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GAIL has acquired a 20% stake in Eagle Ford Shale acreage of Carrizo.–
GAIL will pay US$64m upfront and a drilling carry of US$31m for net
4040 acres of condensate rich Eagle Ford shale acreage and expects a total
investment of US$300m over the next 5 years. While not very material for
GAIL, this does signal an increased focus on upstream gas sourcing
GAIL is paying US$23.5k/acre… Valuations seem in-line with recent
transactions in condensate rich shale regions (KNOC - Anadarko's Eagle
Ford shale acreage and Marathon Oil-Sugarloaf acquisition).
…with some production: GAIL would get 4,040 net acres located
primarily in La Salle County, Texas and also acquires 20% interest in
eight horizontal wells currently producing approximately 1,700 net
barrels of oil per day and 3,800 net Mcf per day of rich gas. Carrizo's
internally estimated mid-year 2011 proved reserves allocated to these
acres amount to 13.8 million boe (2.76 million boe net to GAIL –
US$34/boe)
Financially, not very material. GAIL has cash balances of US$430m
and operating cashflows of c.US1bn, so we think the foray into shale gas
is unlikely to have a material impact on GAIL valuations (US$11bn –
Mkt cap) even though we believe the acquisition will be marginally
accretive in FY13E. However, this does signal GAIL’s growing interest
in acquiring overseas upstream equity as domestic gas ramp-up has been
disappointing.
Volume visibility, subsidy uncertainties weigh on stock. We have an
Overweight rating on GAIL given its strong leverage to growth in India
gas demand in the medium term. The stock has strong defensive
attributes and has outperformed benchmark indices; however, we think
absolute performance will need better clarity on volumes, subsidies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GAIL has acquired a 20% stake in Eagle Ford Shale acreage of Carrizo.–
GAIL will pay US$64m upfront and a drilling carry of US$31m for net
4040 acres of condensate rich Eagle Ford shale acreage and expects a total
investment of US$300m over the next 5 years. While not very material for
GAIL, this does signal an increased focus on upstream gas sourcing
GAIL is paying US$23.5k/acre… Valuations seem in-line with recent
transactions in condensate rich shale regions (KNOC - Anadarko's Eagle
Ford shale acreage and Marathon Oil-Sugarloaf acquisition).
…with some production: GAIL would get 4,040 net acres located
primarily in La Salle County, Texas and also acquires 20% interest in
eight horizontal wells currently producing approximately 1,700 net
barrels of oil per day and 3,800 net Mcf per day of rich gas. Carrizo's
internally estimated mid-year 2011 proved reserves allocated to these
acres amount to 13.8 million boe (2.76 million boe net to GAIL –
US$34/boe)
Financially, not very material. GAIL has cash balances of US$430m
and operating cashflows of c.US1bn, so we think the foray into shale gas
is unlikely to have a material impact on GAIL valuations (US$11bn –
Mkt cap) even though we believe the acquisition will be marginally
accretive in FY13E. However, this does signal GAIL’s growing interest
in acquiring overseas upstream equity as domestic gas ramp-up has been
disappointing.
Volume visibility, subsidy uncertainties weigh on stock. We have an
Overweight rating on GAIL given its strong leverage to growth in India
gas demand in the medium term. The stock has strong defensive
attributes and has outperformed benchmark indices; however, we think
absolute performance will need better clarity on volumes, subsidies.
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