Dallas-based Pioneer Natural Resources Company (PXD) agreed to sell a 45% interest of its assets in the Eagle Ford field southeast of San Antonio for $1.35 billion to India’s oil, gas and petrochemicals giant Reliance Industries Ltd., according to a report by Reuters.
Earlier this month, Reuters had reported that Reliance was in talks with Pioneer to buy a stake in its shale gas assets.
India’s energy major will pay $300 million in cash and the remainder in capital expenditure over the next four years for Eagle Ford Shale. With an intention to create a foothold in the U.S. shale plays, Reliance also formed a joint venture for the highly prospective Marcellus Shale with Pennsylvania-based Atlas Energy (ATLS) in April, acquiring a 40% stake in the latter’s operations in the shale.
Pioneer holds 310,000 acres in Eagle Ford Shale with a gross resource potential of more than 11 trillion cubic feet equivalent (Tcfe) and completed its fifth well as of May 2010. Last month, the company proposed to pursue a joint venture to boost development in Eagle Ford.
Eagle Ford Shale is a lucrative prospect for exploration and production (E&P) players owing to its low breakeven cost, high liquids content and large lease sizes relative to other shale plays. Demand for shale gas, which accounts for 15% to 20% of U.S. gas production, is growing by the day and is anticipated to increase by four times in the coming years.
We remain optimistic on Pioneer given its oil growth exposure, low-risk, exploitation-driven growth and significant drilling potential at Eagle Ford. Given our favorable long-term outlook for oil and Pioneer’s oil-weighted drilling program along with its significant cost-control initiatives, we expect the company to furnish better earnings and free cash flow visibility.
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