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    Northern closes $250mn Reliance purchase

Summary

Northern has hedged the bulk of the expected gas production this year from the US assets.

by: Joe Murphy

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Northern closes $250mn Reliance purchase

Delaware-based Northern Oil and Gas announced on April 6 it had closed the purchase of the US Marcellus shale play operations of India's Reliance Industries for $250mn.

Northern paid nearly $121mn in cash and issued 3.25mn of common stock warrants for the business, which is expected to produce 75-85mn ft3/day of gas and receive $20-25mn of capital expenditure in 2021. Northern has hedged 66% of the assets' forecasted gas production in the remainder of the year at an average price of $3/mn Btu, and 33% of their projected output in the first quarter of 2022 at $3.17/mn Btu. 

The transaction, reached in February, "extends Northern's non-operated model to Appalachia – the leading US natural gas basin – and creates a national non-operated franchise diversified by region and commodity mix," the US firm said.

Reliance invested in various US shale gas assets between 2010 and 2013. It bought stakes in three exploration joint ventures with Chevron, Pioneer Natural Resource, and Carrizo Oil and Gas, and a midstream joint venture with Pioneer. Since 2015, it has divested most of these positions.