Carrizo closes Marcellus Shale JV with RIL subsidiary

Carrizo Oil & Gas, Inc. has closed its previously announced joint venture transaction in the Marcellus Shale with a subsidiary of Reliance Industries Limited (Reliance).

In connection with the joint venture, Reliance acquired a 20% interest in approximately 52,200 net Carrizo acres in Pennsylvania considered highly prospective for Marcellus Shale natural gas at a purchase price of $65 million. Reliance paid $11.4 million in cash to Carrizo at closing with $1.7 million more expected later this year. In addition, Reliance will pay an expected $52 million of Carrizo's share of future drilling, completion, and seismic costs (development carry). The joint venture agreement is effective immediately.

Simultaneous with the closing of this transaction, an affiliate of Carrizo's already existing joint venture partner, Avista Capital Partners ("Avista"), closed on the sale its entire interest in the same properties to Reliance for approximately $327 million. Under the terms of Carrizo's current joint venture agreement with Avista, Carrizo expects to receive approximately $44 million in cash from Avista based on the sale of Avista's approximately 52,200 net acres. The amounts to be received by Avista and Carrizo are subject to adjustment, pending completion of land title work.

The new Carrizo/Reliance joint venture agreement covers approximately 104,400 gross acres in northern and central Pennsylvania. Under the terms of the agreement, Carrizo retains a 40% working interest in the acreage and Reliance owns 60%. In addition to funding its own share of future development obligations, Reliance will fund 75% of Carrizo's portion of these costs over the next two years or until the earlier full utilization of the $52 million development carry, subject to certain conditions and extensions. Carrizo will continue as operator with Reliance having the right to assume operations in certain parts of Central Pennsylvania after one year.

Carrizo's joint venture with Avista Capital will continue, and now covers approximately 140,000 gross Marcellus acres primarily in the states of West Virginia and New York.