Northern Oil and Gas grows Permian exposure
Northern Oil and Gas said June 16 it will pay $102.2mn to acquire roughly 2,900 net acres of non-operated rights in the Permian shale basin, with an eye on increasing production.
The acquired acreage is now operated by Mewbourne Oil Company, Colgate Energy, ConocoPhillips and EOG Resources. Northern said production for May averaged 2,200 barrels of oil equivalent/day, about 66% of which is oil.
Northern said it expects output to increase to 3,700 boe/day by the second half of the year. With production expected to nearly double over the next several years, Northern said it expected the assets in question could yield more than $100mn of free cash flow through 2025.
“These assets represent the trifecta,” commented Adam Dirlam, Chief Operating Officer of Northern. “We are acquiring high return core properties with top operators, assets with significant inventory and growth potential, and engaging in a transaction expected to meaningfully impact Northern’s free cash flow profile.”
The acquisition builds on Northern’s existing Permian portfolio, which consists of about 285 net acres and provided 7% of the company’s Q1 2021 production, or about 2,700 boe/day.
The US federal government reported June 14 that most of the short-term gains in oil and natural gas production are expected from the Permian basin situated mostly in Texas. Permian oil production is forecast to see a 1.2% increase in output from June to 4.7mn b/d. For natural gas, the EIA predicts only a very minor increase in nation-wide production, from 84.2bn ft3/d to 84.3bn ft3/d, an increase of just 0.05%. The Haynesville, Permian and Appalachia basins all are forecast to show gains in natural gas production next month.
To finance the acquisition, Northern announced the public offering of 5mn shares of its common stocks, with a 30-day option for underwriters to purchase up to 750,000 additional shares.