA," the firm stated in a regulatory statement, adding that the consideration was USD 25 million.
OIL and Indian Oil Corporation (IOC) purchased a 30% share in Houston-based Carrizo Oil & Gas's Niobrara shale project in Colorado in October 2012 for USD 82.5 million.
Through their respective companies, OIL purchased 20% and IOC purchased 10% of Carrizo's Niobrara basin land assets.
The entire investment of USD 82.5 million includes a USD 41.25 million upfront cash payment and a USD 41.25 million carry sum tied to Carrizo's future drilling and development costs.
The interest was sold to Verdad Resources LLC, the asset's operator.
Initially, OIL purchased a 20% stake in the liquid-rich shale asset in the Denver-Julesburg Basin from
Carrizo Oil & Gas, Inc. In January 2018, Carrizo
sold its full share in the Niobrara asset to Verdad Resources LLC. As a result, Verdad became the asset's new operator.
Haimo Oil & Gas owns the remaining ten percent of the project.
The action by OIL follows Reliance Industries Ltd's departure from US shale, which has not proven profitable.
Reliance said in November of last year that its wholly-owned subsidiary Reliance Eagleford Upstream Holding, LP had inked a deal with Ensign Operating III, LLC to dispose its investment in upstream assets in Texas' Eagleford shale field.
With this transaction, Reliance has sold all of its shale gas assets and departed the North American shale gas sector. Previously, the company had sold its entire investment in the Marcellus shale blocks.
GAIL (India) Ltd, the state gas utility, retains a 20% ownership in Carrizo's Eagle Ford shale land, which it purchased in 2011.
OIL, in the filing, said its subsidiary Oil India (USA) Inc had reported a net profit of USD 279,000 on a revenue of USD 4.27 million in the fiscal year ending March 31, 2021.
When in 2012 it and IOC bought a stake in Niobrara, they were to receive a 30 per cent interest in Carrizo's production of about 1,850 barrels of oil-equivalent a day from 24 gross wells.
Carrizo held 61,500 gross acres in the Niobrara basin, of which the Oil India-IOC consortium had 18,450 acres, spread over three counties in Texas.
Aside from participating in Carrizo/Verdad-operated wells, OIL USA has also engaged in wells drilled by other regional operators such as Noble Energy, Whiting Oil and Gas, Mallards, Bison Energy, and others. The net output to OIL was around 415 barrels of oil equivalent.
OIL, whose holdings in the northeast account for all of its crude oil output and the majority of its gas production, has been vigorously scouting for international assets over the previous decade.
As a consequence, it obtained a stake in oil and gas exploration and production assets ranging from Venezuela to Russia. It is still in possession of such assets.