National Fuel Acquires Shell's Upstream and Midstream Assets in Pennsylvania
Royal Dutch Shell Plc has signed an agreement with Williamsville-based integrated energy company National Fuel Gas Co. (NFG) to sell its upstream and associated midstream assets in the Appalachian basin in Pennsylvania, for a total consideration of US$541 million.
Although the consideration is intended to be fully paid in cash, NFG has an option to pay up to US$150 million in NFG common stock at an adjusted price of US$38.97 per share, with the balance to be paid in cash. Should NFG exercise the option, it will also pay two annual contingent payments of up to US$15 million each in 2021 and 2022, to the extent the calendar year average NYMEX gas price for the year equals or exceeds US$2.75 per million British thermal units (MMBtu).
The transaction includes the transfer of approximately 400,000 net leasehold acres across Pennsylvania, with around 350 producing Marcellus and Utica wells in Tioga County. The current net production from these assets is around 250 million cubic feet per day (MMcf/d). The deal also includes 142 miles of gathering pipelines and related compression, over 100 miles of water pipelines, and associated water handling infrastructure.
“The transaction is part of divesting non-core assets and in line with Shell’s strategy which focuses on the development of higher-margin, light tight oil assets,” Shell said in a statement.
NFG said the proposed deal will increase its drillable acreage in north-western Pennsylvania by about 50% and expand its natural gas transportation network. The company currently operates across Pennsylvania and New York, and will acquire the assets through its wholly-owned subsidiaries Seneca Resources Company LLC, National Fuel Gas Midstream Company LLC, and NFG Midstream Covington LLC.
The deal is subject to closing adjustments with a transaction effective date of January 1st, 2020, is expected to close by the end of July.
JP Morgan Securities and Goldman Sachs & Co. acted as financial advisors to NFG.