Northern Oil & Gas Acquires Reliance's Marcellus Assets
NYSE-listed Northern Oil & Gas Inc. has entered into a Purchase and Sale Agreement (PSA) with Reliance Marcellus LLC, a subsidiary of Indian conglomerate Reliance Industries Ltd., to acquire certain non-operated assets in the Appalachian basin for a total purchase consideration of US$250 million, plus the issuance of 3.25 million warrants to purchase common shares at an exercise price of US$14 per share.
Northern also entered into a cooperation agreement with an unaffiliated third party, Arch Investment Partners LLC, pursuant to which Arch will be assigned an undivided 30% interest in the assets acquired under the PSA, in exchange for funding 30% of the aggregate cash purchase price payable to Reliance. As a result, Northern will acquire an undivided 70% interest in the PSA assets, for an unadjusted aggregate purchase price of US$175 million in cash plus warrants.
The assets acquired cover approximately 64,000 net acres with 102.2 net producing wells and 22.6 net wells in process, located in south-western Pennsylvania. The acreage also contains approximately 231.1 net undrilled locations in the core of the Marcellus and Utica plays. Production from the assets averaged nearly 120 million cubic feet equivalent per day (MMcfe/d) during July 2020, net to Northern’s effective 70% interest. In 2021, Northern’s share of the assets is expected to produce approximately 100-110 MMcfe/d.
“This transaction furthers our goal of becoming a national non-operated franchise with low leverage, strong free cash flow and a path towards returning capital to shareholders. With this transaction, we expect increased opportunities to efficiently allocate capital and diversify risk, our commodity mix and geographic footprint,” said Nick O’Grady, Northern’s CEO.
Minnetonka, Minnesota-based Northern Oil & Gas is currently focused on operations in the Bakken/Three Forks play in the Williston basin of North Dakota and Montana, and in the Permian basin.
Mumbai-based Reliance Industries is India’s largest private-sector conglomerate, and is controlled by Indian billionaire businessman Mukesh Ambani. The group owns businesses spanning across the oil & gas exploration & production, refining & marketing, petrochemicals, telecom, textiles, and consumer retail sectors.
BofA Securities is advising Northern on the deal, while Citigroup Global Markets is acting as lead financial advisor to Reliance.
The deal is subject to customary closing conditions, and is expected to be completed in April 2021.