Northern Oil and Gas has agreed to acquire significant production in North Dakota, currently having a production of more than 4,100 barrels of oil equivalent (Boe) per day.
The asset, primarily a large package of producing wells, is being acquired from Pivotal Petroleum Partners (“Pivotal”), a portfolio company of funds managed by Tailwater Capital LLC.
Total consideration at closing will consist of $68.4 million in cash (subject to customary adjustments) and 25.75 million shares of Northern common stock.
Pivotal will be subject to a lock-up on the shares over a 13-month post-closing period. The agreement contains a mechanism for potential additional consideration to be paid during the 13-month lock-up period if Northern’s common stock trades below certain price targets.
The acquisition is expected to close in approximately 60 days, with an effective date of June 1, 2018.
The acquisition is expected to be accretive to cash flow, leverage metrics, and earnings per share through 2020
Northern expects the acquired asset to generate approximately $56 million of cash flow from operations over the next twelve months
Northern expects to enter into commensurate hedge agreements for a significant portion of the acquired volumes
Northern expects to become cash flow positive immediately upon closing
Northern expects to be sub-2.0x Net Debt/Adjusted EBITDA in 2019
Northern founder and president Mike Reger said: “This transaction in the core of the Williston Basin is transformative for Northern, with both strong free cash flow and a high rate of return.
“The combination of this asset, along with our significant and growing core inventory of future drilling locations and the outstanding well results we have seen so far in 2018, will achieve our goal to be cash flow positive upon closing, with below-peer debt metrics in 2019.
“We look forward to welcoming Pivotal as a new, significant shareholder in Northern.”