$406 million Permian Basin acquisition made by Northern Oil and Gas

NOG Stock Forecast, Price & News (Northern Oil and Gas)


Northern Oil and Gas based in Minneapolis, Minnesota says it has acquired Permian Basin assets of Veritas Energy, LLC in far West Texas and Southeast New Mexico.

The $408.6 million deal involves non-operated oil and gas properties in the Delaware and Midland Basins including some assets operated by Oklahoma-based Devon Energy. Northern said the assets are primarily located in Lea and Eddy Counties of New Mexico and Loving, Reeves, Ward and Winkler Counties in Texas.

As part of the transaction, Northern will issue the Seller ~1.9 million seven-year equity warrants with a strike price of $28.30 at closing. Northern expects to commence a public equity offering to fund a portion of the acquisition.

Current production on the assets is approximately 9,100 to 11,500 Boe a day and 60% is oil. By 2022, Northern expects average production of more than 10,500 Boe a day and nearly $43 to $45 million in cash flow in the fourth quarter 2021.

Northern expects the assets to be immediately self-funding at closing. Forward 1-year unhedged cash flow from operations from the effective date is expected to be approximately $185 million and 2022 unhedged cash flow from operations is expected to exceed $180 million, based on current strip pricing. Northern expects $35 to $40 million in capital expenditures on the assets in 2022.

The acquired assets include 31.7 net producing wells, 5.6 net wells in process, 4.0 AFE’d or permitted net wells and 40.8 risked net future development locations. The assets are managed by multiple, best-in-class operators in the Permian Basin, including Mewbourne, Devon, ConocoPhillips, and EOG as the largest operators accounting for an estimated 64% of the expected 2022 production across the Assets.

The effective date for the transaction is October 1, 2021 and Northern expects to close the transaction in the first quarter of 2022.