The assets include 5.3 net producing wells, 5.0 net wells in process and an additional 23.1 net undrilled locations
The assets involved in the acquisition produced around 2,200boed in May. (Credit: drpepperscott230 from Pixabay.)
Northern Oil and Gas (Northern) has signed three agreements to acquire non-operated interests in a nearly 2,900 acreage located in the Reeves County, Texas and Lea and Eddy Counties, New Mexico for a total price of $102.2m.
The assets involved in the acquisition produced around 2,200 barrel of oil equivalent per day (boed) in May.
The company anticipates an aggregate production of 3,700boed in the second half of 2021, given that the transaction is assumed to be closed on 1 August.
Also, the development plan on the properties is expected to increase the production to nearly 6,500boed over next few years, and generate more than $100m cash flow for Northern through 2025.
Northern Oil and Gas chief operating officer Adam Dirlam said: “These assets represent the trifecta. We are acquiring high return core properties with top operators, assets with significant inventory and growth potential.
“We expect to generate over $100m in free cash flow from the assets through 2025, based on current strip prices.”
The assets included in the transaction are 5.3 net producing wells, 5.0 net wells in process and an additional 23.1 net undrilled locations attributed to the core zones.
The additional 23.1 net undrilled locations include the Wolfcamp A, Wolfcamp B and 1st through 3rd Bone Springs.
Mewbourne Oil, Colgate Energy, ConocoPhillips and EOG Resources are the primary operators of the assets.
Northern estimates capital expenditures of around $35m on the combined properties for this year, including estimated purchase price adjustments at closing.
The company has already completed the acquisition of a portion of the assets in June and anticipates to close the acquisition of the remaining assets in the third quarter of 2021.
Northern chief executive officer Nick O’Grady said: “Consistent with our fundamental approach to growing our enterprise, these transactions achieve all of our stated goals.
“These deals are immediately accretive to our enterprise and all relevant per share statistics. As promised, alongside a reduction in leverage ratios, it means an acceleration of our dividend strategy to shareholders, while augmenting our inventory and growth profile.”