Northern Oil & Gas (NOG) Update - Aug 17

[dan_s]

This acquisition will increase NOG's Q4 2022 production.
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NOG Announces Midland Basin Bolt-on Acquisition
August 17, 2022 7:15am EDT

HIGHLIGHTS

Bolt-on acquisition of high oil cut, core non-operated working interest properties in the Midland Basin for $110 million
Average production >1,800 Boe per day (2-stream, ~86% oil) expected over the next twelve months
Strong line of sight with approximately 9.6 net undeveloped and in-process locations and ~1,600 net acres located in Howard County, Texas
Forward 1-year unhedged cash flow from operations (assumed October closing) expected to be approximately $48 million at strip pricing as of 8/15/2022, representing an initial purchase price transaction multiple of 2.3x
Strong free cash flow profile with only ~$12.5 - 17.5 million of annual sustaining capital expenditures necessary to maintain production on assets
Transaction expected to be accretive to key valuation metrics, including TEV / EBITDA, earnings per share, free cash flow and cash flow per share, over a multi-year period
Acquisition to be financed with cash; still expect to exit 2022 below 1.0x leverage ratio

MINNEAPOLIS--(BUSINESS WIRE)-- Northern Oil and Gas, Inc. (NYSE: NOG) (the “Company” or “NOG”) today announced that it has entered into an agreement to acquire properties in the Midland Basin.

MIDLAND BASIN ACQUISITION

NOG has entered into a definitive agreement to acquire non-operated interests in the Midland Basin for a purchase price of $110 million in cash, subject to typical closing adjustments. NOG expects to fund the acquisition with cash on hand, operating free cash flow and borrowings under NOG’s revolving credit facility.

At closing, production on the assets is expected to be greater than 1,600 Boe per day (2-stream, ~87% oil) and NOG expects average production of over 1,800 Boe per day over the next twelve months post-closing (2-stream, ~86% oil). NOG expects less than $5 million of capital expenditures to be incurred post-closing in 2022 and does not anticipate revising 2022 capital expenditure guidance for the acquisition. These high-quality properties have operating costs lower than NOG’s corporate average.

The acquired assets are located in Howard County, Texas and include approximately 1,600 acres, 6.4 net producing wells, 1.6 net wells-in-process and approximately 8 net undeveloped locations. Substantially all of the assets are operated by SM Energy.

The effective date for the transaction is August 1, 2022, and NOG expects to close the transaction in October 2022. The obligations of the parties to complete the transactions contemplated by the purchase agreement are subject to the satisfaction or waiver of customary closing conditions.

MANAGEMENT COMMENTS

“We continue to focus on a balanced approach to growing our enterprise, with a focus on quality and low-breakeven economics,” commented Nick O’Grady, NOG’s Chief Executive Officer. “NOG continues to build a stronger, more diversified company built to drive higher shareholder returns for the long term.”

“In our second meaningful bolt-on acquisition of 2022, we have found a high-quality prospect that continues to grow our Midland Basin position,” commented Adam Dirlam, NOG’s President. “Anchored by highly economic inventory, high oil cuts, and a strong operator, this transaction helps continue to build out the Permian Basin as an area of growth for NOG.”

ADVISORS

Kirkland & Ellis LLP is serving as legal advisor to NOG.

ABOUT NORTHERN OIL AND GAS

NOG 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 premier basins within the United States. More information about NOG can be found at www.northernoil.com.

[dan_s]

I have updated my forecast/valuation model, adding 1,800 Boepd (86% oil) to Q4 production. I also increased cash G&A and interest expense to round my stock valuation to $63.00 per share, an increase of $1 from the profile update we sent out on Monday.

TipRanks: "On 8-16-2022 Piper Sandler analyst Mark Lear raised the price target on Northern Oil and Gas (NYSE: NOG) to $50.00 (from $49.00) while maintaining a Overweight rating."

TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for NOG. The average price target among the analysts is $44.86. The seven price targets range from $32.00 to $61.00."

At the time of this post, NOG was trading for $28.39.