Northern Oil and Gas, Inc. announces Williston Basin Bolt-on acquisition

Picture credit: Small cap Exclusive

Northern Oil and Gas, Inc. (NYSE American: NOG):

WILLISTON BASIN ACQUISITION

Northern has entered into a definitive agreement to acquire non-operated interests across over 400 producing wellbores located primarily in Williams, McKenzie, Mountrail and Dunn Counties, ND for a purchase price of $154 million in cash, subject to typical closing adjustments. Northern expects to fund the acquisition with cash on hand, operating free cash flow and borrowings under Northern’s revolving credit facility.

Northern expects a significant increase to its borrowing base from both the acquired and existing assets and will begin the process to expand its elected commitment during its regularly scheduled fall borrowing base redetermination, which it expects to complete in November 2021.

October production on the assets is expected to be greater than 4,500 Boe per day (2-stream, ~65% oil) and Northern expects average production of more than 4,100 Boe per day in 2022 (2-stream, ~65% oil). Northern expects negligible capital expenditures on the assets.

The acquired assets include 65.9 net producing wells. The assets are operated by multiple operators in the Williston Basin, and Northern holds existing ownership positions in 84% of the wellbores acquired.

The effective date for the transaction is October 1, 2021 and Northern expects to close the transaction within 40 days.

INCREASED STOCKHOLDER RETURNS

Given the strong, low risk cash flows from the acquired properties, Northern’s Management plans to submit a request to the Board of Directors for a 33.3% increase to the common stock dividend for the fourth quarter of 2021, for shareholders on record as of December 31, 2021. This anticipated increase to a dividend of $0.06 per common share represents a 100% increase since the initiation of a dividend program in May 2021. Under Delaware law, the Board may approve such a measure within 60 days of the record date.

HIGHLIGHTS

•$154 million bolt-on acquisition of proved producing properties in the Williston Basin

•>4,500 Boe per day of production (2-stream, ~65% oil)

•Mature, shallow decline (~18% first year decline expected)

•Northern owns existing interests in 84% of the acquired wellbores, providing high confidence and visibility in the acquired assets

•Forward 1-year unhedged cash flow from operations expected to be approximately $60 million at current strip pricing as of October 4, 2021, representing a purchase price transaction multiple of approximately 2.6x

•De minimis capital expenditures expected to drive a significant increase to corporate free cash flow

•Northern estimates PDP PV-10 of approximately $205 million, based on current strip pricing as of October 4, 2021

•Transaction expected to be accretive to all material valuation metrics, including TEV / EBITDA, earnings per share, free cash flow and cash flow per share over a multi-year period

•Northern reiterates current 2021 Capital Budget of $215 – 260 million

•Management to submit request to Northern’s Board of Directors for a 33.3% increase to the quarterly dividend to $0.06 per share upon closing of transaction