Oil India exits US shale venture, sells 20 pc stake for USD 25 mn

State-owned Oil India Ltd (OIL) has exited from a US shale oil venture, selling its 20 per cent stake to its venture partner for $25 million - the second exit of an Indian firm from the US shale business in two months.

“Oil India (USA) Inc (wholly owned subsidiary of OIL), divested its entire stake in Niobrara shale asset, USA,” a regulatory filing by the company said, adding the consideration received was $25 million.

OIL and Indian Oil Corporation (IOC) had together in October 2012 bought a 30 pc stake in Houston-based Carrizo Oil & Gas’s Niobrara shale asset in Colorado for $82.5 mn. While OIL had acquired 20 pc, IOC bought 10 pc in Carrizo’s Niobrara basin acreage assets through their respective subsidiaries. The investment of $82.5 mn included an upfront cash payment of $41.25 mn and a carry amount of $41.25 million, linked to Carrizo’s future drilling and development cost.

The stake was sold to Verdad Resources LLC, which is the operator of the asset. Originally, OIL acquired the 20 per cent interest in the liquid rich shale asset in the Denver-Julesburg Basin from Carrizo Oil & Gas, Inc. Carrizo sold its entire stake in the Niobrara asset to Verdad Resources LLC in January 2018. As a result, Verdad became the new operator of the asset.

Haimo Oil & Gas holds the remaining 10 per cent stake in the project. The move by OIL follows Reliance Industries Ltd’s exit from US shale, which has not been attractive in generating returns. In November last year, Reliance said its wholly-owned subsidiary Reliance Eagleford Upstream Holding, LP has signed an agreement with Ensign Operating III, LLC to divest its interest in upstream assets in the Eagleford shale play of Texas.

State gas utility GAIL (India) Ltd continues to hold a 20 per cent stake in Carrizo’s Eagle Ford shale acreage, which it had acquired in 2011. OIL, in the filing, said its subsidiary Oil India (USA) Inc had reported a net profit of $279,000 on a revenue of $4.27 million in the fiscal year ending March 31, 2021.