NOG Announces Additional Core Northern Delaware Basin Bolt-on Acquisition expected to close in December, 2022
October 11, 2022 7:22am EDT
HIGHLIGHTS
> Bolt-on acquisition of core non-operated working interest properties in the Northern Delaware Basin for a purchase price of $130.0 million
> Average production of ~2,500 Boe per day (68% oil, 2-stream) expected for 2023, generating an estimated $55 million of unhedged cash flow in 2023 at strip pricing as of October 10, 2022 (~2.4x transaction multiple)
> ~2,100 net acres located in Lea and Eddy Counties, NM and Loving & Winkler Counties, TX with significant Tier-1 inventory (sub-$40 per barrel average breakevens)
> Strong growth and free cash flow profile with ~$25 million capital spending expected on the assets in 2023
> Transaction expected to be accretive to key financial metrics
MINNEAPOLIS--(BUSINESS WIRE)-- Northern Oil and Gas, Inc. (NYSE: NOG) (the “Company” or “NOG”) today announced the acquisition of Northern Delaware Basin properties.
DELAWARE BASIN ACQUISITION
NOG has entered into a definitive agreement to acquire certain non-operated interests (the “Assets”) in the Delaware Basin from a private seller (the “Seller”) for a purchase price of $130.0 million in cash, subject to typical closing adjustments.
The acquired assets are located in Lea and Eddy Counties, New Mexico and Loving and Winkler Counties, Texas, and include approximately 2,100 net acres, 5.3 net producing wells, 2.1 net wells-in-process and approximately 17.2 net undeveloped locations. The primary operator of the assets is Mewbourne Oil, one of the most cost efficient and active operators in the Northern Delaware Basin. Other operators include Coterra and Permian Resources.
The effective date for the transaction is November 1, 2022, and NOG expects to close the transaction in December 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.
HEDGING UPDATE
In addition to its continuous hedging program, NOG has hedged, as standard practice, a significant portion of the production from the pending transaction. Updated hedge schedules can be found in NOG’s related October Acquisition Presentation at http://ir.northernoil.com.
MANAGEMENT COMMENTS
“NOG continues to press its advantage as a well-capitalized, reliable and consistent purchaser of high-quality non-operated properties,” commented Nick O’Grady, NOG’s Chief Executive Officer. “More importantly, NOG’s technical team continues to underwrite for returns with precision and focus on the best assets available in the marketplace today.”
“This transaction lies squarely in NOG’s fairway on a number of levels,” commented Adam Dirlam, NOG’s President. “The Assets contain high-quality, low breakeven development that is leveraged to some of NOG’s top operating partners, as our investors have come to expect.”
ADVISORS
Wells Fargo Securities served as financial advisor to NOG for the acquisition. Kirkland & Ellis LLP is serving as the Company’s legal advisor for the acquisition.
TPH&Co., the energy business of Perella Weinberg Partners, served as financial advisor to the Seller. Bracewell LLP is serving as the Seller’s legal advisor.
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.
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Assuming the most recent two North Delaware Basin Acquisitions close in December, NOG's 2022 production exit rate should be ~85,000 Boepd, which compares to their Q2 2022 production of 72,689 Boepd.
Northern Oil & Gas (NOG) Update - Oct 11
Northern Oil & Gas (NOG) Update - Oct 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Northern Oil & Gas (NOG) Update - Oct 11
MINNEAPOLIS--(BUSINESS WIRE)-- Northern Oil and Gas, Inc. (NYSE: NOG) (the “Company” or “NOG”) today announced its intention to offer, subject to market and other conditions, $350,000,000 aggregate principal amount of convertible senior notes due 2029 (the “notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company also expects to grant the initial purchasers of the notes an option to purchase, for settlement within a period of 13 days from, and including, the date notes are first issued, up to an additional $50,000,000 principal amount of notes.
The Company intends to use a portion of the net proceeds of the offering to fund the cost of entering into the capped call transactions described below. In addition, the Company intends to use $25 to $30 million of the net proceeds of this offering to repurchase shares of its common stock concurrently with the pricing of this offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as the Company’s agent. The Company intends to use any remaining net proceeds from this offering for general corporate purposes (initially, the repayment of outstanding debt under its revolving credit facility, and ultimately a portion of the proceeds is intended to be used to fund the cash purchase price for recently announced acquisitions of non-operated properties in the Delaware Basin). If the initial purchasers exercise their option to purchase additional notes, the Company expects to use a portion of the net proceeds from the sale of the additional notes to enter into additional capped call transactions.
The notes will be senior, unsecured obligations of the Company, will accrue interest payable semi-annually in arrears and will mature on April 15, 2029, unless earlier repurchased, redeemed or converted. Noteholders will have the right to convert their notes in certain circumstances and during specified periods. The Company will settle conversions by paying or delivering, as applicable, cash and, if applicable, shares of its common stock, based on the applicable conversion rate(s). The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after April 15, 2026 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.
In connection with the pricing of the notes, the Company expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the “counterparties”). The capped call transactions are expected to offset the potential dilution to the Company’s common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such offset subject to a cap.
The Company expects that, in connection with establishing their initial hedge of the capped call transactions, the counterparties or their respective affiliates will purchase shares of the Company’s common stock and/or enter into various derivative transactions with respect to the Company’s common stock concurrently with, or shortly after, the pricing of the notes, including potentially with certain investors in the notes. These activities could increase (or reduce the size of any decrease in) the market price of the common stock or the notes at that time. In addition, the counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company’s common stock and/or purchasing or selling shares of common stock or other securities of the Company in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period relating to a conversion of the notes). This activity could also cause or prevent an increase or a decrease in the market price of the common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, could affect the number of shares of the Company’s common stock and value of the consideration that noteholders will receive upon conversion of the notes.
The offer and sale of the notes and any shares of common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.
The Company intends to use a portion of the net proceeds of the offering to fund the cost of entering into the capped call transactions described below. In addition, the Company intends to use $25 to $30 million of the net proceeds of this offering to repurchase shares of its common stock concurrently with the pricing of this offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as the Company’s agent. The Company intends to use any remaining net proceeds from this offering for general corporate purposes (initially, the repayment of outstanding debt under its revolving credit facility, and ultimately a portion of the proceeds is intended to be used to fund the cash purchase price for recently announced acquisitions of non-operated properties in the Delaware Basin). If the initial purchasers exercise their option to purchase additional notes, the Company expects to use a portion of the net proceeds from the sale of the additional notes to enter into additional capped call transactions.
The notes will be senior, unsecured obligations of the Company, will accrue interest payable semi-annually in arrears and will mature on April 15, 2029, unless earlier repurchased, redeemed or converted. Noteholders will have the right to convert their notes in certain circumstances and during specified periods. The Company will settle conversions by paying or delivering, as applicable, cash and, if applicable, shares of its common stock, based on the applicable conversion rate(s). The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after April 15, 2026 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.
In connection with the pricing of the notes, the Company expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the “counterparties”). The capped call transactions are expected to offset the potential dilution to the Company’s common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, with such offset subject to a cap.
The Company expects that, in connection with establishing their initial hedge of the capped call transactions, the counterparties or their respective affiliates will purchase shares of the Company’s common stock and/or enter into various derivative transactions with respect to the Company’s common stock concurrently with, or shortly after, the pricing of the notes, including potentially with certain investors in the notes. These activities could increase (or reduce the size of any decrease in) the market price of the common stock or the notes at that time. In addition, the counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company’s common stock and/or purchasing or selling shares of common stock or other securities of the Company in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period relating to a conversion of the notes). This activity could also cause or prevent an increase or a decrease in the market price of the common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, could affect the number of shares of the Company’s common stock and value of the consideration that noteholders will receive upon conversion of the notes.
The offer and sale of the notes and any shares of common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Northern Oil & Gas (NOG) Update - Oct 11
NOG worse performer today , down 9 %
Re: Northern Oil & Gas (NOG) Update - Oct 11
The Wall Street Gang does not favor "Aggressive Growth" funded by debt this year, no matter how accretive the acquisitions are. If oil & gas prices hold up, NOG is going to have a very impressive year-end reserve report.
If you look at row 52 of my forecast model you will see that NOG has more than enough operating cash flow to service their debt load. Note that operating cash flow will increase from $1.0 billion in 2022 to over $1.5 billion in 2023 (based on a realized oil price of $83/bbl net of differentials and settlements on their hedges).
Key to the Non-Op business model is the quality of their operators.
If you look at row 52 of my forecast model you will see that NOG has more than enough operating cash flow to service their debt load. Note that operating cash flow will increase from $1.0 billion in 2022 to over $1.5 billion in 2023 (based on a realized oil price of $83/bbl net of differentials and settlements on their hedges).
Key to the Non-Op business model is the quality of their operators.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group