Business Standard: Reliance Close to Selling Stake in US Shale Gas JV

India’s largest corporate entity, Reliance Industries Ltd (RIL), is set to sell its 45 per cent stake in a shale gas joint venture with Pioneer Natural Resources at Eagle Ford, US, by next week at a far lower valuation than its initial expectation of $4.5 billion. The drop in valuation is largely due to the fall in prices of crude oil since the sale process began last year, as well as concern about damage to the environment due to fracking in the US.

Now, RIL’s stake is likely to be valued at about $4 billion.

Bankers say the Eagle Ford Midstream sale process took much longer than expected due to complexities in the contractual arrangements such as Pioneer moving away from providing its own drilling services and contracting these to a third party. Negotiations on committing volumes to the third party also led to delay in closing the deal.

“But the company (Pioneer) remains very optimistic that it will announce the sale of this business within the first week of June and its proceeds will substantially improve the balance sheet of the partners,” said a banker. Pioneer, the operator of the field, holds 46 per cent stake in the Eagle Ford venture, while nine per cent is held by Alpha SAB’s Newpeck LLC.

When contacted, an RIL spokesperson said the company constantly strived to identify means to create additional value for its shareholders. “It is Reliance’s policy not to comment on market speculation. If there are any required disclosures, the company will make them at an appropriate time,” he said. MORE