Royal Dutch Shell Plc agreed to sell its entire Appalachia shale position to New York-based integrated energy company National Fuel Gas Co. for roughly $541 million, the two companies said in separate releases on May 4.

The transaction is part of Shell’s strategy to focus on the development of higher-margin, light tight oil assets, according to Shell Upstream Director Wael Sawan.

“Divesting our Appalachia position is consistent with our desire to focus our shales portfolio,” Sawan said in a statement. “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 roughly 450,000 net leasehold acres across Pennsylvania, with about 350 producing Marcellus and Utica wells located in Tioga County and associated facilities. The current net production is about 250 million standard cubic feet per day. Shell will also transfer its owned and operated midstream infrastructure as part of the agreement.

Payment for the transaction will be made in cash, but National Fuel has the option to provide up to $150 million of NFG common stock as consideration. According to a release by the company, National Fuel has taken appropriate steps to ensure ample liquidity and protections as it pursues permanent financing for the acquisition, though the transaction is not contingent on financing conditions.

In its release, Shell said it remains committed to Pennsylvania as it still plans to build the Pennsylvania Petrochemicals Complex. The project, which began construction in November 2017, will consist of an ethylene cracker with a polyethylene derivatives unit near Pittsburgh.

The sale is subject to regulatory approvals and is expected to close by end of July. The transaction will have an effective date of Jan. 1.

J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC are financial advisers to National Fuel. Kirkland & Ellis LLP and Jones Day are the company’s legal advisers.

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