Dallas-based Pioneer Natural Resources Corp. on Thursday agreed to sell almost half of its Eagle Ford Shale interests to India’s Reliance Industries Ltd. for $1.15 billion.

The Eagle Ford joint venture (JV) follows Reliance’s agreement in April to partner with Atlas Energy Inc. in the company’s Marcellus Shale leasehold (see Daily GPI, April 23). The Pioneer agreement is scheduled to close by the end of this month.

Reliance officials, said Pioneer CEO Scott Sheffield, “share our confidence in the development potential of Pioneer’s large, liquids-rich acreage position in the Eagle Ford Shale…” Gross resource potential of Pioneer’s Eagle Ford leasehold is estimated at more than 11 Tcfe.

Pioneer now has about 212,000 net acres in the South Texas shale play. Under the agreement, Pioneer is selling Reliance a 45% interest in its net acreage for $266 million in cash at closing and an additional $879 million to carry Pioneer’s share of future drilling costs. Separately Reliance also agreed to partner with Pioneer’s existing Eagle Ford partner, Newpek LLC, in a $210 million deal.

The agreement, effective June 1, gives Reliance around 95,300 net acres of leasehold held by Pioneer. As operator, Pioneer would retain an average 42% working stake in the acreage and Reliance would receive an average 41% stake, with other working interest owners continuing to hold the remaining 17% stake.

Reliance would have the right to perform some drilling and completion operations beginning in 2011: one rig initially escalating up to four rigs under the current drilling ramp-up schedule. In addition to funding its own drilling obligations, Reliance agreed to fund 75% of Pioneer’s portion of drilling costs until the $879 million of drilling carry is fully utilized. Pioneer has six years to use the drilling carry, subject to an extension.

Under the JV, the partners forecast that they would drill 26 horizontal Eagle Ford wells through December, increasing to 70 wells in 2011, 120 wells in 2012 and 140 wells in 2013. The plan, consistent with the accelerated development program previously announced by Pioneer, would allow the JV to retain its acreage position.

To date Pioneer, which now has five rigs running, has drilled and completed six horizontal wells in the Eagle Ford Shale. Five are producing at a combined rate of 28 MMcfe/d. The sixth well will be on production by late September once a central gathering facility is completed.

A new fracture stimulation fleet to support the JV’s drilling ramp-up is expected to be operational by mid-2011.

Pioneer and Reliance expect to continue to grow the JV’s Eagle Ford leasehold position within an area of mutual interest (AMI) that includes six Texas counties (Atascosa, Bee, DeWitt, Karnes, Live Oak and McMullen). Pioneer would act as the sole leasing agent in the AMI, and Reliance would have the option, under comparable terms, to acquire a 45% interest in any new acreage.

As a 49.9% minority partner, Reliance also plans to team with Pioneer to develop midstream properties in the shale play.

Initially the midstream venture would consist of central gathering facilities to separate condensate production from produced gas and to treat the produced gas, Pioneer said. As majority owner, Pioneer expects to spend around $275 million through 2013 on the facilities, with most of the funding to be completed by the end of 2011.

Based on the JV development plan, Pioneer’s net production in the Eagle Ford Shale is expected to increase to a range of 32,000 boe/d to 41,000 boe/d in 2013 from an average of 2,000 boe/d this year .

“We had originally forecasted total company production growth at 10%-plus per year over the 2011 through 2013 period, while continuing our commitment to spend within cash flow,” said Pioneer’s Sheffield. “This strong growth was primarily attributable to our significant drilling ramp up in the Spraberry field.

“With the addition of the ramp-up in Eagle Ford Shale drilling, we now expect production growth over this same period to be 15%-plus per year, while still spending within cash flow.” Cash flow is forecast to increase from $1.2 billion this year to about $2 billion in 2013.

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