Reliance Marcellus to sell $250 million worth assets in the US to Northern Oil and Gas

Reliance Marcellus is a wholly-owned subsidiary of Reliance Industries (RIL). The former will sell its stake in certain upstream assets in the Marcellus shale play of south-western Pennsylvania for $250 million. EQT Corporation and affiliates currently operate the assets. Northern Oil and Gas, a Delaware corporation, will pay a consideration of $250 million in cash for these assets. It also warrants the company to give entitlement to purchase 3.25 million common shares of Northern Oil. The former can purchase them at an exercise price of $14.00 per common share in the next seven years.

Both the companies have signed a purchase and sale agreement on February 3, 2021, for this sale. The transaction is subject to customary terms and conditions of closing. Citigroup Global Markets, Inc. acted as financial advisor to Reliance. Further, Gibson, Dunn & Crutcher LLP served as its legal counsel, the company has stated in regulatory filings.

Reliance businesses in Pennsylvania

RIL had bought stakes in three upstream oil exploration joint ventures with Chevron, Pioneer Natural Resource, and Carrizo Oil and Gas between 2010 and 2013. It also has a midstream joint venture with Pioneer. In June 2015, the company sold its Eagle Ford (EFS) midstream joint venture with Pioneer Natural Resources in the US. There, it realised $1 billion from the sale. Later, RIL had spent $46 million in acquiring the 49.9% stake in EFS. It also invested another $208 million over the years.

Till 2014, RIL had been bullish on the shale gas segment. However, the drop in crude oil prices since late 2014 hit the valuations of oil and gas assets. Shale gas blocks have suffered far more than conventional oil and gas blocks as they are economically viable only when prices are above a certain threshold. In the year 2017, Reliance Industries had sold a shale oil and gas block in the Marcellus shale in northeastern and central Pennsylvania for $126 million.