In its continued quest to take significant stakes in North American unconventional resources, India-based Reliance Industries is once again rumored to be targeting yet a third U.S. large independent for a joint venture in a shale-gas play—or more.
Quicksilver Resources is the target du jour. According to Mumbai’s Daily News & Analysis, in addition to a JV, Reliance might be interested purchasing a stake in the company or even the entire company.
The Fort Worth producer holds sizable shale positions in the Texas Barnett shale and Canada’s Horn River Basin, but is tight on cash. It’s debt load stands at $2.5 billion, with a debt-to-market cap ratio of 70% and no free cash flow to boot. It is also sitting on numerous uncompleted wells in the Barnett, waiting patiently for better days. They may have arrived.
The Texas company has already partnered with Italian energy producer ENI for a portion of its Barnett holdings in a relatively small JV late last year, and at the time suggested it was pursuing partners for the remainder of its Barnett and possibly its Horn River assets, where it now holds some 130,000 net acres in British Columbia.
Reliance has satiated previous rumors by following through on deals with Atlas Energy in the Marcellus shale and Pioneer Natural Resources in the Eagle Ford shale, where it took nonoperated positions for a combined $3 billion. Internal sources have verified that the Indian energy giant was still actively seeking a greater position in North America.
Global Hunter Securities’ analysts have this view: “Our take is that a joint venture would likely be focused on the Horn River Basin or other emerging plays and not the entire company, based on Reliance’s entry into other early stage plays.”
Simmons & Co.’s Jeff Dietert suggests a “favorable” price of $10,000 an acre for the Horn River position would “remove a financial overhang and provide additional development visibility.”
In my view, a Reliance rumor is as good as gold. The only questions remain, how much gold, when and where?