Northern Oil and Gas, Inc. (NYSE American: NOG) ("Northern") announced today that it has entered into a definitive agreement to acquire approximately 320 acres of core Williston Basin properties operated by WPX Energy. Total consideration at closing will consist of $1.5 million in cash for the acreage, subject to customary adjustments. Closing is expected on July 1, 2020. Since signing, Northern has received 9 gross well proposals to fully develop the unit consisting of 2.1 net wells.
Northern expects approximately $12.5 million of development capital through 2020 and early 2021, with expected initial sales in the first quarter of 2021. The acquired assets are expected to produce 1,200 barrels of oil equivalent (Boe) per day 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, 2020. 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.
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 per barrel for 2021 for 1,500 barrels per day. That average price is approximately $3.85 higher than the underlying strip price used to calculate the estimated cash flow stream described above.
"We have consistently believed this environment would create opportunities for our shareholders in 2020 and beyond, and budgeted for opportunities like this," commented Northern's Chief Operating Officer, Adam Dirlam. "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 non-operator. We expect this deal to be materially accretive to cash flow in 2021, yet represents no additional capital spending to our stated 2020 budget."
ABOUT NORTHERN OIL AND GAS
Northern Oil and Gas, Inc. is an exploration and production company with a core area of focus in the Williston Basin Bakken and Three Forks play in North Dakota and Montana.
More information about Northern Oil and Gas, Inc. can be found at www.NorthernOil.com.
This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts included in this release regarding Northern's results of operations, business strategy, plans and objectives of management for future operations, actual or potential future production and cash flow, industry conditions, timing and benefits of pending acquisitions, and other matters are forward-looking statements. When used in this release, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "continue," "anticipate," "target," "could," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond Northern's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: the completion of the transactions contemplated by the definitive agreement described above, the effects of the COVID-19 pandemic and related economic slowdown, changes in crude oil and natural gas prices, the pace of drilling and completions activity on Northern's current properties and properties pending acquisition, Northern's ability to acquire additional development opportunities, changes in Northern's reserves estimates or the value thereof, general economic or industry conditions, nationally and/or in the communities in which Northern conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, Northern's ability to raise or access capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting Northern's operations, products, services and prices. Additional information concerning potential factors that could affect future financial results is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated from time to time in amendments and subsequent reports filed with the SEC.
Northern has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Northern's control. Northern does not undertake any duty to update or revise any forward-looking statements, except as may be required by the federal securities laws.
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