Reliance sells stake in US shale gas assets for $250m

Billionaire Mukesh Ambani's Reliance Industries Ltd has sold its stake in the shale gas asset in the US to Northern Oil and Gas Inc for USD 250 million, the firm said on Thursday.

"Reliance Marcellus, LLC (RMLLC) a wholly-owned subsidiary of Reliance Industries Limited (RIL), announced the signing of agreements to divest all of its interest in certain upstream assets in the Marcellus shale play of southwestern Pennsylvania," a company statement said.

These assets, which are currently operated by various affiliates of EQT Corporation, have been agreed to be sold to Northern Oil and Gas, Inc, a Delaware corporation, for USD 250 million cash and warrants that give entitlement to purchase 3.25 million common shares of Northern Oil and Gas (NOG) at an exercise price of USD 14.00 per common share in next seven years.

"A Purchase and Sale Agreement (PSA) has been signed between RMLLC and NOG on February 3, 2021, for this sale and the transaction is subject to customary terms and conditions of closing," the statement said.

Reliance had between 2010 and 2013 invested in the US shale gas assets, buying stakes in three upstream oil exploration joint ventures with Chevron, Pioneer Natural Resource, and Carrizo Oil and Gas; and a midstream joint venture with Pioneer.

Midstream refers to the processing, storing, transporting and marketing of hydrocarbons.

Aggregate investments since the inception of these ventures were USD 8.2 billion till 2016.

In 2017, it sold the first of its shale gas ventures -- Marcellus shale gas assets in north-eastern and central Pennsylvania for USD 126 million.

The Carrizo-operated assets held by Reliance Marcellus II LLC, a unit of Reliance Holding USA Inc and RIL, were sold to BKV Chelsea LLC, an affiliate of Kalnin Ventures LLC. In 2010, RIL had bought a 60 per cent stake in the assets for USD 392 million.

In June 2015, the company sold its Eagle Ford (EFS) midstream joint venture with Pioneer Natural Resources for USD 1 billion. RIL had spent USD 46 million in acquiring the 49.9 per cent stake in EFS and invested another USD 208 million over the years.

In June 2010, Reliance had invested in the US shale gas business, where it bought a 45 per cent stake in the Eagle Ford shale gas fields, owned by Pioneer, for USD 1.3 billion. As part of the deal, it received a 49.9 per cent stake in the midstream venture. Pioneer Natural Resources held a 46.4 per cent stake in that venture.

Chevron Upstream Northeast held a 60 per cent stake in the second JV, in which RIL's stake is 40 per cent.

Reliance had been bullish on shale gas till 2014 before a drop in crude oil prices hit the valuations of such 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.

Citigroup Global Markets, Inc acted as financial advisor to Reliance and Gibson, Dunn & Crutcher LLP served as its legal counsel for the deal announced Thursday, the statement said.