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Carrizo Inks Another Niobrara JV
Carrizo Oil & Gas Inc. is forming a joint venture (JV) in the Niobrara formation with Haimo Oil & Gas LLC, a unit of China’s Lanzhou Haimo Technologies Co. Ltd. Separately, the company announced third quarter production growth for oil, condensate and natural gas liquids (NGL).
Haimo will acquire an undivided interest in about 6,000 net acres primarily in Weld and Adams counties, CO, along with associated infrastructure and production of about 185 boe/d for a cash payment of $27.5 million, subject to conditions, including Chinese government approvals, and price adjustments.
The property sale is to be effective Oct. 1, 2012, the same effective date of Carrizo’s separate Niobrara JV with OIL India (USA) Inc. and IOCL (USA) Inc, subsidiaries of OIL India Ltd. and Indian Oil Corp. Ltd., respectively (see Shale Daily, Oct. 5). After closing of the transactions late in the fourth quarter, the joint venture interest ownership participation in Carrizo’s Niobrara development activities will stand at 60% Carrizo, 30% OIL/IOCL and 10% Haimo, Houston-based Carrizo said Thursday.
“On a metrics basis, [Haimo is] essentially paying the same for just under 10% (9.7%) as the prior group paid for 30%,” wrote Wells Fargo Securities analyst David Tameron. “Our understanding was if an additional 10% was sold, the terms would be different than the original transaction — on surface we don’t see the difference, so devil must be in the detail. Although anticipated, we view this as a positive given the slightly better terms, and our expectation is that proceeds will be used to reduce the $150-170 million outspend projected for 2012-2013.”
Carrizo is focused on the Eagle Ford Shale in South Texas; the Niobrara Formation; the Barnett Shale in North Texas; the Marcellus Shale in Pennsylvania, New York and West Virginia; and the UK North Sea where its Huntington Field project is under development.
Separately on Thursday Carrizo reported preliminary average daily production rates for the third quarter.
Average oil and condensate production for the third quarter was 8,600 b/d, a sequential increase of 14% from the record rate reported in the second quarter and exceeding the high end of the company’s oil production guidance of 8,200 b/d. Average natural gas and NGL production rate for the third quarter was 101,500 Mcfe/d (5% NGLs), exceeding the high end of prior guidance of 96,000 Mcfe/d, which had been adjusted to reflect the impact of the sale of Barnett Shale gas production to a subsidiary of Atlas Resource Partners LP effective May 1 (see Shale Daily, March 19).
“Our oil production benefited from having to shut-in fewer producing wells in the Eagle Ford Shale than forecast while we completed new wells on adjacent pads,” said Carrizo CEO Chip Johnson. “In addition, we were able to return the shut-in wells to full production over a shorter period than we had anticipated. Annual production guidance remains unchanged before taking into account the estimated 1,650 boe/d fourth quarter impact from the recently announced joint ventures in the Niobrara and the Gulf Coast asset sale.”
Earlier this month Carrizo said it had closed on the sale of a majority of its leasehold in the northern Utica Shale to an undisclosed buyer for $43 million in cash. Before the sale was finalized, the Houston-based company used a purchase option with its JV partner, Avista Capital Partners, to increase its interest in the properties from 10% to 50%. A spokesman told NGI’s Shale Daily that 19,000 acres were sold, but he did not identify the buyer (see Shale Daily, Oct. 17).
Carrizo is scheduled to release 2012 third quarter results Nov. 6.
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