HIGHLIGHTS
- Delaware Basin acquisition includes acreage and proposed wells
in Lea County, NM operated by EOG Resources
- Northern expects monthly peak production from the acquisition
of approximately 1,400 barrels of oil equivalent (“Boe”) per day in
mid-2021
- Northern expects the transaction to be accretive to EV /
EBITDA, corporate return on capital employed, earnings per share,
and free cash flow metrics in 2021 and beyond
- Northern is providing an operations update, adjusting Q3 2020
production guidance upward to 25,000 – 30,000 Boe per day
Northern Oil and Gas, Inc. (NYSE American: NOG) (“Northern” or
the “Company”) today announced an acquisition in the Delaware Basin
and other business updates.
DELAWARE BASIN ACQUISITION
Northern has acquired non-operated interests in the Delaware
Basin from an undisclosed seller consisting of approximately 66 net
acres, on which 1.1 initial net wells have been proposed. The
proposed wells are expected to be spud in late 2020 and/or early
2021 and turned in line beginning in the second quarter of 2021.
The underlying acreage carries additional future development
upside. The assets are operated by EOG Resources and located in Lea
County, NM.
Total acquisition costs plus the initial development costs on
the 1.1 net wells are expected to be approximately $11.9 million.
Northern expects approximately 54% of this capital to be incurred
in 2020, all of which would be within Northern’s previously stated
2020 capital budget.
Northern expects monthly peak production of approximately 1,400
Boe per day on the initial wells late in the second quarter of
2021. Upon turning in line, Northern expects these assets to be
accretive to EV / EBITDA, corporate return on capital employed,
earnings per share, and free cash flow metrics in 2021 and
beyond.
OPERATIONS UPDATE
Northern has seen steady and marked improvement in operations
throughout the third quarter of 2020. Realized oil pricing
differentials have narrowed from wide levels experienced in the
second quarter. Northern also expects a significant reduction in
per unit lease operating expenses in the third quarter compared to
the second quarter. Operators have continued to return shut-in and
curtailed production to sales at a steady rate, at or above
Northern’s internal forecasts. Northern is adjusting its third
quarter of 2020 production guidance upward from 22,500 – 30,000 Boe
per day to 25,000 – 30,000 Boe per day, an increase of 1,250 Boe
per day at the midpoint. Inclusive of today’s announced
acquisition, Northern continues to be well within its stated
capital budget of $175 – 200 million for 2020 and does not
currently anticipate accessing its $50 million reserve budget for
accelerated completions.
BALANCE SHEET UPDATE
Northern has reduced its Senior Secured Notes (the “Notes”) by
$130.0 million year-to-date, through previously announced open
market purchases and exchanges for common and preferred equity. Of
this $130.0 million, the vast majority are complete, with less than
$2.1 million of exchange value remaining to be completed by the end
of September. These transactions have been designed to reduce fixed
charges, capture pricing discounts on the Notes, and earn a strong
return on capital employed for shareholders. On an annualized
basis, these transactions have reduced annual interest expense by
over $11 million. The transactions involving Notes purchased for
cash or exchanged for common equity have captured discounts to par
value of approximately $9.3 million. However, given recent
volatility in the price of Northern’s common stock and the current
value of the Notes, Northern does not currently anticipate any
further exchanges for the Notes in 2020.
MANAGEMENT COMMENTS
“We have been actively building data in the Permian Basin for
two years,” commented Nick O’Grady, Chief Executive Officer of
Northern. “The 2020 downturn in the energy sector has made the
Permian Basin competitive for the first time, inclusive of acreage
costs, on a full cycle return basis with our Williston Basin
program. Coupled with Northern’s Ground Game acquisitions in the
Williston, this increased opportunity set should add additional
breadth to our strategy as the natural consolidator of non-operated
working interests. Returns matter: the capital markets continue to
ignore our stellar capital allocation process that has led to the
highest return on capital employed of any public oil-centric
E&P. With this deal, we continue to carefully invest
countercyclically in high return future cash flows and inventory to
capture upside, while ongoing operations continue to improve.”
“Northern continues to execute on its active management strategy
adhering to our strict return on capital requirements,” commented
Adam Dirlam, Chief Operating Officer of Northern. “Northern’s
unique business model can add significant high quality, high return
inventory and development, regardless of current activity levels.
Additionally, after patiently building data over the past several
years, our technical ability has allowed us to expand this strategy
further, as demonstrated by our first deal in the Permian
Basin.”
ABOUT NORTHERN OIL AND GAS
Northern Oil and Gas, Inc. is a company with a primary strategy
of investing in non-operated minority working and mineral interests
in oil & gas properties, with a core area of focus in the
Williston Basin Bakken and Three Forks play in North Dakota and
Montana.
More information about Northern Oil and Gas, Inc. can be found
at www.NorthernOil.com.
SAFE HARBOR
This press release contains forward-looking statements regarding
future events and future results that are subject to the safe
harbors created under the Securities Act of 1933 (the “Securities
Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).
All statements other than statements of historical facts included
in this release regarding Northern’s financial position, business
strategy, plans and objectives of management for future operations
and industry conditions are forward-looking statements. When used
in this release, forward-looking statements are generally
accompanied by terms or phrases such as “estimate,” “project,”
“predict,” “believe,” “expect,” “continue,” “anticipate,” “target,”
“could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may”
or other words and similar expressions that convey the uncertainty
of future events or outcomes. Items contemplating or making
assumptions about actual or potential future sales, market size,
collaborations, and trends or operating results also constitute
such forward-looking statements.
Forward-looking statements involve inherent risks and
uncertainties, and important factors (many of which are beyond
Northern’s control) that could cause actual results to differ
materially from those set forth in the forward-looking statements,
including the following: changes in crude oil and natural gas
prices, the pace of drilling and completions activity on Northern’s
properties and properties pending acquisition, the effects of the
COVID-19 pandemic and related economic slowdown, Northern’s ability
to acquire additional development opportunities, changes in
Northern’s reserves estimates or the value thereof, general
economic or industry conditions, nationally and/or in the
communities in which Northern conducts business, changes in the
interest rate environment, legislation or regulatory requirements,
conditions of the securities markets, Northern’s ability to
consummate any pending acquisition transactions, other risks and
uncertainties related to the closing of pending acquisition
transactions, Northern’s ability to raise or access capital,
changes in accounting principles, policies or guidelines, financial
or political instability, acts of war or terrorism, and other
economic, competitive, governmental, regulatory and technical
factors affecting Northern’s operations, products, services and
prices.
Northern has based these forward-looking statements on its
current expectations and assumptions about future events. While
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond Northern’s control. Northern does not undertake
any duty to update or revise any forward-looking statements, except
as may be required by the federal securities laws.
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version on businesswire.com: https://www.businesswire.com/news/home/20200910005993/en/
Mike Kelly EVP, Finance (952) 476-9800 ir@northernoil.com
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