Northern to Expand Holdings Beyond Williston and Permian
Reliance Marcellus, LLC (RMLLC) has signed an agreement to sell its interest in EQT Corp. (NYSE: EQT)-operated Marcellus shale upstream assets in southwestern Pennsylvania, parent company Reliance Industries Limited (RIL) (NSE: RELIANCE) reported Thursday.
Northern Oil and Gas, Inc. (NYSE American: NOG) will acquire RMLLC’s stake for $250 million in cash and warrants entitling RMLLC to purchase 3.25 million common shares of NOG at an exercise price of $14 per share in the next seven years, RIL noted.
For Northern, the deal adds approximately 64,000 net Appalachia acres to its existing roughly 183,000 net acres in the Williston and Permian basins, the company stated separately. The firm noted that it expects the assets to produce approximately 100 to 110 million cubic feet of gas equivalent per day – 19,000 barrels of oil equivalent – net to the company in 2021. In addition, it stated the acreage contains some 102.2 net producing wells, 22.6 net wells in process, and 231.1 net undrilled locations in the core of the Marcellus and Utica plays.
“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,” remarked Northern CEO Nick O’Grady. “Coupled with stable future development, these assets are expected to provide, at current strip prices, an average 18 percent free cash flow yield on the investment over a multiyear period.”
Northern CFO Chad Allen pointed out the company expects to fund the acquisition through a mix of equity and debt.
“Our cash purchase price for these assets only ascribes value for producing wells and the large inventory of wells-in-process, with significant upside value on the undeveloped properties,” stated Adam Dirlam, Northern’s chief operating officer. “The joint venture structure allows Northern significant input and clarity on the development plans for these assets on a multiyear basis. We look forward to being an excellent partner for the development of these properties side-by-side with EQT for years to come.”
EQT, which recently acquired Chevron’s Appalachian properties, will operate approximately 95 percent of the assets, Northern stated.
RIL noted that RMLLC and NOG signed the purchase and sale agreement on Feb. 3, adding the transaction is subject to customary terms and closing conditions. Northern stated the transaction has an effective closing date of July 1, 2020, and will likely close in April 2021.
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