Marcellus Shale

Carrizo Oil and Gas Forms Marcellus Shale Joint Venture

Carrizo Oil and Gas (CRZO) reported that the company has entered into an agreement with Reliance Industries Limited to jointly develop acreage in the Marcellus Shale.

Reliance Industries Limited will acquire a 20% interest in 52,200 net acres in Pennsylvania from Carrizo Oil and Gas in exchange for $65 million. Carrizo Oil and Gas said that Reliance Industries Limited would pay $13 million up front, and then carry $52 million of the future costs of developing the acreage. The deal will close in September 2010.

Reliance Industries Limited also acquired 52,200 net acres in the Marcellus Shale from Avista Capital Partners for $326.6 million.

Carrizo Oil and Gas said that the new joint venture would total 104,400 gross acres in the Marcellus Shale, with the company owning a 40% interest, and Reliance Industries Limited owning 60%.

Carrizo Oil and Gas - Marcellus Shale Summary

Carrizo Oil and Gas (CRZO) is known mostly for its operations in the Barnett Shale in Texas, but recently the company updated its activities in the Marcellus Shale. The company is targeting the Marcellus Shale as its next growth area.

Carrizo Oil and Gas established a joint venture with Avista Capital Partners to jointly develop its acreage in the Marcellus Shale. The company has approximately 216,000 acres in the joint venture.

Carrizo Oil and Gas said that its wells in the Marcellus Shale would cost an average of $3.5 million to drill, and have an estimated ultimate recovery of 3.4 Bcf, for a finding and development cost of $1.03 per Mcf. The rate of return at various price levels is as follows:

$8.00 NYMEX – 102%.

$6.00 NYMEX – 68%.

$4.00 NYMEX – 31%.

Carrizo Oil and Gas has allocated $32.5 million in capital for its 50% share of costs to develop its Marcellus Shale acreage. This capital will cover the drilling of 12 horizontal and 11 vertical wells, and additional seismic and leasing costs.