Shell sells Appalachia shale gas assets for $541 million


THE HAGUE, NETHERLANDS - Royal Dutch Shell plc, through its affiliate SWEPI LP (“Shell”), has reached an agreement with publicly listed U.S. energy company National Fuel Gas Company (NFG), and its subsidiaries, Seneca Resources Company, LLC, National Fuel Gas Midstream Company, LLC, and NFG Midstream Covington, LLC (together “National Fuel”), to sell its Appalachia shale gas position for $541 million, subject to closing adjustments. The transaction has an effective date of January 1, 2020.

The consideration is intended to be paid in cash, but National Fuel has the option to provide up to $150 million of NFG common stock as consideration. The transaction is part of divesting non-core assets and in line with Shell’s Shales strategy which focusses on development of higher margin, light tight oil assets.

“Divesting our Appalachia position is consistent with our desire to focus our Shales portfolio,” said Wael Sawan, Upstream Director at Shell. “While we maximize cash in the current environment, our drive for a competitive position in Shales continues. It is a core part of our Upstream portfolio along with the Deep Water and Conventional oil and gas businesses.”

The transaction includes the transfer of ~450,000 net leasehold acres across Pennsylvania, with approximately 350 producing Marcellus and Utica wells in Tioga County and associated facilities. The current net production is ~250 million standard cubic feet per day. The transaction also includes the transfer of the Shell owned and operated midstream infrastructure.

The sale is subject to regulatory approvals and expected to close by end of July 2020.

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The sale values the acreage @ $1202 per each.  Seems like a fire sale price.

With a whole lot more PDP.  "Shell has quadrupled the production and is selling it for less than 1/10 the price they paid."

Not the kind of asset sale I was expecting but an opportunity for a company focused on natural gas.  NFG got a deal.  aw, do you know the NFG footprint?  Will this be bolt on acreage?

I work the area but had never heard of them.  Although we're not in Tioga.

Here's their current footprint:

And here's an article with a basemap showing both acreage positions in Tioga:

They sure though it was bolt-on:  "Shell’s large Tioga County acreage footprint, which is contiguous to our existing development areas, along with significant, integrated gathering facilities, and valuable pipeline capacity, Shell’s assets are a perfect fit for the company’s diversified business model, and provide meaningful synergies with our existing operations.”

Seems like the midstream assets largely played into the purchase.

Interesting.  Seems RSD is reducing it's exposure to natural gas even as it continues to invest in downstream projects.  Is this area of the Marcellus wet gas or dry?

It's a mix in the Marcellus but mostly dry and dry Utica too.  That was one stated reason Shell divested: "They are in the dry gas areas of the Marcellus and Utica shales and would not be able to produce the ethane, a natural gas liquid that another Shell subsidiary plans to turn into plastic pellets at the petrochemical plant under construction in Potter, Beaver County."

Thanks.  I thought that might be an issue that informed RDS's decision to divest their leasehold and infrastructure.


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