Northern Oil and Gas (NOG) has signed a definitive agreement to acquire oil-producing assets from W Energy Partners.
Image: Northern Oil and Gas intends to acquire oil-producing assets. Photo by rawpixel on Unsplash.
At closing, the acquisition will represent approximately 6,750 barrels of oil equivalent (Boe) per day of production and 10,600 net acres in the core of the Williston Basin. Total consideration at closing will consist of $100 million in cash (subject to customary adjustments) and 56.37 million shares of Northern common stock, which will be subject to an equity lock-up feature.
In addition, Northern is pre-announcing preliminary second quarter 2018 average production of over 21,000 Boe per day, which is substantially above consensus expectations.
HIGHLIGHTS
The W Energy assets are expected to produce approximately 6,750 Boe per day at closing, will add 10,600 net acres in the core of the Williston Basin, and will be meaningfully accretive on a cash flow and earnings basis
The W Energy acquisition, combined with the recently announced Pivotal acquisition, upon closing, will allow Northern to generate significant free cash flow and substantially reduce leverage
Northern’s preliminary estimate of production in the second quarter of 2018 exceeded expectations, increasing 52% year-over-year and nearly 17% sequentially to average approximately 21,045 Boe per day in the second quarter
Northern expects to exit 2018 generating substantial free cash flow and expects to have approximately $100 million of cash on hand at year end
MANAGEMENT COMMENTS
“The W Energy acquisition will add robust drilling inventory under some of the best acreage in the Williston Basin,” commented Northern’s founder and President, Mike Reger. “This asset fits perfectly with Northern’s existing core leasehold and drilling inventory and is highly complementary to our recently announced Pivotal acquisition. With significant excess cash flow from these acquisitions, we are in a position to further our strategy as the natural consolidator of non-operated working interests in the Williston Basin.”
“Based on our preliminary estimates, production from our existing assets in the second quarter exceeded our expectations, driven primarily by outstanding organic well performance and a little less than a month of contribution from our recently closed Salt Creek acquisition,” commented Northern’s Chief Executive Officer, Brandon Elliott. “Upon the closing of both the Pivotal and W Energy acquisitions, we will be generating significant free cash flow along with below-peer leverage ratios. We look forward to welcoming Crestview Partners as another new, long-term shareholder.”
ACQUISITION
Northern has entered into a definitive purchase agreement with an affiliate of W Energy Partners, a portfolio company of Crestview Partners. The assets to be acquired comprise 10,600 acres and, at closing, an estimated 6,750 Boe per day of production. The acquisition is expected to generate approximately $95 million in cash flow in 2019, with an estimated 2019 base capital plan of approximately $42 million, representing a 17% free cash flow yield based upon purchase price. Total consideration at closing will consist of $100 million in cash (subject to customary adjustments) and 56.37 million shares of Northern common stock. The shares will be subject to a limited lock-up over a 13-month post-closing period, which includes a mechanism for additional consideration if Northern’s stock trades below certain price targets. The acquisition is expected to close in approximately 60 days, with an effective date of July 1, 2018.
Source: Company Press Release