Reliance Industries said it had signed agreements to sell all of its interest in certain upstream assets in north-eastern and central Pennsylvania, known as Marcellus shale.

The assets, which are currently operated by Carrizo Oil & Gas, Inc., were sold to BKV Chelsea, LLC, an affiliate of Kalnin Ventures LLC, for consideration of $126 million, subject to customary closing terms and conditions, the company said.

“Additionally, Reliance could receive contingent payments of up to $11.25 million in aggregate based on natural gas prices exceeding certain thresholds over the next three years,” the oil and gas company said.

The assets produce mainly gas and are located in Susquehanna, Wyoming and Clearfield Counties of Pennsylvania.

Reliance remains invested in the Marcellus shale play via its non-operated position with Chevron in southwestern Pennsylvania and in the Eagle Ford play via its non-operated position with Pioneer in Texas, the company said.

Walter Van de Vijver, President and CEO of Reliance Holding USA, Inc., commented that: “This transaction represents an opportunistic sale of developed upstream Marcellus assets and ends a successful partnership of 7 years with Carrizo in a joint sale. We will continue to actively manage the remainder of our US shale resources.”

The Carrizo operated acreage was one of the three upstream assets in the USA, owned by Reliance.

The sale of the assets will be consummated in accordance with the terms of a purchase and sale agreement, dated October 5, 2017, by and between Reliance and the buyer, the company said.

The transaction is anticipated to close by the end of the third quarter of FY2018, with an April 1, 2017 effective date. Citigroup Global Markets, Inc. acted as financial advisor to Reliance, Haynes and Boone served as its legal counsel.

RIL is India’s largest private sector company, with a consolidated turnover of INR 330,180 crore and net profit of INR 29,901 crore for the year ended March.

In 2010, RIL announced that it was buying a 60% stake in Marcellus Shale acreage in the US for $392 million (around Rs 1,800 crore).

At the time, it said that the Carrizo-Reliance joint venture agreement covered approximately 104,400 gross acres in northern and central Pennsylvania. Under the terms of the agreement, Carrizo retained a 40 per cent working interest in the acreage and Reliance owns 60 per cent, it had said.

RIL’s 60 per cent represented approximately 62,600 net acres. The acreage was expected to support the drilling of approximately 1,000 wells over the next 10 years, according to the 2010 statement by RIL. Reliance was to pay $327 million in for Avista’s entire stake and $65 million for 20 per cent of Carrizo’s stake.

The valuations of oil and gas assets have crashed in recent years due to the fall in crude oil prices. Though not as steep, prices of natural gas have also seen sharp corrections, dragging down valuations of gas fields.

Shale gas blocks have been hit especially hard as they are economically viable only when prices are above a certain threshold. The US has seen many shale gas producers go bankrupt in the last few years due to the low prices.

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