Friday, September 30, 2011

Big Money Still Has Taste for US Shale

Carrizo Oil & Gas has been busy selling off portions of its shale gas lease interests this week.  First came a transaction with GAIL, India's national oil and gas company, to buy 20% of a portion of Carrizo's Eagle Ford acreage - about 20,200 net acres - for $95 million ($63.7 MM of cash plus $31.4 MM of drilling costs).

Today comes news that Carrizo has entered into a joint venture with Avista Capital Partners to develop acreage in the Utica Shale.  The deal calls for Carrizo to own 10% of the venture with an option to buy up to 50% of the venture.  While it is odd for the producer to own so little of the venture, is consistent with the fact that Carrizo is cash poor and opportunity rich.

Bottom line:  even with the anemic price of natural gas, shale gas deals are getting done and there still is big money out there trying to get in. After three years of crappy prices, natural gas still looks attractive to the "haves" of the energy world.  The question is, who will still be standing to enjoy it when things finally do turn around?

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