Northern Oil and Gas Inc. agreed on June 10 to a bolt-on acquisition of properties operated by WPX Energy Inc. in the core of the Williston Basin.
The Minneapolis-based company, which touts itself as being the largest Williston Basin nonoperator, will pay an undisclosed seller $1.5 million in cash for the properties comprising about 320 acres. Since signing, Northern said it has received nine gross well proposals to fully develop the unit consisting of 2.1 net wells.
In a statement commenting on the acquisition, Northern COO Adam Dirlam said: “We have consistently believed this environment would create opportunities for our shareholders in 2020 and beyond, and budgeted for opportunities like this.”
“This acquisition, while modest in size, is located in the heart of the core with one of the top operators in the Williston Basin and highlights Northern’s competitive advantage as an actively managed nonoperator,” Dirlam continued in his statement.
Further, he believes the deal will to be materially accretive to cash flow in 2021, yet represent no additional capital spending to Northern’s stated 2020 budget.
The acquired assets are expected to produce 1,200 boe/d and produce an estimated $11.3 million of unhedged cash flow from operations in 2021 at the current commodity pricing strip as of June 5.
Northern expects approximately $12.5 million of development capital through 2020 and early 2021, with expected initial sales in first-quarter 2021. Inclusive of the development capital and acquisition costs, Northern expects a payback period of under 1.5 years.
All acquisition and associated development capital has already been accounted for in Northern’s recent 2020 capital budget, according to the company release.
In addition, Northern entered into additional crude oil derivative “swaption” transactions to hedge a portion of the production associated with this and other transactions at an average of $45.48/bbl for 2021 for 1,500 bbl/d. That average price is approximately $3.85 higher than the underlying strip price used to calculate the estimated cash flow stream described above, the release said.
Northern expects to close the bolt-on acquisition on July 1.
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