Northern Oil and Gas has agreed to acquire the Williston Basin properties of VEN Bakken, a wholly-owned subsidiary of Flywheel Bakken, a portfolio company of the Kayne Private Energy Income Funds.
The assets to be acquired by Northern Oil and Gas are expected to produce approximately 6,600 barrels of oil equivalent (Boe) per day during the second half of 2019.
The assets consist of approximately 18,000 net acres containing 86.9 net producing wells, 2.7 net wells in process, and 47.5 net undrilled locations across the center of the Williston Basin.
Northern Oil and Gas expects to generate an estimated amount of approximately $44.9m in cash flow from operations at during the second half of 2019, with an estimated second half capital expenditure budget of $15.6m.
Northern chief executive officer Brandon Elliott said: “This transaction furthers our stated goals of allocating capital to generate free cash flow in low commodity prices, keep debt metrics low, and grow our debt adjusted cash flow per share. Durable cash flows, core drilling inventory, hedges and low leverage should help to generate long term value for shareholders.”
Total consideration paid to the VEN Bakken amounts to $165m in cash, a $130m 6% three-year senior unsecured note due 2022 and approximately 5.6million shares of Northern Oil and Gas’ common stock.
The company said that the cash and note portions of the consideration are subject to typical closing and post-closing adjustments. The transaction is expected to close and be effective on 1 July 2019.
Northern chief financial officer Nick O’Grady said: “At an accretive acquisition price of less than 3.5x cash flow, this asset should see multi-year production growth while being self-funding and still generating excess free cash flow.
“The additional size and scale provided from this acquisition serve to continue to grow our borrowing base and reduce our per unit G&A costs to industry leading levels.”
The company said that it does not expect accessing the public equity or debt markets for the present transaction.