As COO of Northern Oil and Gas Inc., Adam Dirlam has led more than $1 billion worth of acquisitions across 400-plus transactions, helping transform Northern into the largest nonoperator in the Williston Basin and one of the largest nonoperated businesses in the industry. Amid the current downturn, Northern benefits from the creative structuring approach he brings to A&D, which has helped the company delever and invest countercyclically.
How has he managed to maintain this pace?
Dirlam’s answer is clear: “It is through the relationships and teams that I’ve built, learning from my prior managers, the people that I directly manage, and external coworkers that I believe I’ve been able to accomplish what I have personally and for Northern.”
“At Northern, I have been able to shape many different processes, in particular the capital allocation process. In the land grab days of old, acquisitions were often loosely evaluated with limited due diligence, and the focus was on growth. As I was elevated to the position where I am today, changing the overall process to high-grade our asset base and focus on rate of return was instrumental to our success.
“Through collaboration among our land, engineering and finance departments, we practice what I refer to as the ‘active management’ of our portfolio of opportunities, which involves continuous ‘ground-game’ acquisitions leveraged to the best operators and areas of the play, as opposed to passively waiting for an operator to come and develop the acreage we currently hold.
“Leading those processes and organizational changes has enabled us to fully utilize our 180,000-net-acre footprint in the Williston Basin and execute on a record number of acquisitions over the last two years. As a result, we have been able to show the highest return on capital employed relative to any other E&P in 2019.”
Closing the deal
“In a cyclical industry like oil and gas, you have to be able to adapt to your current situation by continually reviewing what’s worked in the past and what circumstances have changed.
“From a deal-making standpoint, you need to understand your competition, their capital availability and their cost of capital. All of this constantly changes, and you need to be able to adjust your bids accordingly so that you don’t end up bidding against yourself and paying a higher price than necessary to close the deal.
“Conversely, you may need to change acquisition strategies if the asset class you’re pursuing is overly crowded and you can generate a better return elsewhere.
“Having this awareness of how things are changing at a macro level and what the seller needs will also help you differentiate your offer letters and term sheets so that you can bridge the market’s bid/ask spread."
Perspective on mentors
“I’ve certainly had mentors throughout my life, but I’ve never really looked at mentorship in the traditional meaning. I am a firm believer that everyone you come into contact with can teach you something regardless of whether they have more or less experience than you, and I’ve always tried to keep that open mindset. I’ve been fortunate to be surrounded by many highly intelligent and thoughtful people throughout my life and career.”
“I am a very internally motivated and competitive person, and the oil and gas industry lines up well with that. The depleting nature of our business generally means that if you’re not growing, you’re dying.
“That means that there is always something to do whether that’s acquisitions, trades, divestitures. It also means that no day is ever the same, especially with shifting investor sentiment toward oil and gas.
“My motivation is to continue to build a company that is focused on making returns for our shareholders and ensuring that growth is an output from solid decisions made at the investment level. Northern’s business model has often been misunderstood, so I’m passionate about showing through our best-in-class returns that our specific model of active management is one of the best ways to invest in the space.”
“I am a firm believer that everyone you come into contact with can teach you something whether they have more or less experience than you.”